abstract - CONSOB AND ITS ACTIVITIES
Economic report 2024
ECONOMIC REPORT 2024
Trends and challenges for the Italian financial sector
The Report is structured in four sections, each dealing with a specific topic, developed on the basis of the analyses in the Appendix that accompanies the document. Section 1 illustrates the current economic context characterised by the persistence of uncertainties linked to both geopolitical tensions and the weak economic growth affecting the euro area countries; in section 2 a comparative analysis of the size and characteristics of the Italian and European capital markets in the international landscape is proposed, showing data and insights on the degree of participation in capital markets by institutional and retail investors; section 3 examines public and private sector debt levels and future prospects in a context of higher interest rates compared to the historically low levels of the decade prior to 2022 and still rather subdued productivity conditions; section 4 analyses the strong performance of the secondary market in 2024 and proposes useful indicators to assess conditions of liquidity, volatility and interconnectedness between markets. The Appendix contains a comprehensive set of additional analyses, organised into seven sections: macroeconomic landscape; equity markets; bond markets; non-financial corporations; banks; households; mutual funds.
| The current economic context is shaped by persisting uncertainties related to both economic growth and intensifying geopolitical tensions. ... more |
| In addition to the ongoing war in Ukraine, there are several other conflicts currently taking place in various regions across the globe, with the Middle East being a prominent area of concern. The impact of these events on the financial markets remains relatively limited at the present time. Neverthless, the effects on commodity prices in the future could potentially influence the declining trends of inflation observed in all developed economies in 2024. Furthermore, the potential for mounting geopolitical risks to affect the real economy is heightened by their impact on foreign trade and global value chains. On this regard, the World Trade Organisation (WTO) has indicated that the weight in world trade of exports of non-fuel intermediate goods declined from 57% in early 2022 to 53% in June 2024, signalling a slight deterioration in the global value chains. |
| Overall, trends in GDP growth exhibit heterogeneous dynamics across economies. The GDP growth rate for 2024 is lower than the pre-pandemic levels in the major European countries, with the exception of Italy, while in the United States the output shows a more robust performance. ... more |
| As for the euro area, in its latest forecasts, published in November, the European Commission (EC) estimates that, after a weak GDP growth in 2024, the output will increase slightly in the next two-year period, with an estimated annual change of +1.3% in 2025 and +1.6% in 2026. According to EC’s forecasts, among the major countries in the area, Germany exhibits the most subdued performance in 2024, largely due to the persistent weakness of the manufacturing sector. In Italy, the GDP growth rate is projected to remain positive in the period 2024-2026, albeit at a rate below the euro area average. With regard to price dynamics, in 2024, as the inflation rate decreased, a phase of gradual monetary policy easing started at the global level. In the euro area inflation rate is expected to remain around 2% in 2025 and 2026. |
| The macroeconomic trends were only partially reflected in the performance of the stock markets. ... more |
| In Europe the EuroStoxx50 increased by 8% in 2024, while in US the S&P500 rose by about 23%. The Italian stock market exhibited a good performance with an increase of Ftse Mib index of about 13%. As for the other major euro area countries, the German Dax40 index displayed the most robust rise (+19%) despite the negative performance of the real output, followed by the Spanish Ibex35 (+15%). In France, conversely, the Cac40 exhibited a decline of about 2%. Throughout 2024, stock markets volatility remained at low levels on average, with only a few significant but short-lived episodes of market turbulence. |
| In this context, euro area markets continue to be characterised by a smaller size than the US market. Furthermore, Eurozone and US are facing a contraction in equity markets, with a notable decline in the number of listed companies in recent years. ... more |
| As for Italy, in 2024, there were 23 new listed Italian companies on Borsa Italiana, with only two on the main market Euronext Milan (EXM) and 21 on the Euronext Growth Milan (EGM) dedicated to smaller companies. In the same period, 29 companies were delisted, 15 from EXM and 14 from EGM. Since 2018, the total number of new listings on both markets was equal to 254 (50 on EXM and 204 on EGM) compared to 175 delisted firms (84 on EXM and 91 on EGM). Overall, the number of companies listed on the Italian market has increased, although the net number of new listed and delisted companies is negative for EXM (-34) and positive for EGM (+113). The decrease of listed companies on European markets confirms the importance of intensifying efforts to fully implement the actions outlined in the EU Plan for a Capital Markets Union (CMU), which aims to foster a greater market development in the EU . |
| In order to achieve this objective, it is essential to consider the role of institutional investors in equity markets. In Europe, the participation of such investors is significantly lower than in the US. ... more |
