Italy Economic Outlook
Waning economic relevance:
Italy's economy—the Eurozone's third largest—has languished in recent years. In 2010, the country's GDP was roughly three-quarters that of France's; by 2022, that figure slipped to less than two-thirds. A declining population, a high stock of debt, a rigid jobs market and copious red tape all hold back momentum. Conditions vary considerably by region, with the south lagging far behind the more dynamic north in terms of economic growth and job creation.
Industrial strength:Italy's industrial sector is still important to its economy, despite having lost clout over the last few decades as a share of GDP. Italy boasts particular strengths in automotive, pharmaceuticals, machinery, fashion and luxury goods. Global brands like Fiat, Ferrari, and Luxottica exemplify Italy's reputation for quality and design.
Tourism hotspot:The services sector, including tourism, banking, and retail, plays a significant role in Italy's economy. Italy's rich cultural heritage and scenic beauty make it one of the world's top tourist destinations, significantly contributing to national revenue. The banking and finance sector, centered in Milan, is also important to the economy.
Myriad challenges:Italy faces several economic challenges, including slow growth rates and one of the highest public debt levels in the world. Structural issues such as labor market rigidity, bureaucratic inefficiency, and a complex tax system contribute to these challenges. Addressing these issues is critical for sustainable economic growth.
Meager economic prospects:In the coming years, large inflows of EU funding will support activity. However, comprehensive structural reforms to boost the country's meager potential growth rate are unlikely; as such, Italy will continue to lose economic clout relative to other Eurozone members over our forecast horizon.
Italy's Macroeconomic Analysis:
Nominal GDP of USD 2,047 billion in 2022.
Nominal GDP of USD 2,302 billion in 2023.
GDP per capita of USD 39,109 compared to the global average of USD 10,589.
GDP per capita of USD 34,676 compared to the global average of USD 10,589.
Average real GDP growth of 0.3% over the last decade.
Average real GDP growth of 0.7% over the last decade.
Sector Analysis
In 2021, services accounted for 75% of overall GDP, manufacturing 15%, other industrial activity 8%, and agriculture 2%. Looking at GDP by expenditure, private consumption accounted for 58% of GDP in 2021, government consumption 20%, fixed investment 20%, and net exports 2%.International trade
In 2021, manufactured products made up 81% of total merchandise exports, mineral fuels 3%, food 10%, ores and metals 3% and agricultural raw materials 1%, with other categories accounting for 2% of the total. In the same period, manufactured products made up 67% of total merchandise imports, mineral fuels 13%, food 10%, ores and metals 6% and agricultural raw materials 2%, with other goods accounting for 2% of the total. Total exports were worth USD 623 billion in 2022, while total imports were USD 641 billion.Main Economic Indicators
Economic growthItaly's GDP growth over the last decade was sluggish, reflecting structural economic weaknesses such as dire demographics, low productivity growth, high public debt, a sclerotic bureaucracy and political uncertainty. The economy contracted sharply during the COVID-19 pandemic, exacerbating pre-existing issues. Recovery in 2021-2023 was supported by EU recovery funds, but long-term growth prospects remain constrained by structural barriers and the lack of deeper economic reforms. To read more about GDP growth in Italy, go to our dedicated page.
Fiscal policy
Italy's fiscal deficit was in line with the European Commission's 3% target in the years before the pandemic, but has been much larger than that since. The COVID-19 pandemic exacerbated fiscal pressures, leading to increased spending and debt. The government has struggled to control the deficit since, partly due to difficulties in dealing with the unwinding of generous construction subsidies. Find out more on our dedicated page.
Unemployment
Italy's unemployment rate over the last decade reflected its economic challenges and sluggish growth. The rate was in double digits in the early part of the decade, with only gradual improvements due to structural issues and slow economic recovery. While the unemployment rate fell to an over-decade low in 2022, it remained higher than the European average, indicating ongoing challenges in the Italian job market. For more information on Italy's unemployment click here.
