EU Revises Italy's Growth Forecasts for 2025 and 2026 Amid Economic Concerns
The European Commission lowers Italy's GDP growth projections, citing declining productivity and external trade pressures.
Brussels – The European Commission has revised its economic forecasts for Italy, signaling concerns about the country's growth prospects.
While the growth forecast for 2024 remains unchanged at 0.7 percent, the projections for 2025 and 2026 have been lowered by 0.3 percentage points.
The revised expectations indicate that Italy's gross domestic product (GDP) is now anticipated to grow by 0.7 percent in 2025 and 0.9 percent in 2026.
Central to this revision are persistent issues regarding labor productivity, particularly noted in Germany and Italy, among the largest EU member states.
The European Commission has highlighted Italy’s vulnerability in the face of ongoing trade tensions, particularly those linked to policies of the United States.
The country is regarded as 'strongly exposed' to trade measures enacted by the U.S. government, which could adversely affect Italian exports as domestic demand is expected to pick up in 2025.
Despite efforts by Prime Minister Giorgia Meloni, including a visit to Washington aimed at mitigating the trade crisis, there has been little evidence of improvement in perceptions within Brussels.
Consequently, projections indicate that Italy will rank last among EU countries in terms of growth rate in 2026, sharing this position with Belgium.
In conjunction with stagnant growth, Italy's debt-to-GDP ratio is projected to rise, violating European Union fiscal commitments.
Estimates suggest an increase from 134.6 percent in 2023 to 138.2 percent by 2026. This upward trajectory is partly attributed to the financial implications of the Superbonus scheme established during the previous government.
The European Commission has noted that increases in debt are anticipated to be driven primarily by adjustments relating to tax credits for housing renovations.
While the deficit projections indicate a downward trend, they remain above the European Union's 3 percent of GDP threshold.
Italy is expected to have a deficit of 3.4 percent in 2024 and 3.3 percent in 2025, before returning to compliance with EU budgetary rules in 2026, when the deficit is forecasted to be 2.9 percent.
The corrections in Italy’s fiscal outlook may prevent the initiation of an excessive deficit procedure by the EU. However, this will be revisited by EU officials in early June during the assessment of compliance with fiscal rules outlined in the European Semester package.
In light of these economic challenges, EU Economy Commissioner Valdis Dombrovskis has called for decisive reforms to enhance competitiveness and mitigate risks to Italy's economic outlook.
While the growth forecast for 2024 remains unchanged at 0.7 percent, the projections for 2025 and 2026 have been lowered by 0.3 percentage points.
The revised expectations indicate that Italy's gross domestic product (GDP) is now anticipated to grow by 0.7 percent in 2025 and 0.9 percent in 2026.
Central to this revision are persistent issues regarding labor productivity, particularly noted in Germany and Italy, among the largest EU member states.
The European Commission has highlighted Italy’s vulnerability in the face of ongoing trade tensions, particularly those linked to policies of the United States.
The country is regarded as 'strongly exposed' to trade measures enacted by the U.S. government, which could adversely affect Italian exports as domestic demand is expected to pick up in 2025.
Despite efforts by Prime Minister Giorgia Meloni, including a visit to Washington aimed at mitigating the trade crisis, there has been little evidence of improvement in perceptions within Brussels.
Consequently, projections indicate that Italy will rank last among EU countries in terms of growth rate in 2026, sharing this position with Belgium.
In conjunction with stagnant growth, Italy's debt-to-GDP ratio is projected to rise, violating European Union fiscal commitments.
Estimates suggest an increase from 134.6 percent in 2023 to 138.2 percent by 2026. This upward trajectory is partly attributed to the financial implications of the Superbonus scheme established during the previous government.
The European Commission has noted that increases in debt are anticipated to be driven primarily by adjustments relating to tax credits for housing renovations.
While the deficit projections indicate a downward trend, they remain above the European Union's 3 percent of GDP threshold.
Italy is expected to have a deficit of 3.4 percent in 2024 and 3.3 percent in 2025, before returning to compliance with EU budgetary rules in 2026, when the deficit is forecasted to be 2.9 percent.
The corrections in Italy’s fiscal outlook may prevent the initiation of an excessive deficit procedure by the EU. However, this will be revisited by EU officials in early June during the assessment of compliance with fiscal rules outlined in the European Semester package.
In light of these economic challenges, EU Economy Commissioner Valdis Dombrovskis has called for decisive reforms to enhance competitiveness and mitigate risks to Italy's economic outlook.
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