| As of November 2024, the market capitalisation of the top 100 US companies attributable to institutional investors was approximately 74%, compared to 42% for the top 100 European companies. With specific reference to Italy, the need to foster a greater development of capital market is even more pronounced. The increase in the types of source of funding is particularly important for SMEs that represent ‘niches of excellence’ in the Italian economy. In order to compete on a global scale they need to increase their efficiency typically through a greater scale of operations or technology updates and hence, through a wider capital base. Indeed, limited access to capital is one of the main obstacles to SME growth and institutional investors can play a key role in their success. These investors, with substantial resources and long-term horizons, are inclined to favour stable investments suitable for SMEs. As a matter of fact, the presence of institutional investors in the Italian companies listed on Euronext Milan (EXM) increases with their size, reaching 31% for the top 5 companies by market capitalisation, and falling to 1.4% for the 5 smallest. At the end of October 2024, institutional investors hold around 11.2% of the capital of SMEs listed on EXM compared to 24.1% for non-SMEs (listed SMEs are defined based on article 1 of the Italian Consolidated Law on Finance). When considering the size of SMEs, the percentage is higher for those with a market capitalisation greater than 500 millions of euros (16.6%) than for smaller ones (9.8%). |
| In order to foster a greater development of capital markets, retail investors participation represent an additional important factor. ... more |
| Furthermore, public capital markets represent a crucial component of an investor protection system, as they provide households with accessible, transparent, and liquid investment opportunities. A key objective of the CMU project is to facilitate greater direct and indirect participation of retail investors in capital markets. In this regard, the data from the Eurozone do not offer a reassuring comparison with those from the US. An analysis of the financial assets held by households in the two regions shows that, as of June 2024, the ratio of capital market instruments (listed and unlisted equities, mutual fund shares, debt securities, insurance products and pension fund shares) to total financial assets held by households was approximately 70% in the US, compared to 54% in the euro area (57% in Italy). During the same period, the ratio of liquidity (cash and deposits) to capital market instruments in the household portfolio was 17% in the US and 60% in the euro area (48% in Italy). |
| A well-developed, efficient, and adequately sized capital market also plays a pivotal role in financing the real economy, particularly in the current economic context, which is characterised by less favourable financial conditions than those observed in the past. ... more |
| In the euro area, interest rates exhibited a downward trajectory throughout 2024, after reaching their highest point at the end of 2023. Nevertheless, as of December 2024, the interest rate level in the Eurozone was approximately 4% higher than in early 2022 and it is projected to remain at higher levels than during the decade 2012-2021. This higher-interest-rate environment carries risks to debt sustainability and, more in general, to financial stability, particularly in sectors or geographical areas characterised by a high level of debt. In Europe, where firms’ funding is more heavily dependent on debt than on equity, the current higher-rate environment and the consequent increase in the cost of debt represent crucial factors. As of June 2024, the debt-to-equity ratio of non-financial companies (NFCs) stood at 47% for US companies in contrast to 70% for euro area firms (77% in Italy). The level of NFCs indebtedness in the euro area is remarkable, even when compared to gross domestic product (GDP). In the United States, the indebtedness of NFCs accounts for 75% of GDP, whereas in the euro area, this ratio stands at 102% (60% in Italy). This figure is mitigated by household debt, which in the euro area is 52% of GDP (37% in Italy) compared with 71% in the US. Additionally, the public sector contributes to the overall indebtedness, with a debt accounting for 120% of GDP in the US in June 2024, compared to a euro area average of 88% (137% in Italy). |
| The data presented in this Report suggest that one of the primary challenges for the Eurozone, and for Italy in particular, is the need to foster a structural change in the sources of financing for the real economy. A greater diversification in the sources of funding could ensure a better resilience of the financial system as a whole and support the competitiveness of firms in a global framework more and more complex. ... more |
| In addition to this goal, to implement an effective investor protection, a growing attention must be paid to the development of sustainable finance and to the technological innovation occurring within the financial sector. In order to make it easier for businesses and investors to meet and navigate financial markets, it is important to further pursue the simplification of the regulatory framework and to intensify financial education activities for both households and enterprises, in particular SMEs. The aforementioned courses of action are precisely those that should facilitate the transition from a CMU to a Savings and Investments Union (SIU). Italy must undertake this transition to play a more prominent role in the rapidly evolving global landscape . |
The Report was prepared by:
Paola Deriu (coordinator) - CONSOB, Head of the Research and Regulation Department (p.deriu@consob.it)
Valeria Caivano (coordinator) - CONSOB, Research and Regulation Department (v.caivano@consob.it)
Francesco Fancello - CONSOB, Research and Regulation Department (f.fancello@consob.it)
Monica Gentile - CONSOB, Research and Regulation Department (m.gentile@consob.it)
Alberto Noè - CONSOB, Research and Regulation Department (a.noe@consob.it)
Lucia Pierantoni - CONSOB, Research and Regulation Department (l.pierantoni@consob.it)
Greta Quaresima - CONSOB, Research and Regulation Department (g.quaresima@consob.it)
The authors would like to thank Francesco Scalese for the analyses presented in Box 1 ‘Italian primary market’ and Giovanna Di Stefano for her contribution to the analyses presented in Box 2 ‘Institutional investors in Italian listed companies’.
The opinions expressed in the Report are the authors' personal views and are in no way binding on Consob.
Report [PDF format]
Appendix [PDF format]