Economy — Italy · Synthesis

Modest but resilient growth. Italian GDP grew by around 0.7% in 2024 (ISTAT), a weak pace but better than Germany (−0.2%), supported by construction (effect of renovation incentives) and European funds. However, long-term potential growth remains one of the lowest in the Union, constrained by demographics and productivity.

The euro area's second-largest debt. Public debt hovers around 135% of GDP (ISTAT/Eurostat), the second highest in the euro area after Greece. This debt, the legacy of decades of deficits and weak growth, makes Italy sensitive to rate movements and the spread with Germany — a permanent watchpoint.

A sharply reduced deficit. The public deficit, which rose to ≈ 7.2% of GDP in 2023 under the effect of the 'Superbonus' (an energy-renovation tax credit with a massive budgetary cost), fell back to around 3.4% of GDP in 2024 (ISTAT) with the phasing out of the scheme. Italy is subject to a European excessive deficit procedure.

The PNRR, a lever of modernisation. Italy is the largest beneficiary of the European recovery plan ('NextGenerationEU'), with a National Recovery and Resilience Plan (PNRR) worth nearly 200 billion euros. Its implementation (investments, reforms) is the main lever of modernisation and the main wager of the decade.

A dual productive fabric. The Italian economy combines a powerful and export-oriented manufacturing sector (notably in the North: mechanical engineering, fashion, agri-food) with a persistent structural gap between a developed North and an underdeveloped South ('Mezzogiorno') (SVIMEZ).

Delivering the PNRR. The central challenge is the effective implementation of the recovery plan (investments, reforms of justice, competition, and administration) within European deadlines. Its success conditions the lift in potential growth; deployment delays are a risk monitored by the UPB and Banca d'Italia.

Stabilising the debt. Controlling debt, in a context of weak growth and higher rates, is the dominant fiscal trade-off. The credibility of the trajectory conditions the spread and the cost of financing.

Demographics and productivity. Ageing (one of the most advanced in the world) and productivity stagnation weigh on growth potential. Immigration, female and youth employment, and investment are the identified levers (see Labour and Immigration categories).

Reducing the North–South gap. The Mezzogiorno's catch-up, via the PNRR and cohesion funds, is a long-term issue for growth and national cohesion (see Social Cohesion category).

The open questions. Three trade-offs will shape the period: (1) delivering the PNRR and the associated reforms; (2) stabilising the debt under rate constraint; (3) raising potential growth in the face of demographic headwinds.

Placed in its environment, Italy appears as an economy heavily indebted with weak potential growth, but one that has cleaned up its deficit and benefits from an important European lever.

Three takeaways. (1) Growth: modest but not last. At +0.7% in 2024, Italy underperforms France (+1.1%) but outperforms Germany (−0.2%), at a level close to the bottom of the European pack over the long term.

(2) Debt: among the highest. At ≈ 135% of GDP, Italian debt is the highest among the large countries in the panel, ahead of France (≈ 113%) and well above Germany (≈ 63%).

(3) Deficit: a notable clean-up. The sharp reduction in the deficit (from ≈ 7.2% to ≈ 3.4%) between 2023 and 2024, following the phasing out of the Superbonus, is a marked improvement — even if the deficit remains above the European threshold.