Inflation
Italy faced generally low inflation rates until the pandemic, often close to or below 0%, as a result of weak domestic demand. That said, the picture has changed notably since the pandemic: Inflation was well above the European Central Bank's 2% target in 2022 and 2023, due to global supply pressures, a strong bounce-back in economic activity, a rise in protectionism and the reduction of Russian gas flows. Go to our Italy inflation page for extra insight.
Monetary Policy
In Italy, monetary policy is determined by the European Central Bank (ECB). The European Central Bank (ECB) maintained historically low policy rates from 2013 to 2021, reflecting prolonged economic sluggishness and low inflation in the Euro area. By 2022 however, the focus had shifted towards normalizing policy in response to economic recovery and rising inflation, with policy rates hiked to an over decade high. See our Italy monetary policy page for additional details.
Exchange Rate
Italy is part of the Euro area single currency bloc. The euro saw volatility over the last decade in response to changes in global risk sentiment, and relative interest rates in the U.S. vs Europe. That said, the euro has tended to depreciate vs the dollar, likely on higher safe-haven demand and the United States' economic outperformance relative to the Eurozone. For more info on the euro, click here.
Economic situation in Italy
After a strong start to the year, the economy unexpectedly decelerated in Q3, with GDP stagnating quarter on quarter (Q2: 0.2% qoq s.a.). The slowdown was due to a deterioration in net trade on the expenditure side and a negative contribution from agricultural and industrial output on the production side. Turning to Q4, our panelists expect the economy to grow 0.2%, in line with the Euro area average but one of the weakest among G7 countries. Looking at available data, lower inflation in October compared to Q3, paired with ECB interest rate cuts, likely helped boost consumer sentiment and therefore household spending in turn. In other news, in October, Fitch Ratings upgraded the outlook on Italy’s debt rating to ‘positive’, leading the government to receive a record EUR 200 billion in orders for its bonds late in the month and boding well for the country’s fiscal health.Italy Economic Forecasts
Projections out to 2034.55 indicators covered including both annual and quarterly frequencies.
Consensus Forecasts based on a panel of 51 expert analysts.
Want to get insight on the economic outlook for Italy in the coming years? FocusEconomics collects projections out to 2034 on 55 economic indicators for Italy from a panel of 51 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts, and averaged to provide one Consensus Forecast you can rely on for each indicator. This means you avoid the risk of relying on out of date, biased or outlier forecasts. Our Consensus Forecasts can be visualized in whichever way best suits your needs, including via interactive online dashboards , direct data delivery and executive-style reports which combine analysts' projections with timely written analysis from our in-house team of economists on the latest developments in the Italy economy. To download a sample report on the Italy's economy, click here. To get in touch with our team for more information, fill in the form at the bottom of this page.
Italy Economic Indicators
Frequently Asked Question about Italy's Economy
What is the performance of the Italian economy?
Why is Italy struggling economically?
Does Italy have a strong economy?
What is the main economic sector in Italy?
After a significant post-pandemic rebound, Italy's GDP growth has slowed. Challenges include high public debt and inflation, slow productivity growth, and regional disparities. The government focused on reforms and investment, particularly in green energy and digital infrastructure, to stimulate long-term growth.
Italy's economic struggles stem from high public debt, slow productivity growth, and regional disparities. Additional challenges include an aging population and bureaucratic inefficiencies. These factors have constrained economic growth and recovery efforts.
While Italy boasts the 3rd largest economy in the Euro area and a strong manufacturing sector, it also faces challenges such as high public debt, sluggish growth and structural rigidities.
Italy's main economic sector is services, which includes finance, tourism, and retail and comprises over 70% of GDP. This sector benefits from a strong tourism industry and a large and skilled workforce. Manufacturing, particularly in high-quality consumer goods like fashion, automotive, and machinery, also plays a crucial role in Italy's economic landscape.