This report provides a comprehensive analysis of Italy’s economic performance under the Meloni Government, which assumed office in October 2022, extending through 2024 and offering detailed projections for 2025, 2026, and 2027. The Italian economy has demonstrated moderate, albeit slowing, growth, a resilient labor market with historically low unemployment, and a significant deceleration of inflation from its 2022 peak.
The government has navigated a complex economic landscape by projecting fiscal discipline to European partners while simultaneously pursuing a more nationally focused industrial agenda. Key policy initiatives include efforts to reduce the fiscal deficit, implement the National Recovery and Resilience Plan (NRRP), and introduce targeted labor market incentives.
Despite these efforts, Italy continues to face substantial challenges, notably its persistently high public debt-to-GDP ratio, which is the second highest in the European Union, and the ongoing scrutiny from the European Commission regarding its fiscal trajectory. Structural impediments such as low productivity growth, adverse demographics, and low female labor force participation remain critical long-term concerns.
Forecasts from leading institutions, including ISTAT, the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), the Bank of Italy, and the European Commission, generally converge on a path of subdued but positive GDP growth for 2025-2027, ranging between 0.4% and 0.9%. Inflation is expected to remain around or below the European Central Bank’s (ECB) 2% target, while unemployment is projected to stay low. The outlook is subject to significant risks, including escalating global trade tensions and the imperative of rigorous fiscal consolidation.
1. Introduction: The Meloni Government’s Economic Mandate
Context of Government Formation
The Meloni government was formally sworn into office on October 22, 2022, marking one of the swiftest government formations in the history of the Italian Republic.1 This historic moment saw Giorgia Meloni become Italy’s first female Prime Minister, leading the nation’s first far-right government since World War II.3 The ruling coalition is predominantly comprised of the Brothers of Italy (FdI), the League (Lega), and Forza Italia (FI), securing a comfortable majority in both houses of the Italian parliament.2 The political landscape in 2024 has been characterized by unexpected stability and a consolidation of the government’s political dominance, largely attributed to Meloni’s strong leadership within her party and FdI’s electoral strength.4 Key economic portfolios are held by figures such as Giancarlo Giorgetti, who serves as the Minister of Economy and Finance.2
Initial Economic Landscape
Meloni’s political background provides important context for understanding her government’s fiscal philosophy, as she previously opposed the austerity budget implemented under the technocratic government of Mario Monti in 2011, a budget widely credited with averting Italy’s financial collapse at the time.3 Upon assuming power, the government inherited an economy that had recorded a robust 3.9% GDP growth in 2022.5 However, inflation was a significant immediate concern across the Euro Area, with the annual inflation rate peaking at 10.6% in October 2022, the same month the government took office.6
Overview of the Government’s Stated Economic Priorities
A primary objective articulated by the Meloni government was to “steer the economic ship back to shore and tamp down on inflation”.7 The economic strategy outlined by the Brothers of Italy aimed for a blend of economic liberalism, including tax cuts and deregulation, alongside social protection measures targeting groups such as artisans and pensioners.7 A strong emphasis was placed on promoting “Made in Italy” products and re-stressing protectionist policies.7 The government committed to projecting an image of fiscal discipline to both the European Union and international markets.7 Beyond immediate economic concerns, the coalition also pursued major structural reforms, including a central objective for FdI to shift Italy towards a presidential form of government.4
The interplay between political stability and economic policy is a critical dynamic for Italy. The research consistently highlights the “unexpected stability and consolidation of political dominance” of the Meloni government.4 This stability, somewhat uncharacteristic for recent Italian political history, could theoretically offer a more consistent and predictable environment for the implementation of long-term economic policies. However, the available information also reveals a multifaceted approach to governance: on one hand, the government seeks to project fiscal responsibility to Brussels and international markets 7, while on the other, it pursues more nationally focused and potentially less universally market-friendly domestic policies, such as “Made in Italy” protectionism.7 Furthermore, concerns have been raised about “institutional reshaping” and appointments based on political proximity 9, which could potentially weaken judicial independence and corrode bureaucratic efficiency. This dual approach suggests a delicate balancing act. While the government’s political strength might enable it to push through reforms and maintain short-term market calm 7, the nature of some of these reforms and the underlying ideological leanings could introduce long-term risks to investor confidence, the rule of law, and overall economic predictability, even if immediate market reactions have been stable. The challenge lies in sustaining economic growth and fiscal health without undermining the institutional frameworks that support a stable investment climate.
