Italy’s Economic Outlook: 2025–2026

Italy’s GDP is projected to grow by 0.6% in 2025 and 0.8% in 2026, following a 0.7% increase over the past two years. This growth is expected to be driven entirely by domestic demand (excluding inventories), which is set to contribute +0.8 and +0.9 percentage points in 2025 and 2026 respectively. In contrast, net foreign demand is anticipated to have a slightly negative impact, subtracting 0.2 and 0.1 percentage points in each year.

The forecast assumes a gradual easing of uncertainty around U.S. trade policy in the second half of 2025. However, tariffs are still expected to weigh on global trade and international growth prospects.

Private consumption is forecast to rise steadily by 0.7% annually in both 2025 and 2026, supported by wage and employment growth but tempered by an increased household saving rate. Investment is set to expand by 1.2% in 2025—up from 0.5% in 2024—buoyed by a strong first quarter, though stagnation is likely later in the year. A modest rebound is expected in 2026 (+1.7%) as Italy enters the final stage of its National Recovery and Resilience Plan (NRRP).

Employment, measured in full-time equivalents (FTEs), is projected to grow at 1.1% in 2025 and 1.2% in 2026, slightly outpacing GDP growth but slowing relative to recent years. The unemployment rate is forecast to decline further, reaching 6.0% in 2025 and 5.8% in 2026.

Following a period of rising prices from late 2024 into early 2025, inflation is expected to ease, driven by lower energy costs and subdued demand. The household spending deflator is projected to rise by 1.8% in 2025 and slow further to 1.6% in 2026.

Source: ISTAT (istat.it)