Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Italy's economy was heavily impacted by the global financial crisis and only emerged from recession in 2015; however, the country was one of the most affected by the COVID-19-induced crisis. After losing almost 9% in 2020, Italy’s GDP rebounded by an estimated 5.8% in 2021, on the back of private consumption and higher investments. The Italian economy is expected to embark on a stable and sustained expansion path this year (+4.2%), thanks to investments financed by EU’s Recovery and Resilience Facility (RRF), the easing of supply shortages, and an expansive budgetary policy. For 2023, the IMF forecasts a growth of 1.6% (2.3% according to the European Commission), a rate still sizeably higher than Italy’s long-term average.

The country’s primary budget (which excludes interest payments) is structurally positive; however, the interest cost on the government’s debt weighs heavily on Italy’s accounts, with the general government budget being structurally in deficit. This trend was exacerbated by the COVID-19-induced crisis (estimated at 4% of GDP in 2021 by the European Commission), which prompted a reduction in revenues from both direct and indirect taxes, as well as by increased government expenditure. Overall, the general government balance was negative by 7.1%. The global recovery and the phasing-out of COVID-related support measures should favour a gradual decrease of the deficit over the forecast horizon (3.8% this year and 3.3% in 2023 - IMF). The historically-high debt-to-GDP ratio spiked by more than 20pp in 2020, decreasing only marginally in 2021 (154.8%). Interest expenditure is set to steadily decline as a share of GDP in light of favourable financing conditions, benefiting the debt-to-GDP ratio which is expected to be around 150%. Being a net importer of energy, Italy’s inflation was pushed by rising global energy costs over the course of 2021, with headline inflation above 1.7%. A similar rate should be recorded this year (1.8%) before the index starts to decrease in 2023 (1.2% - IMF).

The unemployment rate, which has been on the rise since the global financial crisis, started dropping in recent years; however, it spiked in the aftermath of the global pandemic crisis, reaching 10.3% in 2021. The end of pandemic-relief measures (including the general dismissal ban and job retention schemes for workers in the manufacturing and construction sector) are expected to cause a marginal increase of the unemployment rate this year (11.6%), before falling to 11.4% by 2023 (9.2% as per the EU Commission estimates), amid a gradual rise in labour supply. Italy has high levels of youth unemployment (29.8% as of Sept. 2021 according to ISTAT), and regional inequalities between the highly industrialised and dynamic North and the poorer, rural southern “Mezzogiorno” areas are still high. Furthermore, Italy has to face a falling birth rate and a declining population. Italy’s GDP per capita (PPP) was estimated at USD 43,376 by the IMF in 2021, just below the EU-27 average (Eurostat).

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