Italy, growth stalls: only 0.7 percent in 2024, last in 2025

Brussels – Italy is losing momentum and, by 2025, will be again ranked last in the EU for growth rates. It is already struggling now, as real GDP is estimated to grow 0.6 percent in 2023, slightly below the projections in the November economic forecast. In the Winter Economic Forecasts, the European Commission once again certifies the anemic nature of the economy. Compounded by a deteriorating general environment, forecasts for Italy are also downwardly revised by 0.2 percentage points to 0.7 percent for this year.

For 2025, however, the picture ahead is mixed. The Italian economy will grow by half a percentage point, with GDP expected to expand from 0.7 percent to 1.2 percent, the lowest growth in the entire eurozone and even the European Union, albeit on par with Germany. It will still be at the last. In comparison, it will not do well. Drawing up economic forecasts for Italy, the Commission assumes that the country knows how to carry out reforms. The underlying assumption is the implementation of the National Recovery Plan (NRRP). In Italy, “Investment is expected to accelerate in 2025, as the implementation of RRF-backed projects [Recovery Fund that finances the NRRP] gathers pace.” If not, the situation could deteriorate further: a message for the Meloni government and the majority parties.

Economy Commissioner Paolo Gentiloni recalls “the flow of funding” underway for everyone, but to some more than others, as Italy is among the biggest beneficiaries of the EU recovery plan (68.9 billion euros in grants and 122.6 billion euros in loans). Valdis Dombrovkis, responsible for an Economy that serves people, subtly hints to not slow the pace of reforms: “EU funds, including the Recovery Fund, will continue to play a key role.” Reforms will be needed, and fast. The European Commission notes how investment in Italy has slowed considerably due to rising financing costs and the phasing out of tax credits for home renovations. What helps Italy is the reduction in inflation. The cost of living is lower: the Commission erases over half a point, and for 2024, inflation in Italy now moves to 2 percent from the 2.7 percent forecast three months ago. The Commission confirmed its forecast for 2025 at 2.3 percent, still in line and just above the reference target. Reducing the cost of living could play an important role in the Italian economy, especially for consumption. “Economic output is forecast to continue growing slowly in 2024, with households’ purchasing power expected
to benefit from disinflation and an increase in wages,” the Commission notes.