IMF Staff Country Reports

Italy’s financial system remains broadly sound and has demonstrated resilience in a challenging macrofinancial and geopolitical environment. Since the 2020 FSAP, banks have rebuilt capital, achieved record profitability, strengthened balance sheets, and advanced consolidation. Sovereign market sentiment has improved, supported by expectations of fiscal discipline. Yet important structural constraints persist; high public debt, weak potential growth, and adverse demographics weigh on the medium-term outlook and limit policy space. External risks are also rising, with heightened global tensions—including the war in the Middle East—posing challenges for a trade-oriented, energy-importing economy.