2. Economic Performance Under Meloni (2022-2024)
2.1. GDP Growth: Trends and Drivers
Italy’s Gross Domestic Product (GDP) recorded growth of 3.9% in 2022, followed by a moderation to 0.9% in 2023, and 0.7% in 2024.5 The national statistics bureau ISTAT initially trimmed its 2025 growth forecast downwards to 0.6%, following the 0.7% expansion observed in each of the preceding two years.11 In the first quarter of 2025, real GDP expanded by 0.3% quarter-on-quarter 10, marking the sharpest pace of quarterly growth in one year.12 This expansion was partly underpinned by infrastructure investments facilitated by the National Recovery and Resilience Plan (NRRP) and a positive contribution from net exports in 2024.10 Domestic demand components, particularly household consumption and gross fixed investment, have shown notable growth since 2019. Gross fixed investment spending, for instance, increased by a significant 31.6% by Q3 2024 compared to Q1 2019.13
When comparing Italy’s performance with the broader Euro Area, Italy’s quarterly GDP growth in Q1 2025 (0.3% quarter-on-quarter) lagged behind the Euro Area average of 0.6%.12 On an annual basis, Italy’s Q1 2025 year-on-year growth was 0.7%, while the Euro Area expanded by a stronger 1.5%.12 Despite the more recent slowdown relative to the Euro Area, Italy notably distinguished itself as the only major EU country to achieve an average annual GDP growth rate exceeding 1% between 2019 and 2023, surpassing France (+0.6%), Germany (+0.1%), and Spain (-0.9%) during this period.13
A significant observation is the potential decoupling from broader EU growth trends and an increasing reliance on domestic demand. While Italy demonstrated a strong recovery post-2019, outperforming major EU economies in average annual GDP growth from 2019-2023 13, its more recent quarterly and annual growth rates are now below the Euro Area average.12 A critical point from ISTAT is that growth in 2025 and 2026 will be “supported entirely by domestic demand,” with trade flows having a “negative impact” in both years.11 This indicates a shift in the primary drivers of growth, suggesting a potential divergence from broader Euro Area recovery trends. This could be influenced by factors such as rising global trade tensions and the appreciation of the exchange rate, which can dampen export competitiveness.17 The increasing reliance on domestic demand for economic expansion, coupled with anticipated negative contributions from trade, highlights a vulnerability to internal consumption patterns and a struggle to fully leverage external markets. This dynamic could potentially limit Italy’s overall growth potential compared to its EU peers in the near to medium term, especially if global trade conditions deteriorate further.
2.2. Inflation Dynamics
Italy’s annual consumer price inflation has shown a significant easing trend, reaching 1.6% in May 2025, a decrease from 1.9% in April and 2.0% in March 2025.18 This marks the lowest inflation rate observed since February 2025 and, notably, it has remained below the European Central Bank’s (ECB) 2% target for 20 consecutive months.18 Headline inflation, however, did show a gradual strengthening to 2% in April 2025.10 The disinflationary trend was primarily driven by softer price growth in regulated energy goods, unprocessed food, and transport-related services. Furthermore, prices continued to decline for non-regulated energy goods and durable goods.18 Conversely, processed food products experienced an uptick in inflation.18 Core inflation, which excludes the more volatile components of energy and unprocessed food, stood at +2.1% in April 2025, an increase from +1.7% in March.19
When compared to the Euro Area, Italy’s inflation rate has generally been lower. The Euro Area’s annual inflation rate was 2.2% in both March and April 2025, with an expected rate of 1.9% in May 2025.6 This indicates that Italy’s inflation rate (1.6% in May 2025) has typically been below the Euro Area average during early 2025.18
The persistent disinflationary pressures observed in Italy, with inflation consistently below the ECB’s target for an extended period, suggest the presence of underlying economic factors. While the decline in energy prices is a significant contributing factor 10, the sustained low inflation, even in core measures, points to deeper structural issues. This phenomenon can be linked to factors such as weak labor productivity growth, which has averaged only 0.3% annually since 2010, and stagnant real wages, which were still 6.9% below pre-pandemic levels at the beginning of 2024.9 These factors collectively limit demand-side price pressures. While low inflation is generally beneficial for consumer purchasing power, persistent disinflation, particularly if it stems from structural weaknesses like low productivity and stagnant wages, could signal deeper economic issues that impede robust economic expansion. It can also make the challenge of reducing the high public debt-to-GDP ratio more difficult, as nominal GDP growth, which helps dilute debt, would be constrained.
