On July 18, the Executive Board of the International Monetary Fund (IMF) concluded its Article IV Consultation with Italy. The Italian authorities have agreed to publish the Staff Report prepared for this consultation.
Italy's economy has shown moderate growth, with real GDP increasing by 0.7% in 2024. This was supported by spending under the National Recovery and Resilience Plan (NRRP) and positive net exports. Despite global trade policy uncertainties, economic activity in early 2025 remained resilient due to continued investment growth and a strong labor market. Headline inflation rose to just below 2% in June, while credit to households improved, and corporate credit contraction eased. Although public-sector deficit and debt ratios were better than expected in 2024, challenges such as high public debt, weak productivity growth, an aging population, low female labor force participation compared to EU averages, and regional disparities persist.
Growth is expected to slow to 0.5% in 2025 before temporarily rising to 0.8% in 2026 due to increased NRRP-related spending and trade benefits from Germany. Inflation is projected at an average of 1.7% this year before aligning with the ECB's target of 2% by 2026. However, risks include potential delays in NRRP implementation, escalating trade tensions, intensified regional conflicts, tighter global financial conditions leading to higher financing costs, and climate-related disruptions.
The IMF Executive Directors acknowledged Italy's economic resilience supported by strong policies but emphasized that structural challenges like weak productivity growth and rapid population aging need urgent attention through accelerated reforms.
Directors praised Italy's fiscal performance last year but stressed the importance of reducing high public debt through sustained consolidation efforts within a medium-term fiscal plan aligned with EU frameworks. They recommended improving tax compliance, rationalizing expenditures, replacing inefficient subsidies with productive measures while maintaining new spending balance through savings elsewhere.
Directors noted improvements in banking sector soundness but urged continued vigilance over loan quality amid uncertainty while addressing vulnerabilities among smaller institutions according to FSAP recommendations.
They also highlighted ongoing reforms under NRRP as crucial for enhancing productivity and innovation alongside skilled labor supply increases necessary for energy transition goals achievement at both national levels complemented by deepened EU integration fostering finance access improvement across sectors regionally coordinated industrial policies targeting market failures effectively addressing remaining issues constructively aligned strategically towards broader objectives collectively pursued proactively ensuring sustainable progress comprehensively achieved long term globally integrated economically viable solutions envisioned progressively realized ultimately fulfilled consistently delivering impactful results positively contributing significantly toward overall success attained collaboratively shared widely benefiting society holistically developed responsibly managed efficiently administered transparently executed diligently monitored continuously evaluated regularly updated 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