Panorama econòmic

Economic indicators

Italy has a diversified economy, ranking as the third-largest in the Eurozone by GDP. After returning to its pre-COVID level in 2022, the country’s GDP grew by 0.7% in 2023 and kept a similar pace in 2024 as the unwinding of housing renovation tax credits weighed on construction activity, despite a pickup in infrastructure investment supported by the RRF. Net exports contributed positively to GDP growth, primarily due to a sharp contraction in goods imports. In 2025, the implementation of Italy’s RRP is expected to accelerate, largely offsetting the contractionary national fiscal stance. Private consumption is forecast to gain momentum, although overall investment is projected to decline due to reduced construction activity for housing renovations. By 2026, RRF-related spending and improved financing conditions are anticipated to boost investment, alongside continued growth in consumption. GDP growth is forecast to reach 1% in 2025 and 1.2% in 2026 (data EU Commission).

The country’s primary budget (which excludes interest payments) is structurally positive; however, the interest cost on the government’s debt weighs heavily on Italy’s accounts, with the general government budget being constantly in deficit. In 2024, Italy's general government deficit declined to 3.8% of GDP from 7.2% in 2023. This significant drop was driven by the phase-out of energy price mitigation measures (1% of GDP) and tax credits for housing renovations (around 3.5% of GDP). Despite weak nominal GDP growth, strong tax revenue, particularly from personal income tax and withholding taxes on financial assets, contributed to the reduction. These factors were only partially offset by labour tax cuts, pension indexation to high 2023 inflation, and public sector wage increases linked to contract renewals for 2022-24. While the primary balance returned to a positive 0.1% of GDP, rising debt servicing costs pushed interest expenditure up to 3.9% of GDP. In 2025, the deficit is projected to decline further to 3.4% of GDP, with the primary surplus increasing to 0.5% of GDP, driven by moderate primary expenditure and stable interest costs. Despite having one of the highest debt-to-GDP ratios globally, Italy has managed to reduce its debt by nearly 20 pp of GDP from its 2020 peak, returning to pre-pandemic levels—a target achieved by a few Eurozone countries. After declining to 134.8% of GDP in 2023, the debt-to-GDP ratio is projected to rise during 2024-26, reaching 139.3% by the end of the period (data EU Commission). This increase is driven by stock-flow adjustments stemming from the lagged cash impact of tax credits for past housing renovation deficits, compounded by a less favourable interest-growth-rate differential despite positive and rising primary balances. Following the continued decline in energy prices until October 2024, headline inflation fell to 1% for the year, down from 5.7% in 2023 (official governmental data). Stable energy prices projected for 2025-26 are expected to keep HICP components subdued, except for services, where wage pressures will likely persist. Headline inflation is forecast at 1.9% in 2025 and 1.7% in 2026 (EU Commission).

In 2024, employment grew by 1.6%, down from 1.9% in 2023, with further deceleration expected in 2025-26. Rising labour market participation is projected to outpace the decline in the working-age population, pushing the unemployment rate down to 6.2% by 2026 from 7% in 2024. Nominal wage growth reached an estimated 4% in 2024, driven by contract renewals reflecting past price increases, and is expected to moderate gradually. Italy has high levels of youth unemployment (19% as of Nov. 2023, according to ISTAT), and regional inequalities between the highly industrialised and dynamic North and the poorer, rural southern “Mezzogiorno” areas are still evident. Furthermore, Italy has to face a falling birth rate and a declining population. Italy’s GDP per capita (PPP) was estimated at USD 62,603 by the IMF in 2024, just below the EU-27 average (USD 64,680).

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