Italy's Economic outlook 2024-2025

Italian GDP is expected to grow by 0.5% in 2024 and 0.8% in 2025. 

In 2024, GDP growth will be supported by net foreign demand (+0.7 percentage points), while domestic demand will contribute negatively (-0.2 p.p.). In 2025, however, the growth of the Italian economy will be primarily driven by domestic demand (+0.8 p.p.). 

 Household private consumption will continue to be bolstered by the strengthening labour market and the increase in real wages; the persistence of these trends will result in a slight acceleration of their growth rate in 2025 (+1.1%, following +0.6% in 2024). 

Gross fixed investments will see marginal growth in 2024 (+0.4%, compared to +8.7% in 2023) due to the phasing out of fiscal incentives for construction; this effect will be even more pronounced in 2025 when, despite the positive impact of the implementation of measures under the PNRR and lower interest rates, investment growth is expected to stagnate at 0%. 

 The dynamic labour market observed in 2024, measured in terms of full-time equivalent units (FTEs), will lead to growth significantly higher (+1.2%) than that of GDP; these dynamics will align in 2025 (+0.8%). Labour market improvements will contribute to a sharp reduction in the unemployment rate in 2024 (+6.5%, down from +7.5% in 2023), followed by a further slifgt decrease in 2025 (6.2%). 

 The rapid decrease in the inflation rate, driven by lower energy prices in 2024, will underpin a significant deceleration in the household spending deflator (+1.1%, compared to +5.1% in 2023). In 2025, stable incomes and consumption levels are expected to increase household spending deflator (+2.0%).