Istat: GDP expected +0.7% in 2026 and 2027, but depends on duration of conflict
In 2026, household and NPISH consumption is expected to decelerate compared to the previous year (+0.6% compared to +1.1% in 2025), held back by the dampening of the positive trend in per capita wages and the increase in inflation; in 2027, however, growth is expected to accelerate slightly
Key points
Italy's GDP is expected to grow by 0.7% in both 2026 and 2027, after having increased by 0.5% in 2025 (Table 1). The increase in GDP in the two-year forecast period would be sustained entirely by domestic demand net of inventories (+0.9 and +0.5 percentage points, respectively); net foreign demand, negatively conditioned by the effects of the conflict in the Middle East and the consequent increase in energy prices, would provide a negative contribution in 2026 (-0.2 p.p.) and zero in 2027. This is what Istat highlights in its 'Outlook for the Italian economy in 2026-2027'.
In 2026 the consumption of households and ISPs (private social institutions) is expected to decelerate compared to the previous year (+0.6% compared to +1.1% in 2025), held back by the weakening of the positive trend in per capita wages and by the increase in inflation; in 2027 growth is instead expected to accelerate slightly (+0.7). Gross fixed capital formation would continue to grow, but with different intensity in the two years: the increase would reach +2.2% in 2026, sustained by the measures related to the NRP; in 2027 there would be a significant deceleration on average for the year (+0.5%) caused by less favourable financing conditions and by the downsizing, under current regulations, of public stimuli.
Employment will slow down to +0.7% in 2026, unemployment to 5.5%
Employment, measured in terms of labour units (AWU), would show a slowdown in growth dynamics in 2026 (+0.7%, after +1.3% in 2025), which would be accompanied by a further decline in the unemployment rate (5.5%, from 6.1% in 2025); in 2027, a deceleration in AWU (+0.4%) and a stabilisation of the unemployment rate are expected.
Inflation at 2.9% in 2026, falling to 2% in 2027
Commodity price developments would translate into inflation trends, which are expected to rise sharply during 2026: the household expenditure deflator would average 2.9% for the year, before returning to 2% in 2027 as a result of normalising international tensions.
The unknown duration of the conflict between the US, Israel and Iran
In an international framework characterised by geopolitical tensions, Istat emphasises, forecast results are more than ever conditioned by basic assumptions. A key element is the duration of the conflict. A simulation exercise was carried out with Istat's MeMo-it model to assess the consequences on the Italian economy of a prolonged conflict between Iran and the United States as an alternative scenario.
