Italy’s Robust Demand for Palm Oil

Italy may be the third-largest economy in the Eurozone, but it is experiencing many problems. After strong GDP growth of 5-6% annually from the 1950s to the early 1970s, there was a progressive slowdown in the 1980s and 1990s. Over the past decade, the average annual growth rate has been poor, at 1.23% compared to the EU average of 2.28%.

Political efforts to revive the economy with massive government spending since the 1980s have produced a drastic increase in public debt. According to the EU’s statistics body Eurostat, Italian public debt stood at 132.3% of GDP in 2015, up from 116% in 2010. That is the second-largest debt ratio after Greece, which clocks in at 177.4%.

After a shocking decline in economic output of about 9% in 2008 compared to the pre-crisis level, Italy enjoyed its first signs of growth of 0.8% in 2015. Exports and imports grew again, by 3.7% and 3.3% respectively. The trade surplus of goods expanded and, at last count in 2015, stood at 50.14 billion Euros.

Italy is a substantial market for oils and fats, with domestic production of some 1.3 million tonnes per year. More than one-third of this is olive oil, a staple in traditional cuisine.

The country is the second-largest market for palm oil in Europe, surpassed only by the Netherlands. The high intake has to be attributed primarily to a vibrant food processing industry and strong consumer demand.

It is interesting that the combined purchases of only four of the EU-28 countries in 2014 – the Netherlands, Italy, Spain and Germany – accounted for well over two-thirds of the EU´s palm oil imports. Figure 1 shows only aggregates of imports from Indonesia and Malaysia. However, given the dominance of both countries in the trade, the results are representative of the overall picture.

The impressive quantity imported by Italy has more than tripled over the past 10 years (Figure 2). Palm kernel oil imports, though, remained flat during the same period at an average of 33,000 tonnes.