The Italian economy proved resilient in 2024 in an already unpromising international environment, with better-than-expected growth of 0.7%. But in early 2025 the economic outlook is sending out more mixed signals. Consumer and business confidence is weakening and uncertainties are mounting, with persistent geopolitical tensions and threats of tariff hikes from the United States. All of which puts the recovery on hold.

As such, Italy in 2025 is expected to post a third year of moderate growth (+0.6%). Consumption, supported by slightly more favourable purchasing power, is expected to increase, even though caution continues to prevail in terms of savings. While, exports are likely to suffer from trade tensions, with an expected decline of 0.5%, despite a hoped-for rebound in Europe, thanks to Germany and the increase in defence spending. Our estimate does not factor in Trump’s “Liberation Day” announcements, which would generate a decline of a full 4% to 6% if the 20% customs tariffs were to be applied. Business investment could recover slowly, supported by more favourable monetary conditions, but the slowdown in the construction sector will weigh on overall momentum. Inflation is expected to remain stable at around 1.3%.