International Monetary Fund says Italy faces modest growth and urges about 1 percent of GDP in additional fiscal effort

The International Monetary Fund published a staff concluding statement for its 2026 Article IV mission to Italy, setting out preliminary findings that the economy faces a tougher near-term outlook from global uncertainty and higher energy prices, with GDP growth projected at 0.5 percent in 2026 and 2027. The statement calls for faster fiscal consolidation to reduce high public debt, says the financial system remains resilient but needs more proactive supervision and macroprudential policy, and urges continued reforms to lift productivity. Italy's headline deficit narrowed to 3.1 percent of GDP in 2025 and the primary surplus rose to 0.8 percent of GDP, but public debt increased to about 137 percent of GDP. IMF staff recommended additional fiscal efforts of about 1 percent of GDP over 2026-2027 beyond current plans, centered on tax base broadening, improved tax compliance, and spending efficiency, with any new spending fully offset and broad fuel excise relief replaced by targeted cash transfers. The 2026 Financial Sector Assessment Program found banks supported by record profits, good credit quality, solid capital, and ample liquidity, while calling for broader use of the Systemic Risk Buffer, continued attention to sovereign-financial sector linkages and legacy non-performing loans, and further progress on National Recovery and Resilience Plan implementation, labor participation and skills, and the green transition. Subject to management approval, IMF staff will prepare a report for discussion and decision by the IMF Executive Board.