Italy faces huge digital gap

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    Italy estimates its businesses in recent years fell behind the rest of Europe in terms of digital investment by an amount roughly equal to 2 percentage points of GDP. (Reuters Photo)

    MILAN- Italy ranked fourth to last in the EU for digital competitiveness in 2019, according to the Digital Economy and Society Index (DESI).

    By forcing a huge technological acceleration on the country, the pandemic is offering Italy a one-off chance to boost its feeble productivity and economic growth.

    Faster economic expansion is essential for Rome to sustain the world’s third-largest public debt which the pandemic has inflated to 1.6 times gross domestic product (GDP).

    Research by Milan’s Politecnico University shows Italy could add 1.9 percentage points a year on average to its GDP growth if its small- and medium-sized enterprises (SMEs) bridged a 40 percent gap versus Spanish peers measured by indicators ranging from e-commerce capabilities or electronic invoicing to use of big data.

    “But the trick only works if businesses switch from a (crisisdriven) reactive approach to technology to a strategic one, and the environment where they operate evolves with them,” said Giorgia Sali who heads Politecnico’s research hub on SMEs and digital innovation.

    Italy estimates its businesses in recent years fell behind the rest of Europe in terms of digital investment by an amount roughly equal to 2 percentage points of GDP.

    The pandemic has brought a welcome shift, with 86 percent of Italian respondents in a survey of mid- to large-sized firms commissioned by Dell Technologies saying they sped up digital transformation plans in 2020, above a 75 percent European average.

    “The pandemic has forced Italian companies to confront the country’s huge digital gap,” said Francesca Moriani, CEO of IT services provider VAR Group, adding Europe as a whole lags the United States and China.

    The euro zone’s digital economy is only two-thirds the size of that in the United States.

    Encouragingly, 92 percent of SMEs polled by VAR Group expect to invest in digital capacity in the next two years, despite the blow to sales from the pandemic.

    Italy’s digital deficit has a number of roots.

    In a country where broadband access is below the EU average, large companies which can sustain programs of technological investment make up only a tiny proportion of businesses.

    Many firms are family-owned and run, meaning they tend to lack managers with the right skills to lead a digital transformation.

    A European Central Bank study also highlighted funding constraints when businesses rely mostly on bank financing like in Italy, saying traditional lenders often struggle to evaluate the risk involved in projects based on complex technologies

    Add to that an ageing population, and a very low share of ICT graduates – around 5,000 a year compared with around 18,000 in smaller Spain, according to Eurostat figures – and Italy has fallen behind in the digital race.

    To support the adoption of cutting-edge technologies by its companies and ultra high-speed connectivity, Rome has earmarked 46 billion euros in yet-to-be disbursed EU recovery funds for digital investments.