ROME, Italy / AsiaWire.IO / – According to the Bank of Italy, the country’s GDP is expected to increase by 1% in 2026. This new forecast was included in the latest Economic Bulletin published on October 16, where the central bank also revised its outlook for the coming years, now predicting growth of 0.7% in 2027 and 0.8% in 2028. The bank warned that rising oil prices and more rapid inflation could still threaten this growth trajectory.
The 2026 forecast represents an upward revision of 0.4 percentage points compared to the projections made in June. For 2027, the estimate was increased by 0.3 points, whereas the figure for 2028 was reduced by 0.1 points. Once adjusted for working days, the growth for 2026 totals 0.9%. These projections are based on data available as of October 9. The 1% figure aligns with the government’s Draft Budgetary Plan.
The bank noted that Italy’s economy was less affected by the Middle East crisis in the first half of 2026 than initially expected, which was a primary factor behind the upward revision. Contributions from investments related to digital transformation and energy transition also supported the outlook. Additionally, tourism experienced a strong summer season. Employment levels are forecasted to continue rising throughout the period, with the unemployment rate expected to stay near 6% during the projection timeframe.
Downside Scenario Indicates Zero Growth Possibility
Alongside its baseline forecast, the bank outlined a more pessimistic scenario. A significant surge in crude oil prices combined with accelerating inflation could result in no growth in 2026. Under such circumstances, Italy’s GDP would contract by 0.3% in 2027 and again in 2028. The bank identified the ongoing Middle East conflict as a key source of uncertainty, with prolonged tensions potentially driving higher and more persistent inflation.
The baseline assumes an average oil price of $114 per barrel in the last quarter of 2026, with gas prices at €76 per megawatt hour during that period. Both are projected to decline over the subsequent two years. Additionally, interest rates are expected to gradually rise, impacting loans for businesses and households. The European Central Bank increased its deposit rate to 2.5% in September.
Rising Prices to Impact Consumption
Inflation is forecasted to average 3.2% this year, mainly driven by energy costs. It is expected to decrease to 2.4% in 2027 and further to 1.7% in 2028. Core inflation, excluding energy and food, should remain around 2% throughout. The bank anticipates household expenditure to slow down in the latter half of 2026 and through 2027, as rising prices diminish real incomes during this period.
A rebound in consumer spending is anticipated later in the forecast period. Business investments are likely to decline sharply in 2028 due to higher borrowing costs. On the export side, demand from Italy’s key markets is expected to support growth, although the pace will be slower than the expansion of global trade. Since Italian companies have a limited role in high-tech and AI-related exports, global trade growth driven by such sectors is expected to benefit overall. The bank plans to revise its forecasts in December as part of the Eurosystem assessment.