IMF Executive Board Concludes 2026 Article IV Consultation with Italy

IMF News, July 24, 2026

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Canonical URL: IMF Executive Board Concludes 2026 Article IV Consultation with Italy

Date and action: July 24, 2026 — The Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for Italy; this also included a discussion on the findings of the Financial Sector Assessment Program (FSAP) for Italy.
Publication: The authorities have consented to the publication of the Staff Report prepared for this consultation.
Context: Italy’s economy continued to grow at a modest pace in 2025, supported in part by investment under the National Recovery and Resilience Plan (NRRP). Inflation picked up amid increased global energy prices, and sovereign spreads experienced renewed volatility since late February.

2025 outcomes:
- Real GDP grew by 0.5 percent in 2025.
- Employment remained around historic highs for the past several months.
- Domestic inflation increased, reflecting dependence on imported fossil fuels.
Projections:
- Growth is projected at 0.5 percent this year and in 2027.
- Headline inflation is projected to rise to 2.9 percent in 2026 and remain elevated at above 2 percent in 2027.
- Over the medium term, rapid population aging and persistently weak productivity growth are expected to constrain growth.
Drivers and upside potential:
- Continued NRRP-related investment implementation is expected to support growth.
- Upside: faster productivity gains from reforms, digitalization, and adoption of new technologies, including artificial intelligence, could boost growth.
Downside risks:
- Escalation of geopolitical tensions could increase prices, tighten financial conditions, and weaken confidence and activity.
- Slower-than-planned fiscal consolidation or delays in public investment could weigh on market sentiment.

Recent developments:
- Fiscal consolidation has continued to progress, with the primary surplus further strengthening.
- Directors welcomed progress in fiscal consolidation, supported by strong revenues and improved tax compliance.
Concerns:
- Public debt remains too high and vulnerable to interest and growth shocks.
- Directors emphasized that fiscal policy should ensure that debt is put on a decisively downward path while limiting adverse effects on potential growth.
Policy recommendations:
- Enhance spending efficiency, including through digitalization and comprehensive spending review.
- Fully offset new spending measures with savings elsewhere.
- Support amid higher energy prices should remain temporary, targeted, budget-neutral, and avoid distorting the price signal.
- Further strengthen tax compliance, rationalize tax expenditures, and broaden the tax base.
- Recalibrate public guarantees toward pre‑pandemic levels to bolster resilience.

FSAP main conclusion: The FSAP found that the financial system remains broadly sound with robust oversight and banks demonstrating resilience under severe adverse scenarios.
Areas of vigilance and recommendations:
- Continue vigilance regarding sovereign‑bank linkages, vulnerabilities at some less significant institutions, and cyber risks.
- Strengthen supervisory agility and expand the use of macroprudential tools.
- Address concentrated sovereign exposures.
- Enhance crisis management and AML/CFT frameworks.
- Complete ongoing reforms to improve insolvency and debt enforcement processes.

Growth-enhancing reforms prioritized:
- Ease regulatory barriers.
- Improve judicial efficiency.
- Deepen capital markets to foster innovation and risk capital.
Labor market and demographic issues:
- Labor force participation lags peers, particularly among women and youth.
- Addressing aging-related pressures requires boosting labor supply and enhancing skills through improved education, training, and school‑to‑work transitions.
NRRP assessment:
- Directors acknowledged steady implementation of the NRRP and stressed the importance of sustaining reform and investment momentum and accelerating the green transition.
- A more integrated EU single market for goods, services, capital, and labor would complement domestic reforms and incentivize investment, boost productivity, and strengthen resilience.

Directors agreed with the thrust of the staff appraisal: the Italian economy is projected to continue to grow at a modest pace, weighed down by external headwinds and long‑standing structural challenges.
In the context of heightened global uncertainties, Directors concurred that rebuilding fiscal buffers and advancing growth‑enhancing reforms, while safeguarding financial stability, are essential to strengthen resilience.
Directors noted support for the authorities’ commitment to fiscal discipline and most supported their planned gradual adjustment path aligned with the EU fiscal framework.

Real Economy (change in percent)
- Real GDP: 2023: 0.9; 2024: 0.8; 2025: 0.5
- Final domestic demand: 2023: 2.7; 2024: 0.3; 2025: 1.5; 2026: 0.6
- Exports of goods and services: 2023: -0.2; 2024: -0.4; 2025: 1.2; 2026: 2.1; 2027: 2.0
- Imports of goods and services: 2023: -1.9; 2024: -1.0; 2025: 3.6; 2026: 1.9
- Consumer prices: 2023: 5.9; 2024: 1.1; 2025: 1.6; 2026: 2.9; 2027: 2.4; 2028: 2.3
- Unemployment rate (percent): 2023: 7.7; 2024: 6.6; 2025: 6.1; 2026: 5.6
Public Finances
- General government net lending/borrowing 1/: 2023: -7.1; 2024: -3.4; 2025: -3.1; 2026: -2.9; 2027: -2.8; 2028: -2.5
- Structural overall balance (percent of potential GDP): 2023: -7.6; 2024: -3.7; 2025: -3.2; 2026: -2.7; 2027: -2.3
- General government gross debt 1/: 2023: 133.9; 2024: 134.7; 2025: 137.1; 2026: 138.2; 2027: 137.5
Balance of Payments (percent of GDP)
- Current account balance: 2023: 0.2
- Trade balance: 2023: 2.2; 2024: 1.3
Exchange Rate
- Exchange rate regime: Member of the EMU
- Nominal effective rate: CPI based (2000=100): 2023: 108.2; 2024: 110.1; 2025: 112.6

Source: IMF Executive Board concluding statement for the 2026 Article IV Consultation with Italy (Press Release No. 26/256, July 24, 2026).