Italy's Economic outlook 2025 - 2026

Italian GDP is expected to grow by 0.6% in 2025 and 0.8% in 2026, following a 0.7% increase over the previous two years (Table 1)

The increase in GDP over the two-year forecast period would be entirely supported by domestic demand net of inventories (+0.8 and +0.9 percentage points, respectively), while net foreign demand would contribute negatively in both years (-0.2 and -0.1 p.p.). The forecast scenario for net foreign demand assumes a reduction in the climate of uncertainty surrounding U.S. trade policy in the second half of 2025. Nevertheless, a negative impact of tariffs on global trade and international growth prospects is still assumed.

Private consumption is projected to continue growing at a moderate but steady pace (+0.7% in both years), supported on the one hand by the ongoing growth in wages and employment, and on the other hand curbed by a rising propensity to save. Investment growth, which accelerated in 2025 (+1.2%, up from +0.5% in 2024), is expected to benefit from the strong performance in the first quarter. However, a substantial stagnation is likely to follow in the second half of the year, before a slight further acceleration is recorded in 2026 (+1.7%), in conjunction with the final phase of the NRRP.

Employment, measured in terms of Full Time Equivalent (FTEs), would grow slightly faster than GDP (+1.1% in 2025 and +1.2% in 2026), albeit at a slower pace than in previous years, accompanied by a further decline in the unemployment rate (6.0% this year and 5.8% in 2026).

After the rise in prices between late 2024 and the early months of 2025, a more moderate inflation trend is expected over the year, supported by falling energy prices and weakening demand prospects. The increase in the household spending deflator in 2025 would be in line with these developments (+1.8%), followed by a slight further decrease in 2026 (+1.6%).