Bank of Italy: estimates 2026 GDP growth at 1 per cent (0.9 per cent adjusted for working days)
The Bank of Italy forecasts that consumer price inflation will rise to an average of 3.2 per cent in 2026, driven by energy prices, before falling to 2.4 per cent in 2027 and 1.7 per cent in 2028
Key points
The Bank of Italy estimates that GDP will rise by 0.9 per cent in 2026 (estimates based on seasonally adjusted quarterly data, corrected for the number of working days in accordance with Eurosystem criteria); however, this growth figure rises to 1 per cent – in line with the Government’s forecast in the Draft Budgetary Plan (DBP) – without such an adjustment. In subsequent years, the estimate is 0.7 per cent for next year and 0.8 per cent for 2028. Excluding the adjustment for working days, the increase over the three years would be 1.0 per cent, 0.7 per cent and 0.6 per cent respectively. Economic activity would benefit from a favourable trend in external demand. Domestic demand, however, would be affected by rising energy prices and higher financing costs, which would curb household spending and businesses’ investment plans.
Average annual inflation at 3.2 per cent, falling to 2.4 per cent in 2027
The Bank of Italy estimates that consumer price inflation will rise to an average of 3.2 per cent in 2026, driven by the energy component, before falling to 2.4 per cent in 2027 and 1.7 per cent in 2028. Core inflation is expected to remain broadly stable at around 2 per cent over the forecast horizon. ‘There is a high degree of uncertainty surrounding these projections, particularly in relation to developments in the Middle East conflict. The implications of different trends in commodity prices are examined in alternative scenarios.’ The projections are based on information available as at 9 October.
Oil expected to reach $114 a barrel. Interest rates putting pressure on lending
In the baseline scenario, oil prices are expected to average $114 per barrel and natural gas prices €76 per megawatt-hour in the fourth quarter of this year, before falling over the forecast period. The rise in market interest rates is gradually passed on to the borrowing costs of businesses and households over the forecast horizon. The scenario also takes into account the information on the trend in public finances contained in the Public Finance Policy Document (DPFP) approved on 2 October, as well as that relating to measures to increase spending on defence and energy security. Compared with the projections published in June, GDP growth has been revised upwards by 0.4 percentage points in 2026 and by 0.3 percentage points in 2027, and downwards by 0.1 percentage points in 2028. The upward revision for 2026 mainly reflects the fact that the impact of the Middle East crisis in the first two quarters of the current year was less pronounced than anticipated in June, as well as favourable trends in investment linked to the digital and energy transitions and, in the summer quarter, in tourism.
Consumption slows in the second half of the year
According to Bankitalia’s estimates, consumption is set to weaken in the second half of this year and in 2027, mainly due to the erosion of real income caused by higher inflation, before regaining momentum towards the end of the three-year forecast period. Investment continues to expand, but slows significantly in 2028, held back by rising financing costs. Export growth is supported by strong demand for Italian products in the main export markets, but remains below that of international trade, which is driven by the high-tech goods sector (particularly artificial intelligence), in which Italia’s participation remains limited. Employment continues to grow and the unemployment rate remains broadly stable over the forecast horizon, at around 6 per cent.
