ROME, Italy / AsiaWire.IO / – The Bank of Italy anticipates Italy’s gross domestic product will expand by 1% in 2026, surpassing earlier predictions. The growth rate is then expected to decrease to 0.7% in 2027, before rising slightly to 0.8% in 2028. These projections were published in the bank’s Economic Bulletin on October 16. The bank also cautioned that a renewed spike in crude oil prices could eliminate this year’s growth gains.
The forecast for 2026 was revised upward by 0.4 percentage points from the estimates issued in June. Meanwhile, the 2027 outlook increased by 0.3 points, whereas the estimate for 2028 was reduced by 0.1 points. In June, the bank projected 0.5% growth for 2026 and 0.4% for 2027. These updated figures are based on data available up to October 9. When adjusted for the number of working days, the growth rate for 2026 stands at 0.9%.
The central bank explained that the upward revision primarily reflects a lesser impact from the Middle East crisis during the first half of the year than initially anticipated in June. Investment linked to digital and energy transitions also contributed positively to economic activity. Additionally, robust tourism during the summer quarter further supported growth. The 1% forecast for 2026 aligns with the estimate outlined in the government’s Draft Budgetary Plan. Employment is forecasted to continue rising, with unemployment remaining close to 6%.
Oil Price Surge Could Lead Italy to Recession
The bank issued a warning that economic uncertainty persists at elevated levels. A significant increase in crude oil prices, combined with accelerating inflation, could result in zero growth this year. Under such an adverse scenario, Italy’s economy might contract by 0.3% in both 2027 and 2028. The central bank identified the conflict in the Middle East as a major factor adding to economic unpredictability. Energy prices continue to be the primary source of risk for the country’s economic outlook.
The baseline scenario assumes that oil prices will average $114 per barrel in the fourth quarter of 2026. Natural gas prices are expected at €76 per megawatt hour over the same period. Both are forecasted to decline throughout the remainder of the forecast horizon. The bank also anticipates that the rise in market interest rates will gradually influence borrowing costs for households and businesses. The European Central Bank raised its key interest rates in September.
Inflation to Gradually Ease by 2028
Consumer inflation is expected to average 3.2% in 2026, mainly driven by energy costs. The bank projects inflation slowing to 2.4% in 2027 and further decreasing to 1.7% in 2028. Core inflation is forecasted to stay around 2% throughout the period. Household consumption is predicted to weaken in the latter half of 2026 and into 2027, with rising prices eroding real incomes during that time.
According to the bank, household spending should regain momentum toward the end of the forecast period. Investment is expected to slow notably in 2028 due to rising financing costs. Exports will benefit from demand in Italy’s primary markets, although their growth is anticipated to lag behind the expansion of global trade, which is increasingly driven by high-tech goods such as AI products. The bank also noted that Italy’s participation in that segment remains limited.