The Bank of Italy’s latest Economic Bulletin raises its forecasts for Italian GDP growth to 0.9% in 2026 and 0.7% in 2027, upward revisions of 0.4 and 0.3 percentage points from June. Growth is projected at 0.8% in 2028. Inflation is expected to average 3.2% in 2026 as higher energy costs feed into fuel and utility prices, before declining to 2.4% in 2027 and 1.7% in 2028, while core inflation remains around 2%. Uncertainty remains high because of the Middle East conflict, commodity prices and tighter financial conditions. Italian GDP grew 0.2% in the second quarter, supported by household consumption and investment, but activity slowed slightly over the summer. Digital and energy transition investment, tourism and public works provided support, while higher energy costs weighed on household spending and firms. Employment remained broadly favorable, although increased labor force participation lifted unemployment to 6.1% in July and August, and wage growth stayed moderate. Credit growth strengthened over the summer, partly reflecting firms’ higher liquidity needs, but the expansion remained concentrated among medium-sized and large companies as lending to small firms continued to contract. The cost of new corporate loans increased, while mortgage rates were broadly stable. Under the government’s fiscal plans, the deficit is projected to fall to 2.9% of GDP in 2026 before rising to 3.4% in 2027, while public debt is expected to peak at 138.5% of GDP in 2027.
Bank of Italy raises 2026 and 2027 growth forecasts as energy shock lifts inflation
The Bank of Italy raised its GDP growth forecasts to 0.9% for 2026 and 0.7% for 2027, while projecting inflation of 3.2% this year because of higher energy costs. Growth slowed slightly over the summer, although employment and lending remained supportive. Geopolitical tensions, commodity prices and tighter financial conditions continue to cloud the outlook.