OECD cuts Italy's GDP estimates, inflation rises

The OECD has revised downwards the growth estimates of the Italy's GDP for this year and next. In the interim Economic Outlook (interim report, the complete one will be published later), the Paris-based institution, after +0.5% in 2025, estimates for our country a GDP growth of 0.4% in 2026 (against +0.6% in the Economic Outlook published last December) and 0.6% in 2027, from +0.7% in December.

"While fiscal expansion in Germany will support growth, especially in 2027, a more restrictive fiscal policy will be an obstacle in Italia and France," writes the OECD. The Paris-based institution also points to a rise in inflation in Italia, which had already started before the conflict in the Middle East: "Theoverall inflation remained broadly stable in advanced and emerging economies before the conflict in the Middle East. Nevertheless, the trend differed across countries. In fact, even before the escalation, there were signs of an increase in Italia, India, Indonesia and South Africa from previous moderate levels'. In fact, looking at the numbers, after 1.6 per cent in 2025, inflation in Italia is expected to rise to 2.4 per cent in 2026 (against the 1.7 per cent estimated in December) and to 1.8 per cent in 2027 (unchanged). The 'core' figure is also expected to rise, with 2.6% this year (from 1.9% estimated in December) and 1.9% in 2027 (from 1.8%), after 1.9% in 2025. With regard to the development of government bond yields, the OECD reports that 10-year yields "increased in the main advanced economies and emerging markets. This was particularly the case in Mexico, South Africa and Turkey, but also in Italia, Canada, France, Spain and the United Kingdom".

Global growth is holding up, however, according to the OECD, there are "significant downside risks that persistent export disruptions from the Middle East could raise energy prices above expected levels, exacerbate shortages of key commodities, fuel inflation and reduce growth". In the Interim Economic Outlook, the Paris-based institution reported that "soaring energy prices and the unpredictability of the evolution of the Middle East conflict will lead to higher costs and lower demand, offsetting favourable factors stemming from substantial investment and production in the technology sector, lower effective tariffs, and accumulated momentum in 2025." In light of a possible energy shock, according to the OECD, 'central banks need to remain vigilant and ensure that inflation expectations remain well anchored. Monetary policy adjustments may be necessary if price pressures widen or growth prospects weaken substantially'.

Looking at the numbers, global GDP is expected at +2.9% in 2026 (confirmed from December's Economic Outlook) and +3% in 2027 (from +3.1%), levels still lower than the +3.3% in 2025. In the G20 countries, after +3.3% in 2025, growth is seen at +3% this year (from +2.9% in December) and at +3% next year (from +3.1%). Inflation in the G20 countries, after 3.4% in 2025, is expected at 4% this year (from 2.8%) and 2.7% next year (from 2.5%). However, reports the OECD, "the preliminary update of estimates, which took into account data collected up to February, suggested that 2026 global growth could be revised upwards by 0.3%, but this scenario was entirely cancelled out by the impact of the escalation in the Middle East". Similarly, "the increase in inflation would have been only modest, while taking into account the conflict, a substantial upward revision was required".

The conflict in the Middle East, the OECD adds, carries human and economic costs for the countries directly involved and will test the resilience of the global economy. "The disruption of shipments through the Strait of Hormuz and the closure or damage to energy infrastructure have caused energy prices to soar and disrupted global supplies of energy and other important raw materials, such as fertilisers." According to the Paris-based institution, 'the magnitude and duration of the conflict is highly uncertain, but a prolonged period of higher energy prices will significantly increase costs to businesses and drive up consumer price inflation, with negative consequences for growth', which prior to the escalation of the conflict 'remained resilient, with activity supported by strong AI-related investment and production and favourable financial and fiscal conditions'. Against this backdrop, measures put in place by governments to mitigate the impact of rising energy prices 'should be timely, targeted at the neediest households and businesses, preserve incentives to reduce energy consumption, and include clear expiration mechanisms'. Moreover, according to the OECD, fiscal room for manoeuvre 'is limited and action is needed to safeguard debt sustainability and free up resources to meet longer-term spending challenges'.