Bankitalia confirms GDP 2024 at +0.6%, files 2025 and 2026

Italy's GDP would increase by 0.6 per cent in 2024, 0.9 per cent in 2025 and 1.1 per cent in 2026; without taking into account the correction for working days growth would be 0.8 per cent in 2024 and 2025 and 1.2 per cent in 2026. Activity would benefit from the acceleration of foreign demand and the recovery of disposable income, but the effects of still restrictive financing conditions and the reduction of housing incentives would weigh on investment. This is what Bankitalia explains in its Macroeconomic Projections for Italy for the three-year period 2024-2026.

Inflation would be 1.1 per cent in 2024 and just over 1.5 per cent on average in the following two years. Moderate energy and intermediate product prices would contribute to the marked reduction compared to last year. The effects of the acceleration in wages would be absorbed by profit margins and moderate import price developments.

The scenario assumes that geopolitical uncertainty and the related tensions on international financial markets, while high, do not worsen. Potential demand in the main destination markets for Italian exports is assumed to expand again over the three-year period, by about 2.5 per cent per year on average. Based on futures contracts, energy commodity prices would gradually decline over the forecast horizon. Financing costs for businesses and households would remain high in the current year and gradually decline in the next two years.

Bankitalia estimates that output growth will remain moderate this year and will gain momentum from the second half of 2025, thanks to the recovery of disposable income and foreign demand. On average over the year, GDP would increase by 0.6 per cent in 2024, 0.9 per cent in 2025 and 1.1 per cent in 20261). Compared to the projections published in April, GDP growth is unchanged this year and lower by a tenth of a point in both 2025 and 2026 mainly due to the assumptions of slightly higher interest rates in the markets.

Consumption, after the setback at the end of 2023, would return to growth from this year, supported by the recovery of household purchasing power. Investment would slow down markedly, held back by high financing costs and the sharp downsizing of incentives for house redevelopment. These factors, in particular the last one, would lead to a marked contraction in construction investment, which would be only partly mitigated by the increase in infrastructure spending envisaged in the National Recovery and Resilience Plan (NRP). The private investment incentive measures envisaged in the PNRR would also help to support the dynamics of the capital goods component, which would continue to expand throughout the three-year period.