2.3. Labor Market Overview
The unemployment rate in Italy declined to 5.9% in April 2025, a notable decrease from 6.1% in March and 6.7% in April 2024.11 This figure represents one of the lowest points observed in over a decade and is below the long-term average of 9.3%.26 Despite the overall positive trend, youth unemployment (for individuals aged 15-24) remains a concern, standing at 19.0% in March 2025, an increase from 17.3% in February.9 This rate is significantly higher than the overall unemployment figure.
Employment saw a 1.9% increase (+450 thousand persons) compared to March 2024, with growth observed across both sexes and for individuals aged 35 and over.28 The overall employment rate remained stable at 63.0% in March 2025.28 In Q1 2025, Italy recorded one of the highest increases in the employment rate among EU countries, rising by +0.7 percentage points.29 However, a significant structural challenge persists: female labor force participation remains considerably low, at just 41.3% of women aged 15-64 employed in 2024, which is “well below the EU average”.9
In comparison with the Euro Area, Italy’s unemployment rate (5.9% in April 2025) is marginally lower than the overall EU average (5.9%) and the Euro Area average (6.2%) for the same period.31
While Italy’s headline unemployment rate is at a decade-low and compares favorably to the EU average 26, a closer examination reveals a dual reality within the labor market. The persistently high youth unemployment and the significantly low female labor force participation rate indicate that the benefits of overall labor market improvements are not uniformly distributed. The “Jobs Act” reforms, which the Meloni government has chosen not to reverse despite a failed referendum attempt 34, aimed to liberalize the labor market but have been criticized for contributing to an increase in precarious employment.35 This suggests that while overall employment figures are positive, deeper structural issues in fully integrating younger workers and women into stable, productive employment persist. The substantial untapped potential within Italy’s youth and female labor force, if effectively addressed through targeted reforms (e.g., improved childcare support, vocational training, policies reducing precariousness, and better skill-matching), could provide a significant boost to Italy’s long-term growth and productivity. This is particularly crucial given the country’s demographic headwinds.10 The failure of the recent labor law referendums 34 indicates a political preference for maintaining existing labor market flexibilities, which may not fully resolve these underlying structural challenges.
2.4. Public Finances: Debt and Deficit
Italy’s public debt stood at 134.8% of GDP in 2023 and slightly increased to 135.3% in 2024.5 Projections indicate a continued rise to 136.7% in 2025 and 138.2% in 2026.24 The government deficit to GDP ratio decreased from 7.2% in 2023 to 3.4% in 2024.27 The government itself revised its 2024 deficit estimate downwards to 3.8% from an earlier 4.3%.38 The government forecasts a deficit of 3.6% in 2025 and a return to 2.9% in 2026.39 However, the EU Commission’s projections suggest Italy will exceed the 3% threshold in 2025 (at 3.3%) before returning to 2.9% in 2026.40
The “Superbonus” and “Facade Bonus” tax credits have been identified as a major factor contributing to the significant increase in public debt. These schemes were revised upwards and estimated at 2.8% of GDP 39, with the final cost potentially exceeding €100 billion, or about 5% of GDP.41 This program is explicitly cited as a primary reason for the “debt-increasing stock-flow adjustment”.24
The EU’s Ecofin Council initiated an excessive deficit procedure against Italy in June, explicitly recommending that Italy rectify this situation by 2026. This mandates bringing the deficit/GDP ratio back within the 3% threshold.42 Given the government’s own projections, the Italian public deficit is expected to remain above 3% of GDP in 2024 and 2025, only falling below the threshold in 2026.39 This scenario implies a “high probability” of an excessive deficit procedure being formally opened against Italy by the European Commission, unless a new economic governance system is adopted.39 The EU has also imposed specific nominal spending limits on Italy: net spending should not exceed 1.3% in 2025 and 1.6% in 2026.42
