Italy Upgrades 2026 GDP Growth to One Percent While Warning of 2027 Slowdown
Italy expects its gross domestic product to expand by 1.0% in 2026, marking an upward revision from earlier projections, though economists caution that international shocks threaten to stall momentum the following year. Il Sole 24 ORE reported that the positive revision stems from solid economic performance through the first half of the year, alongside contributions from the National Recovery and Resilience Plan, known as the PNRR.
The autumn forecasting report from Confindustria’s economic research center indicates that GDP growth will decelerate sharply to 0.6% in 2027. ANSA noted that the slowdown reflects weakness closing out 2026 and only a modest recovery at the start of the next year. Fixed gross investments are projected to grow by 3.3 in 2026 before cooling to 0.8 in 2027, according to data released by Confindustria. Confindustria’s autumn report also projects resident household consumption to grow by 1.1 in 2026 and 0.5 in 2027, collective consumption to hold flat at 0.0 in 2026 before contracting by -0.3 in 2027, exports of goods and services to increase by 2.9 in 2026 and 1.7 in 2027, and imports of goods and services to rise by 3.4 in 2026 and 1.5 in 2027. Total employment measured in full-time equivalents (ULA) is forecast to increase by 1.0 in 2026 and 0.4 in 2027, while total employment in terms of persons is projected to grow by 0.8 in 2026 and 0.3 in 2027. Consumer prices are expected to rise by 3.2 in 2026 and 2.2 in 2027. Public administration net borrowing is projected at 2.9% of GDP for 2026 and 2.8% for 2027, with public debt estimated at 137.9% of GDP in 2026 and 138.0% in 2027.
Energy Vulnerabilities and the Strait of Hormuz Threat
Energy costs remain the primary vulnerability for Italian industry, according to Confindustria’s analysis. The baseline economic forecast assumes that a diplomatic or political resolution to the United States-Iran conflict will emerge following the U.S. midterm elections, allowing normal maritime transits through the Strait of Hormuz to resume by January.
If those shipping lanes remain disrupted and push Brent crude prices to an annual average of $126 per barrel in 2027—compared to $75 in the baseline scenario and $94 this year—the anticipated GDP growth for 2027 could be entirely wiped out. Corriere della Sera detailed that a similar washout of economic growth would occur if oil averages $115 per barrel alongside natural gas prices hitting 89 euros per megawatt-hour, well above the 58-euro baseline.
Public Finances Face Downside Risks Amid Retrenchment
Italy’s broader public finance framework remains exposed to downside risks driven by global economic uncertainty, despite recent resilience bolstered by Pnrr spending. Teleborsa reported that Istat officials outlined these vulnerabilities during a parliamentary hearing on the Programmatic Document for Public Finance before the budget committees of the Chamber of Deputies and the Senate. According to Istat, an upward trend in energy raw material prices would reduce GDP by 0.1 percentage points compared to the baseline scenario in both 2027 and 2028, with no significant effects in 2029. In a scenario simulating a worsening of financial conditions, Istat noted that the GDP slowdown would be milder than outlined in the Public Finance Programmatic Document, registering no effect in 2027 and a 0.1 percentage point reduction in GDP compared to the reference scenario in both 2028 and 2029.
Adding to fiscal and competitive pressures, the EU Emissions Trading System continues to weigh heavily on domestic manufacturers. Confindustria highlighted that while emissions across Italy’s ETS-regulated manufacturing sector fell by 43% between 2005 and 2025, that reduction largely coincided with the closure of 386 industrial plants—averaging 19 closures per year.
| Economic Indicator | 2026 Projection | 2027 Projection |
|---|---|---|
| Gross Domestic Product (GDP) | 1,0 | 0,6 |
| Resident Household Consumption | 1,1 | 0,5 |
| Collective Consumption | 0,0 | -0,3 |
| Fixed Gross Investments | 3,3 | 0,8 |
| Exports of Goods and Services | 2,9 | 1,7 |
| Total Employment (ULA – Full-Time Equivalents) | 1,0 | 0,4 |
| Consumer Prices | 3,2 | 2,2 |
| Public Administration Net Borrowing (% of GDP) | 2,9% | 2,8% |
| Public Administration Debt (% of GDP) | 137,9% | 138,0% |