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 2,302 billion in 2023.
Nominal GDP of USD 2,368 billion in 2024.
Nominal GDP of USD 2,368 billion in 2024.
GDP per capita of USD 40,157 compared to the global average of USD 10,589.
GDP per capita of USD 40,144 compared to the global average of USD 10,589.
GDP per capita of USD 39,013 compared to the global average of USD 10,589.
Average real GDP growth of 1% over the last decade.
Average real GDP growth of 1% over the last decade.
Average real GDP growth of 1% over the last decade.
Sector Analysis
In 2022, services accounted for 64.9% of overall GDP, manufacturing 15.7%, other industrial activity 17.5%, and agriculture 1.9%. Looking at GDP by expenditure, private consumption accounted for 59.6% of GDP in 2023, government consumption 18.1%, fixed investment 20.9%, and net exports 1.4%.International trade
In 2023, manufactured products made up 79.8% of total merchandise exports, mineral fuels 3.6%, food 10.1%, ores and metals 2.4% and agricultural raw materials 0.6%, with other categories accounting for 3.5% of the total. In the same period, manufactured products made up 65.8% of total merchandise imports, mineral fuels 14.7%, food 10.6%, ores and metals 4.8% and agricultural raw materials 1.6%, with other goods accounting for 2.5% of the total. Total exports were worth USD 623.50 billion in 2024, while total imports were USD 554.30 billion.Main Economic Indicators
Economic growthThe economy recorded average annual growth of 1.0% in the decade to 2024. 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 averaged 4.6% of GDP in the decade to 2023. 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
The unemployment rate averaged 10.0% in the decade to 2024. 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
Inflation averaged 1.9% in the decade to 2024. 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
Euro Area monetary policy rate ended 2024 at 3.15%, up from 0.05% a decade earlier. 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
From end-2014 to end-2024 the euro weakened by 20% vs the U.S. dollar.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
Sequential GDP growth improved from Q4 in Q1, marking the strongest result in two years. In Q2, the economy likely lost some momentum. Higher global trade frictions will have dented external demand, and hit Italy directly given the U.S.’ especially high tariffs on cars and steel, which make up roughly 10% of Italy’s outbound goods shipments. On the flipside, private consumption growth should have remained supportive; inflation remained around the ECB's 2.0% target in April–May, and the seasonally adjusted unemployment rate declined from Q1 in April. In other news, Italy recently pledged to hike defense spending to 5.0% of GDP by 2035, boding well for government spending. That said, this is likely to harm the fiscal position of the country, which is currently under the European Commission’s excessive deficit procedure and which holds one of the world’s highest debt-to-GDP ratios.Italy Economic Forecasts
Projections out to 2034.55 indicators covered including both annual and quarterly frequencies.
Consensus Forecasts based on a panel of 52 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 52 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.