## Italy Needs Higher Productivity and More People Working

_IMF News, July 15, 2025_

## Source details

**Canonical URL:** [Italy Needs Higher Productivity and More People Working](https://www.imf.org/en/news/articles/2025/09/15/cf-italy-needs-higher-productivity-and-more-people-working)

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## Bibliographic details
- Published: July 15, 2025

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### Economic resilience and near-term outlook
- Italy’s economy remained relatively resilient despite global uncertainty.
- Key contributors to resilience:
  - Investment supported growth, notably through strong implementation of the National Recovery and Resilience Plan (NRRP).
  - Labor market improvements, including more jobs with permanent contracts.
  - Share of employed people as a percentage of the working-age population rose to a record high.
  - Diverse export goods and destinations provide some protection.
- Recent performance and projections:
  - Growth was 0.7 percent last year.
  - Projected growth is 0.5 percent this year.
  - Projected growth is 0.8 percent in 2026 when most NRRP infrastructure investments are expected to be completed.
- Fiscal outcome last year:
  - Primary surplus of 0.4 percent of GDP.

### Risks and structural constraints
- External and immediate risks:
  - Trade uncertainty and new tariffs on exports to the United States; recent data indicate trade is being impacted.
  - Intensification of regional conflicts that raise commodity prices; Italy depends on imported energy.
  - Extreme weather risks harming agriculture and tourism.
- Long-term structural constraints:
  - Population aging and weak productivity.
  - Working-age population is projected to decline by double digits between 2024 and 2050.
  - Shortage of highly skilled professionals limiting innovation and productivity.
  - Small innovative firms struggle to become large firms; constrained business dynamism and limited venture capital access.

### Policy recommendations to boost labor supply and productivity
- Labor force participation and human capital:
  - Boost women’s participation in the labor force (examples: increase childcare availability; remove tax disincentives for dependent spouses).
  - Lift skill levels through education and on-the-job training.
- Measures to support firm growth and innovation:
  - Develop policies to help private sector produce and adopt innovation more quickly so promising companies can grow.
  - Address constraints that prevent small firms from tapping venture capital and scaling up.
- Structural and EU-level actions:
  - Deepen the single market and the capital markets union to address fragmented European markets and increase effective market size.
  - Support EU-wide initiatives on artificial intelligence and other frontier technologies.
  - Pursue European labor mobility reforms to narrow the skills gap.
- Estimated impact of reforms:
  - A package that increases women’s participation, raises skill levels, and increases productivity could boost average annual growth by between 0.1 and 0.4 percentage points during 2025–2050.

### Fiscal strategy and recommendations
- Recent fiscal strength and medium-term goals:
  - Last year’s primary surplus: 0.4 percent of GDP.
  - Public debt was around 135 percent of GDP last year.
  - Government commitment shown in its medium-term fiscal-structural plan.
- Rationale for faster consolidation:
  - Projected interest rate on public debt will exceed economic growth, complicating debt reduction.
  - Aging population will increase pressure for spending on pensions and healthcare.
- Recommended fiscal target:
  - Deliver somewhat more consolidation than planned this year and next—reaching a primary surplus of 3 percent of gross domestic product by 2027.
- Suggested fiscal measures to soften growth impact and improve equity:
  - Continue to improve tax compliance.
  - Rationalize tax expenditures (for example, phasing out inefficient hiring subsidies).
  - Eliminate the preferential flat-tax rate on income of self-employed people.
  - Reduce public guarantees to strengthen resilience and reduce risks.

### Institutional and implementation progress
- NRRP implementation is well underway with measures including:
  - Judicial reforms to reduce court backlogs.
  - Improvements to tax compliance.
  - Investments enhancing the railway system and school infrastructure.

*International Monetary Fund*

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## References

- [ITALY AND THE IMF](https://www.imf.org/en/countries/ita)
- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF’s latest report](https://www.imf.org/en/Publications/CR/Issues/2025/07/21/Italy-2025-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-568826)
- [delved into](https://www.imf.org/en/Publications/CR/Issues/2025/07/21/Italy-Selected-Issues-568829)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2025/09/15/cf-italy-needs-higher-productivity-and-more-people-working_