In comparison with the Euro Area, Italy’s debt-to-GDP ratio (136.3% in Q3 202443) remains the second highest in the EU, significantly above the Euro Area average of 88.2% in Q3 2024.27 The Euro Area’s government deficit to GDP ratio stood at 3.2% in Q4 2024.44
The Superbonus scheme, while providing a short-term boost to the construction sector, has created a massive and lingering fiscal burden, estimated at over €100 billion or 5% of GDP.41 This directly contributes to the increase in public debt and makes the task of deficit reduction significantly more challenging.24 Analysts from IEP Bocconi explicitly state that the government’s optimistic growth forecasts 39 are unrealistic, which could jeopardize even a “symbolic reduction” in public debt.39 The EU’s strict demands for deficit correction by 2026 42 place immense pressure on the Meloni government, necessitating a fiscal tightening that could potentially constrain economic growth.4 The Superbonus represents a significant fiscal policy misstep that has effectively locked Italy into a challenging fiscal consolidation path. The government faces a critical dilemma: balancing the stringent demands from the EU for austerity with the domestic imperative for economic growth and the fulfillment of political promises. Failure to meet the EU’s targets could lead to significant fines and a loss of fiscal flexibility, further exacerbating the country’s already precarious debt sustainability.42 This situation forces Italy onto a “fiscal tightrope walk,” where any misstep or external shock could have severe and immediate repercussions for its financial stability.
2.5. Trade and Investment Landscape
Italy’s current account strengthened to a surplus exceeding 1% of GDP in 2024.10 This surplus is projected to stabilize around 1.0% of GDP in the coming years.17 However, exports are anticipated to decrease in the current year (2025) and are only expected to return to growth in 2026, and even then, at a slower pace than foreign demand. This is attributed to a loss of competitiveness caused by exchange rate appreciation and the impact of restrictive trade policies.17 Conversely, imports are likely to expand to a greater extent, particularly in 2025, supported by resilient domestic demand.17 Productive investments have shown robust growth, increasing by 17.8% relative to 2019, outperforming France, Spain, and Germany in this regard.47
Gross fixed investments in Italy exhibited significant growth from Q1 2019 to Q3 2024, rising from €81.5 billion to over €107 billion, representing an increase of 31.6%.13 Investment is expected to receive a boost from the accelerated implementation of projects under the National Recovery and Resilience Plan (NRRP).17 However, investment is also being held back by heightened uncertainty and the phasing out of incentives for residential building renovation, such as the Superbonus.17
The dynamic between investment-driven growth and trade headwinds is a defining feature of Italy’s current economic landscape. Italy’s recent economic performance has been significantly supported by robust investment, particularly under the impetus of the NRRP.10 This indicates a positive shift towards strengthening the supply side of the economy. However, the outlook for exports is less favorable, with projections of decline due to global trade tensions and issues of competitiveness.17 This creates a critical tension where domestic investment must largely compensate for external economic weakness. The gradual phasing out of generous incentives like the Superbonus could also dampen private construction investment 17, making the effective and timely implementation of NRRP projects even more crucial for sustaining overall investment levels. Italy’s near-term economic resilience and its ability to achieve projected growth rates are heavily dependent on its capacity to efficiently deploy NRRP funds to drive productive investment. Failure to maximize the benefits of the NRRP or a significant escalation of global trade tensions could severely undermine growth prospects, potentially exacerbating fiscal challenges.
