Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Italy's economy was heavily impacted by the global financial crisis and only emerged from recession in 2015; however, the country was one of the most affected by the COVID-19-induced crisis. After rebounding by 6.6% in 2021, the economy grew an estimated 3.2% in 2022 (IMF) thanks to solid growth in the first three quarters of the year, exceeding pre-COVID-19 levels in the second quarter of the year. Nevertheless, high energy prices impacted production in energy-intensive industries already in the last quarter of 2022, while falling real incomes due to high inflation, increasing interest rates and subdued export market growth contributed to a slowdown in the economy. Such conditions are expected to continue into 2023, as the Italian economy is forecast to enter a period of contraction, with a tangible recovery not to be expected before the second half of 2023. Overall, the IMF projects a negative growth of 0.2% this year and a rebound to 1.3% in 2024 when private consumption is set to pick up again.

The country’s primary budget (which excludes interest payments) is structurally positive; however, the interest cost on the government’s debt weighs heavily on Italy’s accounts, with the general government budget being structurally in deficit. The 2022 budget included deficit-increasing measures, consisting of a further reduction of the tax wedge on labour and several fiscal packages to mitigate the economic and social impact of high energy prices (valued at 2.6% of GDP by the EU Commission). Overall, the budget deficit was estimated at 5.7% in 2022, whereas in 2023 and 2024 the general government deficit is forecast to decrease to 3.6% of GDP (IMF). Italy has one of the highest debt-to-GDP ratios in the world, estimated at 147.2% in 2022 when interest expenditure increased to 4% of GDP (from 3.6% one year earlier), due to higher bond yields. The IMF expects public debt to remain stable this year (147.1% of GDP) before decreasing slightly in 2024 (146.1%). Being a net importer of energy, Italy’s inflation was pushed by rising global energy costs, reaching a record level of 8.7% in 2022. Consumer price inflation is expected to come down only gradually as energy price caps are phased out in 2023 and recent increases in energy and food prices are triggering wider price pressures. For 2023, the IMF forecasts the inflation rate at 5.2%, before falling further to 1.7% in 2024.

The unemployment rate, which has been on the rise since the global financial crisis, started dropping in recent years; however, it spiked in the aftermath of the global pandemic crisis. Overall, it decreased to 8.8% in 2022 (from 9.5% one year earlier - IMF). More recently, labour demand is decreasing in more energy-intensive sectors such as manufacturing and construction, hence the unemployment rate is expected to increase to 9.4% this year. Italy has high levels of youth unemployment (23.7% as of Sep. 2022 according to ISTAT), and regional inequalities between the highly industrialised and dynamic North and the poorer, rural southern “Mezzogiorno” areas are still evident. Furthermore, Italy has to face a falling birth rate and a declining population. Italy’s GDP per capita (PPP) was estimated at USD 51,062 by the IMF in 2022, just below the EU-27 average (USD 53,960).

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