The Bank of Italy confirmed a 0.6% growth projection for 2026 while trimming its 2027 forecast to 0.4% from a prior estimate of 0.5%, according to a statement released Friday. The central bank linked the softer outlook to weaker domestic demand and to headwinds from rising energy prices and heightened geopolitical uncertainty.
Officials said the revised numbers were produced as part of a coordinated exercise among euro zone central banks intended to support the European Central Bank's forecasts for the euro zone, which were published this week. The Bank of Italy identified higher commodity prices as a key factor weighing on consumption and cited that effect as the main reason for the modest downward revision to the 2027 forecast.
Separate data from the national statistics bureau ISTAT showed Italy's gross domestic product rose by 0.3% in the first quarter compared with the prior three months, a figure released last month that reflected an upward revision from an earlier estimate. Building from that baseline, the Bank of Italy expects quarterly GDP to remain flat for the remainder of 2026 before showing a gradual return to growth in early 2027.
The central bank also said it now projects a jump in inflation this year relative to its previous estimate. The statement did not provide additional numerical detail in the text provided with the growth revisions.
Italy is the third-largest economy in the euro zone. The Italian government, in its April forecast, had projected GDP growth of 0.6% in both 2026 and 2027. The Bank of Italy's updated view thus aligns with the government's 2026 projection while diverging modestly on 2027.
Implications highlighted by the central bank focus on consumption and input-price dynamics. The bank's emphasis on higher commodity and energy prices points to inflationary pressures that can erode household purchasing power and weigh on domestic demand. The coordination with other euro zone central banks underscores the common challenges facing regional outlooks as policymakers reconcile national trajectories with euro-area projections.
The outlook presented leaves open the path for a gradual recovery in growth after a period of stagnation in late 2026, conditional on the evolution of commodity prices, energy costs and geopolitical developments cited by the central bank.