3. Key Economic Policies and Reforms
3.1. Fiscal and Budgetary Measures
The Meloni government has consistently aimed to project an image of fiscal discipline and responsibility to both the European Union and financial markets.7 This approach has been acknowledged by Finance Minister Giancarlo Giorgetti, who attributed Moody’s positive outlook revision to the government’s “serious and silent work”.48 The government has formally confirmed its objective to reduce net borrowing to less than 3% of GDP by 2026.38 It also forecasts achieving a primary surplus of 0.1% of GDP in 2024, which it considers a “moral achievement”.38
Despite these stated objectives, challenges persist. The outgoing Bank of Italy governor, Ignazio Visco, urged the government to reduce the fiscal deficit and implement reforms to boost growth, noting that recent surges in Italy’s borrowing costs reflected investor concerns about weak long-term growth prospects and the country’s high debt.41 Analyses from institutions like IEP Bocconi suggest that the government’s projections for deficit and debt reduction are based on “overly optimistic” macroeconomic assumptions, which increases the risks to debt sustainability.39 Furthermore, the EU has imposed specific nominal spending growth limits on Italy (1.3% in 2025, 1.6% in 2026) as part of its excessive deficit correction procedure.42
There is a notable divergence between the positive market sentiment, reflected in Moody’s outlook upgrade 27, and the more cautious assessments from independent economic bodies like IEP Bocconi and, implicitly, the Bank of Italy. While the government emphasizes its “serious and silent work” and the “moral achievement” of a primary surplus 38, external analyses point to “overly optimistic forecasts” regarding GDP growth and privatization revenues.39 The significant and lingering cost of the Superbonus scheme 41 further complicates the fiscal picture. The EU’s imposition of strict spending limits 42 is a direct response to this perceived lack of realism and the necessity for external pressure to ensure genuine fiscal consolidation. This “credibility gap” suggests that while the Meloni government has managed to maintain short-term market confidence through its rhetoric and initial fiscal outperformance, the long-term fiscal trajectory remains precarious. Sustained market confidence is heavily reliant on the government achieving ambitious growth and privatization targets, which are viewed with skepticism by some experts.39 Any significant failure to meet these targets could quickly erode this confidence, leading to renewed market instability and potentially more stringent EU interventions, thereby limiting Italy’s policy autonomy.
3.2. Structural Reforms
The European Union continues to press Italy for the implementation of long-standing structural reforms, particularly in the areas of justice, public administration, and the cadastral system. Specific deadlines have been set, such as reducing pending court cases by Q4 2028, ensuring full vertical and horizontal mobility in public administration by Q4 2026, and updating cadastral mapping and property values by Q4 2027/2028.40 The EU has explicitly warned that failure to implement these reforms could result in a loss of fiscal flexibility for Italy.42
The effective and timely implementation of the National Recovery and Resilience Plan (NRRP) is deemed crucial for supporting higher and lasting economic growth.10 Investments channeled through the NRRP are expected to significantly boost overall gross fixed capital formation.17 The EU Commissioner for the Economy, Valdis Dombrovskis, has underscored the increasing importance of continuing with the NRRP’s implementation, especially given Italy’s position as the primary recipient of these recovery funds.42
The EU’s continued “dictation” of a specific reform agenda to Italy, complete with deadlines for long-standing issues 40, strongly indicates a historical pattern of slow or incomplete reform implementation in the country. The Meloni government’s stated focus on “immediate economic problems and cultural issues” 7 might suggest a potential de-prioritization of some deeper structural reforms compared to previous administrations. However, the EU’s explicit warning of “hard line” measures and the potential loss of fiscal flexibility 42 provides significant leverage, compelling the government to adhere to the reform commitments. Italy’s capacity to achieve sustained long-term economic growth and significantly improve its public finances is critically dependent on the successful and timely implementation of these structural reforms, particularly those linked to the NRRP. Any significant delays or political resistance to these reforms could jeopardize crucial EU funding, undermine investor confidence, and ultimately worsen the country’s long-term economic outlook, perpetuating the cycle of high debt and low productivity.
