Italy GDP

Economic growth is stable in the first quarter of 2026

Upwardly revised GDP growth confirms resilient momentum: According to a second release, Italy's GDP expanded 0.3% in working-day and seasonally adjusted quarter-on-quarter terms in Q1, up from the 0.2% initially estimated. This leaves economic growth in the first quarter of 2026 unchanged from the prior quarter's reading. In working-day and seasonally adjusted year-on-year terms, GDP expanded 0.8% in Q1, following a 0.9% expansion in the previous quarter.

Net exports underpin economic growth: Compared with the previous period's data, figures in Q1 improved for private consumption (+0.5% on a seasonally adjusted quarter-on-quarter basis vs +0.1% in Q4) and exports of goods and services (+2.2% vs -1.0% in Q4). In contrast, readings worsened for government consumption (0.0% vs +0.2% in Q4), fixed investment (+0.7% vs +1.0% in Q4) and imports of goods and services (-0.7% vs +1.3% in Q4). The second estimate confirmed that the external sector was the engine of growth: Goods exports were likely boosted by stronger-than-expected momentum in pharmaceutical shipments, while services sales benefited from tourism inflows linked to February’s Winter Olympic Games. Meanwhile, domestic demand performed better than initially estimated, with household spending accelerating from the previous quarter likely due to a lower unemployment rate.

Iran energy price shock to weigh on GDP growth: Our Consensus is for GDP growth in Q2 to slow from the prior quarter’s reading for the first time in a year. The Iran energy price shock will erode household consumption and economic activity; this is already evident in consumer sentiment, which averaged lower in April–May than in Q1. That said, fixed investment should remain robust due to a pickup in infrastructure spending as the August deadline of the EU-funded national recovery plan nears. Higher-for-longer energy prices pose a downside risk.

Panelist insight: Commenting on the outlook, Credit Agricole’s Sofia Tozy stated: “Based on our assumptions, growth in 2026 will be significantly impacted by the energy shock, with an estimated impact of -0.6 percentage points compared to a scenario without the blockade of the Strait of Hormuz […]. The inflationary shock will be transmitted [to the economy] primarily through household income. Real disposable income, which had barely recovered to its pre-energy crisis level, will deteriorate again due to rising prices. Wage gains will only slightly compensate for this loss of purchasing power. In this context, precautionary behavior will remain prevalent, or even intensify, maintaining the savings rate at a high level.”

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Italian GDP projections for the next ten years from a panel of 55 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. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable GDP forecast available for Italian GDP.

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