THE’Italian economy will grow less than expected last fall. The spring economic forecasts released in the last few hours, on May 21, 2026, by European Commission indicate that in 2026 the gross domestic product (gdp) of Italy will record an increase of 0.5%, against the 0.8% previously estimated. The data have also been revised downwards for 2027: growth will stand at 0.6%, two decimals less than the latest projections.
The weight of the conflict in the Middle East
According to Brussels’ analysis, the reduction in estimates is mainly caused by the impact of the conflict in the Middle East, which negatively affects all internal and external demand. Household consumption will slow down due to the decrease in real disposable income, despite a slight decline in the savings rate. As regards investments, growth will slow down compared to 2025, penalized in particular by the housing sector. THE trade duties imposed by United States and the difficulties in various foreign markets will affect the export of goods, with an overall negative impact on the GDP.
Latest for growth
New data indicates that in 2027 Italy will be the last country in the European Union for economic growth. Together with Belgium and Germany, which are both expected to grow at 0.9%, Italy is the only member state to remain below the 1% threshold. Immediately above this share are France and the Netherlands, for which Brussels expects a 1.1% increase in GDP. The overall average for European Union countries for 2027 is currently estimated at 1.4%.
Comparison with other countries
Spring forecast data shows a clear gap between the European economies with the highest growth rates and the main eurozone countries. The Commission’s estimates indicate that in 2027 the economy that will grow the most will be that of Malta, with a GDP increase of 3.6%. Ireland follows with 3.4%, Poland with 2.8% and Cyprus with 2.7%. Among the large economies of the continent, Spain stands out, for which growth of 1.9% is expected, a figure higher than the community average.
The trend of investments and the aftermath of Pnrr
During 2026, in Italy, investments in infrastructure and machinery will continue to receive support from the Recovery and Resilience Device (Pnrr) funds. However, Brussels signals that machinery will see a slowdown caused by geopolitical tensions and rising interest rates. The situation will partially change in 2027, when a slight acceleration in GDP is expected to +0.6% thanks to the reduction of the inflationary shock and a recovery in trade flows. In that year, however, the expiry of the Pnrr will lead to a decrease in construction activities and purchases of capital goods.
Inflation above 3% due to energy
The European Commission expects that theinflation in Italy it will rise to 3.2% in 2026, before falling to 1.8% in 2027. The acceleration of the current year is determined by the strong monthly increase in the prices of energy goods recorded starting from March, the effects of which are rapidly being transferred to services and other goods. In the following months, the moderation in the prices of energy raw materials should favor the general index returning below the 2% threshold, even if the prices of services and food goods will continue to maintain sustained dynamics.
Public accounts: stable deficit and increasing debt
As regards public finance, the relationship between deficit and GDP is estimated at 2.9% in both 2026 and 2027, down from 3.1% in 2025. In 2026 the increase in tax revenues will offset the growth in interest spending, which will rise by 0.3 points of GDP. In 2027, current spending will be pushed up by inflation-related pension costs, offset by the end of government projects. Pnrr. The ratio between public debt and GDP is instead expected to increase: it will rise to 138.5% in 2026 and 139.2% in 2027, from 137.1% in 2025. The tax credits granted in recent years for building renovations weigh on this dynamic.
Labor market and unemployment at 5.7%
THE’employment in Italy, after the slowdown already recorded in 2025, it will maintain a modest growth rate in the two-year period 2026-2027. The European Commission notes that the working age population is decreasing and that participation rates are tending to stabilise. In this context, the unemployment rate will fall to 5.7% in both 2026 and 2027. Wages will experience moderate growth, remaining below 3%, as the new price pressures will not be fully passed on to wages.