3.3. Industrial and Energy Policies
The government has made it a priority to protect and bolster Italy’s traditional industrial strengths, particularly in sectors such as mechanical engineering and textiles, while also supporting key industries like food and wine, luxury automotive, and high-tech.8 A cornerstone of the Meloni government’s industrial policy is the reshoring of Italian industries, facilitated by measures such as tax base reductions for companies that relocate their economic activities back to Italy from non-EU countries.8 The government also utilizes “golden power” – a special legal mechanism that grants it the authority to prevent the sale of domestic companies deemed strategically important to foreign entities.8
High energy costs are recognized as a major economic challenge for the government.49 Prime Minister Meloni has called for a pragmatic approach to the “historic challenge” of energy transition, advocating for a balanced energy mix that includes renewables (wind, solar), green hydrogen, biofuels, gas, carbon capture, and nuclear fusion.50 Italy has ambitious targets, aiming for 131.3 GW of installed renewable capacity by 2030 and seeking to meet at least 11% of its power demand with nuclear energy by 2050.50 Since taking office, the government has allocated approximately €60 billion to mitigate energy costs for families and businesses.51
The “Made in Italy” and reshoring initiatives, combined with the strategic use of “golden power” 8, clearly signal a strong industrial nationalist stance by the Meloni government. This approach is further highlighted by Meloni’s direct challenge to the EU Green Deal concerning the automotive sector, which she criticized as “excessively dogmatic and punitive” and as inadvertently benefiting non-EU economic competitors.8 This indicates a potential area of friction with broader EU policy, even as Italy seeks to maintain its credibility as an EU partner.51 The energy policy, while embracing ambitious renewable targets, also emphasizes the role of gas and nuclear power, suggesting a pragmatic, rather than purely ideological, approach to decarbonization that prioritizes energy security and economic viability.50 Italy’s industrial policy under the Meloni government is characterized by a strong protectionist and nationalistic bent. While this aims to strengthen domestic industries and retain industrial know-how, it could potentially lead to trade disputes or increased tensions with EU partners, particularly concerning environmental regulations and internal market principles. If not carefully managed, this approach might inadvertently limit Italy’s full integration and competitiveness within the broader single market.
3.4. Labor Market Initiatives
The government has implemented various initiatives aimed at providing hiring incentives, supporting businesses that create jobs, and mitigating certain inflexibilities within the labor market, all while aiming to maintain worker safeguards.52 A significant portion of the government’s limited resources has been invested in reducing social security contributions and the overall tax wedge by as much as seven points.52 Additionally, benefits have been expanded for approximately 1.3 million workers earning between €35,000 and €40,000 annually.52
Regarding youth and female employment, measures include extending parental leave and providing tax relief for working mothers, aimed at making parenthood more compatible with personal and professional fulfillment.52 The government is also addressing the skills mismatch between job seekers and industry demands through reforms in education systems, technical-vocational training, and career guidance, including the creation of a ‘Made in Italy’ high school.52
In June 2025, a union-backed referendum sought to roll back specific provisions of the 2016 Jobs Act, particularly concerning protections against unlawful dismissals, restrictions on fixed-term contracts, and joint liability in subcontracting.34 The Meloni government actively opposed these proposed changes and encouraged voter abstention. The referendum ultimately failed due to very low voter turnout (approximately 30% compared to the required 50% plus one quorum).34
The government’s stated policy is to “mitigate inflexibilities in the labour market, without this leading to less safeguards for workers”.52 However, its active and successful opposition to the union-backed referendums, which aimed to restore worker protections that critics argue were eroded by the 2016 Jobs Act 34, suggests a clear preference for maintaining or even enhancing labor market flexibility. The successful boycott of the referendum 34 strengthens the government’s position on the existing labor market framework. While tax cuts on productivity bonuses and social security contributions are positive for workers’ take-home pay 52, the underlying structural issues of high youth unemployment and low female labor force participation 9 persist, indicating that current initiatives might not be sufficient to address these deeper challenges. The government is likely to continue its current approach to the labor market, focusing on incentives and tax reductions rather than fundamental reversals of the Jobs Act. This strategy could maintain a degree of labor market flexibility, which some argue is necessary for competitiveness. However, it may not fully resolve the deeper structural issues contributing to youth and female labor inactivity, which are crucial for boosting long-term productivity and addressing Italy’s severe demographic challenges. The political outcome of the referendum also signals a continued push for a more business-friendly labor environment.
4. Economic Outlook and Projections (2025-2027)
4.1. GDP Growth Forecasts
Forecasts from various leading institutions generally converge on a path of subdued but positive GDP growth for Italy in the coming years.
