Italy’s economic growth will not be strong in 2025
Analysts have noted that the Italian economy is growing slower than expected. This trend is causing concern among EU officials, who say the country needs to review its current policies to improve the situation.
In 2024, the Italian economy showed a decline of 0.2%, and in 2025, experts predict a reduction of 0.1%. This dynamic is due to both external and internal factors. One of the main internal problems is the ineffectiveness of fiscal policy. It cannot fully curb inflationary growth, which puts pressure on all processes. A positive factor for Italy will be the reduction in the budget deficit. However, public debt will increase. In connection with this economic growth forecast, the European Parliament recommends that the Italian authorities reform the system.
The analysts’ forecasts for gross domestic product growth are as follows:
– GDP will grow by 1% by the end of 2025;
– a slight improvement is expected in 2026 – by 1.2%.
It is worth noting that GDP will grow by 0.7% in 2024. According to the forecasts presented, Italy’s economy will show the worst growth among EU countries in 2026. In this context, the government should strengthen a number of areas to stimulate the market.
The European Commission recommends paying particular attention to the public accounting sector. Officials also point to the importance of the balance between GDP and the deficit, which should be within 3%. However, it will not be possible to reach this target for at least two years. The ratio will be 3.8% in 2024 and 7.2% in 2023. Analysts expect the ratio to fall to 3.4% in 2025 and 2.9% in 2026. The deficit reduction process is taking longer than expected due to changes in the tax system.
Forecast for 2025
Italy continues to honour its commitments to the EU, which play a key role in supporting its economy. One of the most important is the Pnrr recovery plan, which includes a series of reforms and measures. Analysts expect the implementation of the plan to accelerate, which will have a positive impact on the economy. This, in turn, will offset a number of fiscal concerns.
Private consumption should also grow. However, due to low activity in the construction sector, investment will decline.
The Commissioner for Economic Affairs, Paolo Gentiloni, expressed concern about the increase in public debt. One reason for this is the tax incentives introduced by the Italian government during the pandemic. Public finances could not withstand such a burden, leading to a rise in debt. However, analysts expect the tax changes introduced in 2024 to bear fruit in the near future.
