Il Italian GDP will grow by 0,9% in 2026, more than initially expected. TheParliamentary Budget Office (Upb) revises forecasts upwards on the Italian economy, improving by four tenths the estimate formulated in April. Growth is mainly supported by investments, Pnrr ed exports, together with a job market that continues to show positive signs.
The photograph of the Upb, contained in the Note on the economic situation of August, however, presents a picture of light and shadow: the Italian economy has shown a capacity to hold up better than expected, but the recovery remains fragile and still exposed to various risksThe return of inflation, cautious household spending, stagnant productivity, and an international context marked by geopolitical and trade tensions are weighing on the situation.
The National Recovery and Resilience Plan (NRRP) and investments are driving the Italian economy, but the momentum will slow down.
The positive review comes after a first half better than expectedAccording to preliminary data from theIstatItalian GDP grew by 0,3% in the first quarter of 2026 and by 0,2% in the second quarter, bringing the annual growth forecast to 0,8%. For 2027, the forecast remains unchanged at 0,6%, a sign that the improvement in 2026 is partly due to temporary factors and does not yet alter the medium-term outlook.
The main drivers of the Italian economy are the investments, supported by the final phase of the National recovery and resilience plan (NRRP). In the first quarter, investments increased by 0,7%, thanks in particular to plant and machinery and the acceleration of projects financed with European resources. For 2026, the UPB forecasts investment growth of 2,5%, but this is set to slow to 0,9% in 2027 as the program's effects gradually fade. Next Generation Eu.
The weaker it remains housing construction, while the recovery in exports also shows some signs of fragility. Exports, while contributing to growth, are supported primarily by temporary factors and by some specific sectors, such as shipbuilding, precious metals, and the pharmaceutical industry, without yet seeing a widespread strengthening of foreign demand. In 2026, exports are expected to grow by 1,9%, slower than the forecast 4,6% growth in world trade, with the risk of further market share losses.
Employment is growing, but productivity remains a key issue.
The labor market continues to make a positive contribution to the economy. The occupation reached new record levels, with the employment rate at 63%, while unemployment fell to 5,4% in the first quarter and is expected to average around 5,2% in 2026.
The positive employment picture, however, coexists with some structural critical issues: labor market participation remains low, especially among young people, and Italian productivity continues to stagnate.
Italian consumption in 2026: families remain cautious.
The weakest point of growth remains domestic demand. household consumption They benefited from the recovery in purchasing power and employment in the first months of 2026, but the climate remains one of caution. In the two-year period 2026-2027, private spending is expected to grow by just over 0,5% per year, held back by international uncertainty and the return of inflation.
Consumers' caution also emerges from the Istat data on RetailIn June, sales decreased by 0,1% in both value and volume compared to the previous month. The food sector was the main driver, declining 0,5% in volume, while non-food goods grew by 0,2%. On a year-over-year basis, the picture remains positive, with sales increasing by 3,1% in value and 1,9% in volume, thanks in part to strong growth in e-commerce, which rose by 26,7% in value and 28% in volume compared to June 2025.
Inflation in Italy in 2026: rising prices and wages under pressure.
The other big issue remains inflationIn the second quarter of 2026, prices rose by 3%, then slowed slightly to 2,8% in July, driven primarily by energy price increases linked to tensions in the Middle East. According to the UPB, price dynamics in Italy quickly recovered compared to other eurozone countries, closing the previous negative gap.
For 2026, the household consumption deflator is expected to increase by 3,1%, while the cost of labor is expected to grow by 2,8%. After the recovery of the last two years, therefore, the wages they will return to grow less than inflation, with a new one wage erosion Real. Despite recent progress, real wages remain 8,3% below the 2020 average.
Italy's growth outlook for 2026 remains downside-leaning.
Despite the upward revision of the estimates, the UPB maintains a prudent approach and signals risks mainly oriented towards fall. Among the main unknowns are the tensions geopolitical and commercial, the volatility of the markets energy and financial, the timing of implementation of the PNRR and the effects of climate change.
Italy is therefore showing greater resilience than initially forecast, supported by investment, the National Recovery and Resilience Plan (NRRP), and employment, but the challenge remains to transform still fragile and partly temporary growth into a more solid and structural recovery.
