Moderate Growth for Italy’s Economy Despite Geopolitical Tensions and Uncertain Outlook

In the coming years, Italy’s economy is projected to grow at a moderate pace. The State forecasts that the GDP will increase by 1% in 2024 and 1.1% in 2025, showing a slight acceleration compared to 2023. However, this estimate comes with an uncertain outlook due to geopolitical tensions internationally.

In 2024, the growth of the Italian economy will be supported by contributions from domestic demand net of inventories and net foreign demand, with inventories still having a negative contribution. On the other hand, in 2025, the growth will primarily be driven by domestic demand. Despite this, there is a lack of fiscal incentives for construction which will lead to a deceleration trend in gross fixed investments over the next two years. This trend will be offset by the effects of measures currently in place and reduced interest rates.

Istat predicts that inflation rates will gradually return to ECB targets in the near future, leading to a decrease in spending deflator of resident families in 2024 followed by a moderate increase in 2025. Employment is expected to grow in line with GDP and see a decline in unemployment rate. Furthermore, Istat’s latest report on corruption shows that while corruption is still prevalent in Italy, it is decreasing across various forms such as requests for money or other things in exchange for benefits or services.

Despite these positive signs, household consumption remains constrained due to an increase in propensity to save. However, it is expected to see moderate growth throughout these two years with an acceleration occurring from 2024 onwards. Overall, domestic and international factors are expected to influence dynamics within Italy’s economy moving forward.