Italian GDP is expected to grow by 0.7% in both 2026 and 2027, after increasing by 0.5% in 2025 (Table 1). The increase in GDP, in the two-year forecast period, would be entirely supported by domestic demand net of inventories (+0.9 and +0.5 percentage points respectively); net foreign demand, negatively affected by the conflict in the Middle East and the consequent increase in energy prices, would provide a negative contribution in 2026 (-0.2 p.p.) and zero in 2027. This is highlighted by Istat in the “prospects for the Italian economy in 2026-2027”.
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In 2026, household and private social institution (ISP) consumption is expected to decelerate compared to the previous year (+0.6% compared to +1.1% in 2025), curbed by the weakening of the positive dynamic of per capita wages and the increase in inflation; in 2027, growth is instead expected to slightly accelerate (+0.7%). Gross fixed investments would continue to grow, but with different intensity in the two years: the increase would settle at +2.2% in 2026, supported by interventions connected to the PNRR; in 2027, a significant deceleration would occur on an annual average (+0.5%) caused by less favorable financing conditions and the downsizing, under current legislation, of public stimuli.
Employment will slow to +0.7% in 2026, unemployment falls to 5.5%
Employment, measured in terms of labor units (ULA), would show a slowdown in growth dynamics in 2026 (+0.7%, after +1.3% in 2025) accompanied by a further drop in the unemployment rate (5.5%, from 6.1% in 2025); in 2027, a deceleration of ULAs (+0.4%) and a stabilization of the unemployment rate are expected.
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Inflation at 2.9% in 2026, falling to 2% in 2027
Raw material price trends would translate into inflation trends, expected to rise sharply during 2026: the household expenditure deflator would settle, on an annual average, at 2.9%, then return to 2% in 2027 as a result of the normalization of international tensions.
The unknown duration of the conflict between the USA, Israel and Iran
In an international context characterized by geopolitical tensions, Istat underlines, the forecast results are more than ever conditioned by the basic assumptions. A key element is represented by the duration of the conflict. A simulation exercise was carried out with the Istat MeMo-it model to evaluate the consequences on the Italian economy of a prolonged conflict between Iran and the United States as an alternative scenario.
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