Employees at Celine’s new factory in Tuscany. Italy is a manufacturing hub within Europe, which has helped to boost its FDI stocks over the years. However, the country’s allure to foreign investors seemed to be dimming even before Covid-19 hit. (Photo by Miguel Medina/AFP via Getty Images)

In April 2020, Italy’s central bank, Banca d’Italia, published its latest figures for foreign direct investment (FDI) in and out of the country as of February 2020. Compared with December 2019, both FDI inflows and outflows increased in February, right before the Covid-19 outbreak paralysed the country.

While Banca d’Italia is yet to release the latest FDI figures, Italy had already ended 2019 with a lower level of inbound FDI when compared with 2018, and the pandemic has made the government take a stricter approach to FDI screening.

Banca d’Italia reports that in February outward FDI increased by €4.6bn compared with the previous month, while inward FDI totalled €3.8bn, also an increase from the end of 2019.

The main sources of inward FDI are from France, the US, the UK and Germany. The investments are directed mainly to the manufacturing sector, wholesale and retail trade, professional services, and financial and insurance activities, according to Banca d’Italia.

A declining rate of FDI into Italy

According to the UN Conference on Trade and Development (UNCTAD) World Investment Report 2020, FDI inflows into Italy stood at $27bn at the end of 2019, down from $33bn at the end of 2018. This ranks Italy 15th globally.

In the wake of the Covid-19 pandemic, the Italian government extended the so-called Golden Power Decree to restrict and monitor FDI into certain sectors, such as finance, credit and insurance, as well as categories such as critical infrastructure; sensitive facilities; supply of critical inputs, critical technologies and dual-use items; food security; media freedom and pluralism; and access to sensitive information.

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The extended decree also covers acquisitions of controlling interests and assets by EU entities within the energy, transportation and communications sectors, and acquisitions by non-EU entities representing 10% or more of share capital, where the investment value exceeds €1m, as well as any subsequent acquisition exceeding 15%, 20%, 25% and 50% in companies owning assets with strategic relevance within the energy, transportation and communications sectors.