ROME, Italy / AsiaWire.IO / – As of October 2026, Italy’s economic outlook suggests a growth of 1% in 2026, based on fresh estimates from the Bank of Italy. The institution increased its forecast for this year in its latest Economic Bulletin, which was published on October 16. The central bank anticipates a slowdown to 0.7% in 2027 and a slight rise to 0.8% in 2028. It also warned that rising oil prices and heightened inflation could still disrupt this growth trajectory.
The projection for 2026 marks a 0.4 percentage point increase compared to the forecasts issued in June. Meanwhile, the estimate for 2027 has been upgraded by 0.3 points, and the outlook for 2028 was reduced by 0.1 points. Once adjusted for working days, the growth rate for 2026 amounts to 0.9%. All projections rely on data available up to October 9. The 1% growth estimate aligns with the government’s Draft Budgetary Plan.
In its analysis, the bank noted that the Middle East crisis impacted Italy’s economy less than initially expected during the first two quarters of 2026. This was a primary factor behind the upward revision. Additionally, investments related to digital and energy transitions contributed positively. Tourism experienced a robust summer, and employment is forecasted to continue its upward trend over the coming years. The unemployment rate is expected to stay around 6% throughout the forecast period.
Potential Zero Growth Scenario in an Adverse Environment
Alongside its baseline forecast, the bank presented a less favorable scenario. In this case, a rapid rise in crude oil prices coupled with accelerating inflation could result in zero growth in 2026. Under such conditions, Italy’s GDP would contract by 0.3% in both 2027 and 2028. The bank highlighted the ongoing Middle East conflict as a major source of uncertainty, with prolonged tensions likely to sustain higher and more persistent inflation levels.
The baseline scenario assumes oil prices averaging $114 a barrel in the last quarter of 2026. Gas prices are expected to be €76 per megawatt hour in that period. Both are projected to decline over the subsequent two years. Additionally, higher market interest rates are anticipated to gradually impact loans to businesses and households. The European Central Bank lifted its deposit rate to 2.5% in September.
Rising Prices Signal a Slowdown in Consumer Spending
Inflation is forecasted to average 3.2% this year, mainly driven by energy costs. It is expected to decline to 2.4% in 2027 and further to 1.7% in 2028. Core inflation, which excludes energy and food, should hover around 2% throughout the forecast period. The bank predicts household spending will slow down in the second half of 2026 and into 2027, as rising prices will negatively impact real incomes during this period.
Later in the forecast horizon, spending is projected to recover. However, business investment is expected to diminish significantly in 2028 due to higher borrowing costs. Exports are forecasted to benefit from sustained demand in Italy’s key markets, yet growth is likely to be slower than the expansion of global trade. Since high-tech goods related to AI dominate international trade, and Italian companies have a limited share in this segment, export growth might lag behind global trends. The bank plans to revise its projections in December as part of the Eurosystem exercise.