IMF Executive Board Concludes 2025 Article IV Consultation with Italy
IMF News, July 22, 2025
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- Published: July 22, 2025
Economic performance and recent developments
- Real GDP grew 0.7 percent in 2024, supported by spending under the National Recovery and Resilience Plan (NRRP) and a positive contribution from net exports.
- In the first quarter of 2025, economic activity remained resilient with continued investment growth and a robust labor market.
- Headline inflation gradually increased to just below 2 percent in June 2025.
- Credit dynamics: credit to households has turned positive; the contraction in credit to corporates has eased.
- 2024 public-sector deficit and debt ratios turned out better than projected and enabled a return to a primary surplus.
- Persistent challenges: public debt remains high; productivity growth is weak; the population is rapidly aging; female labor force participation remains well below the EU average; regional disparities endure.
Outlook and risks
- Growth projections:
- Growth is projected to moderate to 0.5 percent in 2025.
- Growth is projected to pick up to 0.8 percent in 2026, supported by increased NRRP-related spending and positive trade spillovers from Germany.
- Inflation projections:
- Headline inflation is expected to average 1.7 percent in 2025.
- Headline inflation is expected to converge to the ECB’s 2 percent target in 2026.
- Risks:
- Upside: global growth acceleration; stronger gains from public investments and reforms.
- Downside: productivity growth could disappoint (for example, delayed NRRP implementation); escalation of trade tensions; intensification of regional conflicts; tightening global financial conditions and higher financing costs; macro-critical climate-related shocks.
Fiscal position and policy recommendations
- Recent outcome:
- 2024 fiscal outturn enabled a return to a primary surplus.
- Directors’ fiscal guidance:
- Sustained consolidation needed to place public debt on a clear downward path.
- Authorities’ commitment to a medium‑term fiscal plan that balances debt sustainability and investment needs and aligns with the EU fiscal framework was welcomed.
- Recommended fiscal measures:
- Continue to improve tax compliance.
- Rationalize tax expenditures.
- Replace inefficient subsidies with productivity‑enhancing measures.
- Any new spending measures should be compensated with savings elsewhere.
- Contain pension‑related pressures.
- Improve cost effectiveness of spending.
- De‑risk the public sector by reducing outstanding publicly guaranteed loans and strengthen transparency and monitoring of contingent liabilities.
Structural reforms and growth-enhancing measures
- Priority reforms to durably lift productivity and growth:
- Full and timely completion of the NRRP remains a priority.
- Successor reforms should build on NRRP lessons and focus on:
- Boosting productivity and innovation.
- Increasing the supply of skilled labor and labor participation.
- Advancing the transition to renewable energy and resilient energy infrastructure.
- Improve access to risk capital to revive private sector dynamism.
- Deepen EU‑level integration to improve access to finance.
- Ensure industrial policies are well‑targeted to address market failures and coordinated at the EU level.
- Support for green transition and energy security recommendations was broadly endorsed.
Financial sector and macroprudential stance
- Directors welcomed further improvement in banking sector soundness.
- Macroprudential policies should balance stability requirements with the need to support credit provision.
- Recommendations and cautions:
- Continue vigilance in monitoring loan quality and sovereign–bank links.
- Address remaining vulnerabilities among some less significant institutions.
- Continue efforts to address the 2020 FSAP recommendations and strengthen the AML/CFT framework.
Executive Board assessment and process
- Executive Directors agreed with the thrust of staff appraisal.
- They welcomed economic resilience, strong policies supporting continued growth, and record‑high employment.
- Directors stressed accelerating reform momentum to strengthen Italy’s growth trajectory as a key priority.
- It is expected that the next Article IV consultation with Italy will be held on the standard 12‑month cycle.
Key selected indicators (as reported)
- Real Economy (change in percent)
- Real GDP: 4.8 (2022); 0.7 (2023); 0.5 (2024); 0.8 (2025); 0.6 (2026); (2027 not shown)
- Final domestic demand: 2.3 (2022); 0.9 (2023)
- Exports of goods and services: 9.9 (2022); 0.2 (2023); 0.4 (2024); -2.4 (2025)
- Imports of goods and services: 12.9 (2022); -1.6 (2023); -0.7 (2024); -2.0 (2025)
- Consumer prices: 8.7 (2022); 5.9 (2023); 1.1 (2024); 1.7 (2025); 2.0 (2026)
- Unemployment rate (percent) 1/: 8.1 (2022); 7.7 (2023); 6.6 (2024); 6.7 (2025); 6.8 (2026)
- Public Finances
- General government net lending/borrowing 2/: -8.1 (2022); -7.2 (2023); -3.4 (2024); -3.3 (2025); -2.8 (2026); -2.7 (2027)
- Structural overall balance (percent of potential GDP): -8.7 (2022); -7.7 (2023); -3.5 (2024); -3.1 (2025); -2.6 (2026); -2.5 (2027)
- General government gross debt 2/: 138.3 (2022); 134.6 (2023); 135.3 (2024); 136.9 (2025); 138.4 (2026); 138.5 (2027)
- Balance of Payments (percent of GDP)
- Current account balance: -1.7 (2022); 0.1 (2023); 1.2 (2024)
- Trade balance: -1.8 (2022); 1.5 (2023); 2.6 (2024); 1.9 (2025); 2.1 (2026)
- Exchange Rate
- Exchange rate regime: Member of the EMU
- Nominal effective rate: CPI based (2000=100): 104.6 (2022); 108.2 (2023); 110.0 (2024)
Source: IMF Executive Board press release — IMF Executive Board Concludes 2025 Article IV Consultation with Italy (July 22, 2025).