Italy faces 3.2 percent inflation as growth reaches 0.9 percent
Italy's GDP will grow by 0.9 percent in 2026 while inflation reaches 3.2 percent, according to Bank of Italy projections published on October 16, 2026. Higher energy prices and financing costs weigh on domestic demand.
Growth slows before inflation eases
Staff project GDP growth of 0.7 percent in 2027 and 0.8 percent in 2028.
Without calendar adjustments, growth reaches 1.0 percent in 2026, 0.7 percent in 2027 and 0.6 percent in 2028.
Relative to June, growth revisions are +0.4, +0.3 and -0.1 percentage points, respectively.
Inflation falls to 2.4 percent in 2027 and 1.7 percent in 2028; revisions are +0.1, +0.4 and -0.2 percentage points across the three years.
Core inflation stays near 2 percent.
Consumption weakens through 2027 as energy costs erode real incomes; higher borrowing costs slow investment, particularly in 2028.
Foreign demand supports exports, but Italy's limited participation in AI-related goods restrains gains.
Unemployment reaches 5.8 percent in 2026 and 6.0 percent in both subsequent years.
Energy and borrowing costs bite
The baseline uses information available on October 9 and market-implied commodity prices.
Oil averages $114 per barrel and gas €76 per megawatt-hour in Q4 2026 before declining.
Three-month Euribor averages 2.4, 3.3 and 3.4 percent in 2026-28; ten-year Italian government bond yields average 4.0, 4.8 and 5.0 percent.
Fiscal assumptions include the Public Finance Planning Document approved on October 2 and defence and energy-security spending.
Those measures support activity over the next two years, but higher rates more than offset their boost in 2028.
The conflict sets the range
The Middle East conflict remains the main source of forecast uncertainty.
A severe energy-price scenario cuts cumulative growth by almost 2 percentage points and adds over 3 points to inflation, mainly in 2027.
A milder scenario adds 0.4 points to cumulative growth and lowers inflation by around half a point.