Istat: GDP expected to grow by 0.7% in 2026 and 2027, but this depends on the duration of the conflict
In 2026, household and ISP consumption is expected to slow compared with the previous year (+0.6% compared with +1.1% in 2025), held back by the easing of the upward trend in per capita earnings and rising inflation; in 2027, however, growth is expected to pick up slightly
Key points
Italia’s GDP is expected to grow by 0.7% in both 2026 and 2027, following a 0.5% increase in 2025 (Table 1). The increase in GDP over the two-year forecast period would be driven entirely by domestic demand excluding inventories (+0.9 and +0.5 percentage points respectively); net external demand, negatively affected by the conflict in the Middle East and the resulting rise in energy prices, is expected to make a negative contribution in 2026 (-0.2 percentage points) and a neutral one in 2027. This is highlighted by Istat in its ‘Outlook for the Italian Economy in 2026–2027’.
In 2026, household and private social institutions’ (private social institutions) is expected to slow compared with the previous year (+0.6% compared with +1.1% in 2025), held back by the easing of the positive trend in per capita wages and rising inflation; in 2027, however, growth is expected to accelerate slightly (+0.7%). Gross fixed capital formation would continue to grow, but at different rates in the two years: the increase would stand at +2.2% in 2026, supported by measures linked to the PNRR; in 2027, there would be a significant slowdown in the annual average (+0.5%) caused by less favourable financing conditions and the scaling back of public stimulus measures under current legislation.
Employment growth to slow to 0.7% in 2026, with unemployment falling to 5.5%
Employment, measured in terms of full-time equivalent (FTE) jobs, is expected to see a slowdown in growth in 2026 (+0.7%, following +1.3% in 2025), accompanied by a further fall in the unemployment rate (5.5%, from 6.1% in 2025); in 2027, FTE growth is expected to slow (+0.4%) and the unemployment rate to stabilise.
Inflation at 2.9% in 2026, falling to 2% in 2027
Movements in commodity prices are expected to feed through to inflation, which is forecast to rise sharply during 2026: the household expenditure deflator is projected to stand at an annual average of 2.9%, before returning to 2% in 2027 as international tensions ease.
The uncertainty surrounding the duration of the conflict between the US, Israel and Iran
In an international context characterised by geopolitical tensions, Istat points out, the results of the forecasts are more than ever influenced by the underlying assumptions. A key factor is the duration of the conflict. A simulation exercise was carried out using Istat’s MeMo-it model to assess, as an alternative scenario, the consequences for the Italian economy of a prolonged conflict between Iran and the United States.
