GDP: Istat estimates +0.6% in 2025 and +0.8% in 2026. Confidence down due to tariffs but exports held up
Italian GDP is expected to grow by 0.6% in 2025 and 0.8% in 2026, after having increased by 0.7% in the two previous years. The increase in GDP in the two-year forecast period would be supported entirely by domestic demand, while foreign demand would make a negative contribution in both years (-0.2 and -0.1 p.p.). The scenario for foreign demand assumes an easing in the second half of 2025 of the uncertainty over US tariffs.
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ISTAT reduces the Italian GDP growth forecast for 2025 from the 0.8% expected in December to 0.6%. Italian GDP is in fact expected to grow by 0.6% in 2025 and 0.8% in 2026, after having increased by 0.7% in the previous two years. The statistics agency explains that the increase in GDP in the two-year forecast period would be supported entirely by domestic demand net of inventories (+0.8 and +0.9 p.p. respectively), while net foreign demand would make a negative contribution in both years (-0.2 and -0.1 p.p.). The forecast scenario for net foreign demand assumes an easing in the second half of 2025 of the uncertainty surrounding the direction of US trade policy. However, a negative impact of tariffs on world trade and international growth prospects is assumed.
Moderate but stable private consumption growth
In its report on 'Prospects for the Italian economy in 2025 - 2025', ISTAT forecasts that private consumption will continue to grow at a moderate but stable pace (+0.7% in both years), on the one hand favoured by the continuation of growth in wages and employment, and on the other hand held back by an increase in the propensity to save. The growth of investments in 2025 (+1.2%), accelerating from +0.5% in 2024, would be favoured by the good performance recorded in the first quarter and would then mark a further slight acceleration in 2026 (+1.7%) to coincide with the final phase of the NRP.
Employment slowing down compared to previous years
.Employment, measured in terms of labour units (AWU), would increase more than GDP (+1.1% in 2025 and +1.2% in 2026), but decelerating compared to previous years and accompanied by a further decline in the unemployment rate (6.0% this year and 5.8% in 2026).
Towards more moderate inflation dynamics
After rising prices between the end of 2024 and the early months of 2025, a more moderate inflation trend is expected during the course of the year, boosted by falling energy prices and a weakening demand outlook. The increase in the deflator of resident household expenditure in 2025 would be in line with these trends (+1.8%), with a further slight reduction in 2026 (+1.6%).
Declining confidence due to tariffs but exports held
.In the first four months of 2025, consumer and business confidence gradually worsened, especially with respect to economic developments, and was only partially offset by an improvement in May. The "high level of uncertainty caused by the succession of announcements concerning the imposition of tariffs on international trade" weighed heavily. "Italy's foreign trade, however, seems to have benefited not only from long-planned contracts in the shipbuilding sector, but also from an 'anticipation effect': the imminent imposition of tariff restrictions may have accelerated transactions, both incoming and outgoing, in the first quarter of 2025 (+2.6% and +2.8% the economic variation for imports and exports of goods and services respectively). These tensions, although gradually recomposing in the second half of 2025, would still continue to have a negative impact on the evolution of the economic cycle, with more accentuated effects on investments and foreign trade and, to a lesser extent, on household consumption. On the one hand, the latter would continue to benefit from the recovery of wages and employment, while on the other hand they would be held back by uncertainty with respect to the evolution of the cycle and the consequent increase in the propensity to save," Istat explains.