Italy GDP Growth Forecasts (Annual % Change)
| Source | 2025 | 2026 | 2027 |
| ISTAT | 0.6% | 0.8% | N/A |
| IMF | 0.4% | 0.8% | 0.7% |
| OECD | 0.6% | 0.7% | N/A |
| Bank of Italy | 0.6% | 0.8% | 0.7% |
| European Commission | 0.7% | 0.9% | N/A |
Data Sources: ISTAT 11, IMF 10, OECD 46, Bank of Italy 17, European Commission 24
These forecasts consistently point to consumption recovery as a primary driver, buoyed by favorable trends in household purchasing power and lower interest rates.17 Investment is also expected to be boosted by the accelerated implementation of NRRP projects.17 Conversely, trade flows are anticipated to have a negative impact on growth in both 2025 and 2026.11
The strong consensus among these institutions for moderate GDP growth, generally ranging between 0.4% and 0.9% for the 2025-2027 period, signals a period of subdued, yet positive, economic expansion. This broad agreement suggests a shared understanding of the underlying economic forces at play. The primary drivers are expected to be domestic consumption and investments bolstered by the NRRP, while external trade is projected to act as a drag.11 The IMF explicitly highlights “heightened uncertainty” and “global trade policy uncertainty” as factors dampening the near-term outlook.10 Italy’s economic future is heavily reliant on internal demand dynamics and the successful execution of the NRRP. External shocks, particularly an escalation of trade tensions (e.g., US tariffs) 11, pose significant downside risks, as they could further undermine exports and investments, which are already projected to be weak. The consistently moderate growth forecasts suggest that Italy will continue to face challenges in significantly reducing its high public debt-to-GDP ratio through economic expansion alone, necessitating rigorous fiscal consolidation.
4.2. Inflation Projections
Inflation in Italy is projected to remain low, generally around or below the ECB’s target.
Italy Inflation Rate Forecasts (Annual % Change, Average Consumer Prices)
| Source | 2025 | 2026 | 2027 |
| Bank of Italy | 1.5% | 1.5% | 2.0% |
| IMF | 1.7% | 2.0% | N/A |
| European Commission | 1.8% | 1.5% | N/A |
| Trading Economics | N/A | 1.70% | 1.90% |
Data Sources: Bank of Italy 17, IMF 10, European Commission 24, Trading Economics 18
These projections are largely influenced by assumptions of lower energy prices and moderate wage growth.10 Unit labor cost pressures are expected to ease significantly over the next two years.17 A potential temporary increase in consumer price inflation to 2% in 2027 is foreseen due to the extension of the EU Emissions Trading System 2 (ETS2) to motor fuels and heating fuels for buildings.17
All major forecasting bodies consistently predict that Italy’s inflation will remain low, generally below or around the ECB’s 2% target, for both 2025 and 2026. A slight uptick is projected for 2027, primarily due to the ETS2.17 This reinforces the observation of persistent disinflationary pressures within the Italian economy, largely driven by declining energy prices and moderate wage growth.10 While a low and stable inflation environment is generally beneficial for consumer purchasing power and economic stability, it also means that nominal GDP growth will be limited. For a highly indebted country like Italy, this can make the task of reducing the public debt-to-GDP ratio more challenging, as debt is diluted less rapidly. Furthermore, the consistent forecast of low inflation suggests that the European Central Bank’s (ECB) monetary policy tightening has had a significant impact, and future interest rate cuts could be on the horizon, potentially providing some stimulus to domestic demand.
4.3. Unemployment Rate Outlook
The outlook for Italy’s labor market remains positive, with unemployment rates projected to stay low.
