With a gross domestic product (GDP) of 1.786 trillion US$ (2007) Italy is the world’s seventh largest economy, and its Northern regions are amongst the richest in Europe. Italy’s economy is the tenth largest in the world in terms of purchasing power parity (PPP) according to IMF and the CIA World Factbook. Though Italy began to industrialize late in comparison to other European nations, the now diversified industrial economy has roughly the same total and per capita output as France and the UK (GDP per capita of 30,400 US$ in 2007). Italy’s economy is by no means dynamic and has been less than successful in developing world-class multinational corporations. A unique facet of Italy is the fact that the country is not powered by huge conglomerates, as is the case in many industrialized nations. Small to medium-sized businesses based on the arts make up a large part of Italy's economy, as was true in the past. The great strength of the Italian economy lies in the number of vibrant small to medium-sized enterprises – of the 35,000 joint stock companies, 13,000 have fewer than ten employees.

There are sharp differences between the North and South in terms of development and economic production. The capitalist economy of Italy remains divided into a developed industrial Northern part, dominated by private companies, that is far more dynamic. The South on the other hand is less developed, welfare dependent, and mostly agricultural. Living costs are correspondingly higher in the North however, but unemployment reaches 20% in the South.

The strength of Italy’s economy is deceptive because it is largely supported by an ‘underground’ or ‘black’ economy that functions outside government controls. Despite significant government progress since the 1990’s, the Mafia continues to exert a strong influence, particularly in Southern Italy. It is estimated that around one fifth of all work is done off the books and without paying any taxes in Italy, a problem that is hindering governmental programs on a national scale.

Labour force

There are currently 24.71 million people in the labour force in Italy. Distribution of the work force is in the following areas: 69.2% services, 22.9% industry, 1.9% agriculture (ISTAT, 2007). The national unemployment figure is 6.7% (2008). The rates of unemployment of women and youth are significantly higher than those of men.

Major industries The country’s main industries are tourism, commerce, communications, machinery, iron and steel, chemicals, food processing, textiles, home appliances, and ceramics. Northern Italy has the largest range of industries. It is best known around the world for its fashionable designs in clothes, shoes and furniture with famous brands including Versace, Valentino, Fendi, Gucci, Prada, Roberto Cavalli, Sergio Rossi, Dolce & Gabbana, Benetton, Armani,  as well as others. Italy also manufactures automobiles, computers, and electronic equipment. The primary sector has always been a prominent industry in Italy. The Po Valley in Northern Italy provides good farm land for rice, wheat and other grains. The regions in Southern Italy grow fruits, olives and tomatoes, where irrigation is possible. Many areas of Italy also grow grapes, as Italy is one of the largest wine producers in the world. The service sector has been consistently growing in importance in Italy. Since the early 1990’s tourism has employed more than half the labor force, playing a vital role in the country's economic performance. Northern Italy has many popular tourist areas, such as Rome, Venice, and Florence.

Imports/exports

Italy's biggest trading partners are Germany, France, the United States, and the United Kingdom. Most raw materials needed by industry and more than 75% of energy requirements are imported. Italy’s main exports include hand painted ceramics, one of a kind furniture pieces, unique fashion, gorgeous glassware, and soft, supple leather, which have been recognized and sought after across the globe for centuries for their magnificent quality. Italy’s imports amounted to US$ 483.6 billion in the year 2006. The main import partners of Italy are predominately European countries: Germany (16.9%), France (9%), China (5.9%), Netherlands (5.5%), Belgium (4.3%), and Spain (4.2%). Italy’s exports accounted for a total of US$ 474.8 billion in the same year. The majority of these exports were delivered to Germany (12.9%), France (11.4%), Spain (7.4%), the US (6.8%), and the UK (5.8%) (ISTAT, 2007).