The Economic Context
The president of Confindustria Carlo Bonomi – interviewed by Il Sole24Ore on 19 January – expressed his opinion in relation to the GDP growth, stating that the first half of 2023 will be difficult while growth in the second half should be robust. Bonomi hopes for a reduction in energy prices and a decrease in inflation as a consequence, which in 2022 soared to the highest level since 1983 due to the huge liquidity injected into the system to stem the difficulties of the pandemic and the increase in prices of energy due to the Russian-Ukrainian war. In addition, he argues that the ECB’s interest rate hike, aimed at curbing inflation, is manageable up to 3%. The increase in interest rates reduces the investment capacity of companies and for this reason Bonomi fears a reduction in direct investments and highlights the importance of incentives aimed at stimulating investments.
The importance of the Transition 4.0
We agree with these conclusions and believe that the Government’s choice to reduce the incentives for the Transition 4.0 – the technological transition driven by digitization and automation – may be a mistake, as the production system is going through a period of intense digital transition with innovation as the main growth driver. Marco Fortis notes the strong increase in the added value of Italian companies since a program to enhance the technology transfer related to industry 4.0 is in place, suggesting that investing in industry 4.0 an investment into the future.
Have past incentives brought benefits?
In the last five years, the innovation system of the Italian industry has progressed significantly and Italy’s rank in the European Innovation Index has improved from 20th to 12th place between 2008 and 2021, mainly thanks to the progress in the three-year period 2019-21.
Comparing the period 2012-15 with 2016-19 when Transition 4.0 incentives were introduced, Italian companies purchased new computer-aided machinery and systems for € 30 billion (+44%). In 2020-23 incentives have been increased from €13 to €18 billion and the purchase of machinery has increased by €14 billion (+14%), 65% compared to the pre-incentive period (2012-15). It should be noted that 2/3 of the orders of new machinery were delived by Italian vendors, thus triggering a virtuous circle at a national level. In addition, these vendors purchase new machines to satisfy the additional demand of advanced machinery.
Current incentives should remain
The benefit-cost ratio (purchase of machinery / allocated incentives) during 2016-19 and 2020-23 went from 7.5 to 6.1, so the increase in allocated incentives brings decreasing benefits. This suggests not to increase today’s incentives for Transition 4.0 but keeping them at the current level for an extended period of time to facilitate a greater diffusion of the digital transition of production processes and to allow the creation of a solid industrial ecosystem to attract foreign direct investment with self-sustaining capability without the need for additional government incentives.