Italy Unemployment Rate Forecasts (Annual %)
| Source | 2025 | 2026 | 2027 |
| ISTAT | 6.0% | 5.8% | N/A |
| IMF | 6.7% | N/A | N/A |
| OECD | 6.1% | 6.1% | N/A |
| Bank of Italy | N/A | N/A | 6.0% |
| European Commission | 5.9% | 5.9% | N/A |
Data Sources: ISTAT 11, IMF 54, OECD 46, Bank of Italy 17, European Commission 24
Despite the moderate GDP growth forecasts, the unemployment rate is generally projected to remain low or even decrease slightly across all major institutional forecasts. This consistent projection indicates a resilient labor market, which is a significant positive for social stability and a crucial support for domestic demand. The continued, albeit slower, growth in employment is also expected to lead to a slight recovery in labor productivity.17 A strong labor market provides a vital buffer against potential economic slowdowns and directly supports consumer confidence and spending, which are identified as key drivers of Italy’s projected growth. However, the persistent challenges of high youth unemployment and low female labor force participation (as detailed in Section 2.3) suggest that while headline figures are positive, the benefits of this resilience are not evenly distributed. Addressing these specific structural issues remains crucial to unlock Italy’s full labor potential and ensure more inclusive growth.
4.4. Public Debt and Deficit Trajectory
The government aims for a deficit of 3.6% of GDP in 2025 and 2.9% in 2026.39 The European Commission’s projections are broadly similar, at 3.3% in 2025 and 2.9% in 2026.40 However, public debt is projected to continue its upward trend, reaching 136.7% in 2025 and 138.2% in 2026.24
Italy faces continued fiscal challenges, particularly concerning its high public debt and deficit. Despite government efforts to project fiscal discipline and achieve a primary surplus, the underlying economic forecasts from independent bodies are often more conservative than the government’s own projections. The significant lingering cost of the Superbonus scheme continues to exert upward pressure on public debt, making the task of fiscal consolidation more arduous. The European Union’s ongoing scrutiny, manifested through the excessive deficit procedure and imposed spending limits, underscores the urgency for Italy to demonstrate a credible and sustainable path to fiscal health. Failure to meet these commitments could lead to more stringent EU interventions, limiting Italy’s fiscal flexibility and potentially impacting investor confidence. The trajectory of public debt remains a critical vulnerability for the Italian economy.
5. Conclusions
The Italian economy under the Meloni Government has exhibited a complex performance, marked by moderate growth, resilient labor market conditions, and a significant easing of inflation. The government, sworn in October 2022, has prioritized fiscal discipline in its engagement with European partners while simultaneously pursuing a more nationalistic industrial agenda.
Key economic indicators show a mixed picture. GDP growth, while positive, has slowed and is projected to remain subdued through 2027, primarily driven by domestic demand and NRRP investments, but constrained by negative contributions from trade flows. Inflation has largely remained below the ECB’s target, reflecting a disinflationary trend influenced by lower energy prices and moderate wage growth. The labor market has shown remarkable resilience, with unemployment rates reaching multi-decade lows, yet structural issues such as high youth unemployment and low female labor force participation persist, representing significant untapped potential.
The government’s fiscal policy faces a critical juncture. While efforts to reduce the deficit have yielded some results in 2024, the legacy of the Superbonus scheme continues to weigh heavily on public debt, which is projected to increase further. The European Union’s intensified scrutiny and the imposition of specific spending limits highlight the imperative for Italy to demonstrate a credible and sustainable fiscal path. The government’s ability to navigate these fiscal constraints while fostering growth will be pivotal.
Structural reforms, particularly those mandated by the EU and linked to the NRRP, are essential for unlocking Italy’s long-term growth potential and improving its public finances. The government’s stance on industrial policy, emphasizing “Made in Italy” and reshoring, suggests a nationalistic approach that could create friction with broader EU policies if not carefully managed. Similarly, the government’s preference for labor market flexibility, as evidenced by its opposition to union-backed referendums, indicates a continued reliance on existing frameworks to drive employment, even as deeper labor market disparities persist.
In conclusion, Italy’s economic outlook to 2027 is characterized by moderate growth, stable inflation, and a resilient labor market. However, the nation remains on a fiscal tightrope, balancing the demands of debt reduction with the need for economic stimulus. The successful implementation of the NRRP and a sustained commitment to structural reforms will be paramount in addressing long-standing challenges and ensuring a more robust and inclusive economic future for Italy. The interplay between domestic policy choices and external pressures, particularly from the EU and global trade dynamics, will continue to shape Italy’s economic trajectory.
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