Overview
The Bank of Italy on Friday published macroeconomic projections that leave this year’s growth estimate unchanged at 0.6% but cut next year’s outlook to 0.4% from a 0.5% forecast issued in early April. The central bank attributes the revision to weaker domestic demand, driven in part by a surge in energy prices and mounting geopolitical uncertainty, and expects inflation to be higher this year than previously estimated.
Forecast details
The projections show gross domestic product expanding by 0.6% in the current year and by 0.4% in 2027. For 2028 the Bank of Italy sees growth of 0.7%. The central bank noted that the trimmed 2027 figure mainly reflects the impact of higher commodity prices on consumption.
Inflation outlook
On price dynamics, the Bank of Italy projects an average EU-harmonised consumer price inflation rate (HICP) of 3.1% for this year, up from the 2.6% it forecast in April. Inflation is expected to ease to 2.0% in 2027, a modest upward revision from a prior estimate of 1.8%.
Recent performance and short-term path
National statistics agency ISTAT reported that Italy's GDP grew by 0.3% in the first quarter compared with the previous three months, a figure that represented an upward revision to an earlier release. The Bank of Italy said quarterly output would likely remain flat through the remainder of this year before beginning a gradual recovery in early 2027.
Context of the projections
The central bank prepared these estimates as part of a coordinated exercise among euro zone central banks to inform the European Central Bank’s area-wide forecasts published this week. The projections align with, but differ in timing and magnitude from, the Italian government's April forecast, which anticipated 0.6% growth in both the current year and next year.
Structural note
Should the Bank of Italy's 2028 projection of 0.7% materialize, it would mark a sixth consecutive year in which Italy's growth remains below 1.0%.
Implications for sectors
The bank highlighted factors that are particularly relevant for consumption-sensitive sectors: higher energy and commodity costs that can reduce household purchasing power and depress demand. These dynamics are likely to influence pricing decisions and margins across consumer goods and other industries exposed to input-cost pass-through.