Italy’s economy, the third largest in the European Union by GDP after Germany and France, has shown stagnation over the past three decades, widening the gap with its best-performing European partners, maintaining an advantage over Spain. From 1995 to 2023, economic growth was limited, with the gap accelerating between 2010 and 2020. However, from 2019 to 2023, it is the only country to record growth above 1%, beating France (+0.6 %), Germany (+0.1%) and Spain (-0.9 %), showing potential improvement.
These among the conclusions of the report “The Economy in Italy: Macroeconomic Performance and Forecasts” edited by Francesco Baldi, Lecturer of Rome Business School’s International Master in Finance; Massimiliano Parco, Economist, Centro Europa Ricerche; and Valerio Mancini, Director of Rome Business School’s Divulgative Research Center.
A positive sign comes from the South of Italy, which, unlike other historical periods, outpaced the Center-North GDP growth at constant prices between 2019 and 2023.According to Svimez estimates, GDP in the South of Italy o grew by 3.7 percent over 2019, compared with +3.4 percent in the Center-North. Among the regions, Puglia stands out, with a real GDP increase of 8.1%, the highest among all Italian regions. Campania (+4.9%), Sicily (+4.3%) and Molise (+3.1%) also posted notable increases, while Basilicata is the only region in the South to show a decrease, at -5.7 %.
In 2023, Italy generated a GDP of 1.917 trillion euros, surpassing Spain by 604 billion, but with a gap of 648 billion compared to France and more than 1.6 trillion compared to Germany. Notably, the gap with Germany widened between 2010 and 2020, while Italy maintained a surplus compared to Spain. Between 2011 and 2019, Italy experienced zero average annual growth, while France, Germany and Spain showed increasing variations. However, from 2019 to 2023, Italy is the only country to record an average annual growth above 1%, beating France (+0.6%), Germany (+0.1%) and Spain (-0.9%).
Despite high public debt and some structural rigidities that continue to limit growth potential, Italy seems to have embarked on a path of greater stability, managing to narrow, at least in part, the gap with its main European partners,” says Francesco Baldi.
For 2024, with the exception of the European Commission, forecasters agree on an increase of 0.5%. Looking ahead, the European Commission predicts GDP growth of 1% in 2025 and 1.2% in 2026. The Bank of Italy and ISTAT estimate a growth rate of 0.8% for 2025, while CER projects 0.6%. For 2027, the most optimistic forecast comes from the Bank of Italy, with GDP growth compared to 2023 at 3.3%, while for Centro Europa Ricerche and Prometeia, the growth would be 2.8% and 2.3%, respectively.
Looking at household and non-profit institutions serving households (NPISH) consumption, a sharp decline is evident in the first quarter of 2020, falling below €250 billion and reaching just over €220 billion in the second quarter of 2020, a decrease of 18.2% compared to the second quarter of 2019. This drop reflects the pandemic-related restrictions, reduced mobility, and economic uncertainty. After a gradual recovery, consumption surpassed pre-pandemic levels in the third quarter of 2022. The recent 2023-2024 biennium has shown moderate stability, with household consumption exceeding €275 billion in the third quarter of 2024, marking the highest point in the historical series. In terms of dynamics, household and NPISH final consumption recorded a 1.7% increase in the third quarter of 2024 compared to the first quarter of 2019.
Finally, public expenditure reached €91.4 billion, marking a 5.8% increase compared to the first quarter of 2019, recovering from the post-pandemic period. Italy now stands at a crossroads:
“On one hand, the PNRR funds offer a unique opportunity to transform the country’s economic and infrastructural fabric; on the other hand, risks remain related to administrative inefficiencies, delays in project implementation, and structural rigidities that could hinder the full utilization of available resources,” says Massimiliano Parco.
After the pandemic shock, gross fixed investments in Italy have shown significant growth, rising from €81.5 billion in the first quarter of 2019 to over €107 billion in the third quarter of 2024, marking an increase of 31.6%. The peak was reached in the fourth quarter of 2024, surpassing €110 billion, followed by a slight decline in the final quarters of the same year. Additionally, looking at foreign trade, the Italian economy maintained a positive trade balance, with imports of goods and services rising by 12.1%, from an average of €120.3 billion per quarter in 2019 to €134.8 billion in 2024. Exports, on the other hand, increased by a lower rate of 9.2%, from €139.2 billion to €152 billion in the average of the first three quarters of 2024. This dynamic negatively affected the current account balance, which fell from an average of €18.9 billion to €17.2 billion per quarter.
The energy transition in Italy, guided by the National Energy Strategy (SEN) and the Integrated National Energy and Climate Plan (PNIEC), aims to achieve 30% renewable energy in total consumption by 2030 and reduce CO₂ emissions by 33% compared to 2005. In 2024, the production of electric vehicles increased by 40% compared to 2022, with a 25% rise in charging infrastructure (ANFIA data, 2024). The PNRR has allocated over 59 billion euros for the ecological transition, with a focus on Southern Italy, where 60% of energy could come from renewable sources by 2030. According to the Institute for Energy and the Environment, projects carried out thanks to the PNRR could increase regional GDP by 5% and create over 200,000 new jobs by 2030. Finally, savings from reduced fossil fuel imports could reach 20 billion euros annually by 2030.
On the digital transition front, according to the latest Digital Economy and Society Index report, Italy ranks 18th in Europe, highlighting the need to accelerate technological adoption, especially among SMEs, which make up 99% of Italy’s business landscape. While these businesses are gradually integrating advanced technologies such as cloud-based management systems and data analytics tools, only 35% use advanced technologies, limiting the country’s competitiveness in the global market (Unioncamere, 2024).
The COVID-19 pandemic has accelerated the regionalization of supply chains, but Italian exports have shown resilience, growing by 12% in 2023 compared to 2019 (ISTAT, 2024). Key sectors such as precision mechanics and chemicals saw increases of 15% and 10%, respectively, driven by technological innovation and automation.
Emerging markets present crucial opportunities: Italian exports to sub-Saharan Africa grew by 20% between 2020 and 2023, thanks to sectors like textiles and agricultural machinery. Italian fashion represents 30% of the global luxury export market, solidifying the dominance of Made in Italy, while the food sector, with over 50 billion euros in annual exports, saw an 18% increase in DOP and IGP certified products in 2023 (Coldiretti, 2024). It’s worth noting the trade conflict between the USA and China, which has favored Italian exports to the United States, with a 25% increase in the fashion and furniture sectors.
Looking ahead, Italy must continue to capitalize on the economic progress made so far, addressing the structural challenges that still limit its potential.
“A sustained growth will require not only the effective implementation of the PNRR funds but also a concerted effort to reduce bureaucracy, improve digital and technical skills, and fully leverage the opportunities offered by the green and technological transition. The 2024-2027 period will be a decisive four years to turn positive signals into concrete and lasting results,” concludes Valerio Mancini