Italy’s economic growth has been slow but resilient in the face of recent shocks, supported by reforms and investment under the National Recovery and Resilience Plan. Progressing on the reform agenda is key to foster broad-based growth and reducing government debt, according to the OECD Economic Survey of Italy.
Following GDP growth of 0.5% in 2025, growth is expected to slow slightly to 0.4% in 2026 due to the drag from higher energy prices linked to the conflict in the Middle East, before recovering to 0.6% in 2027. However, uncertainty remains high.
An ageing workforce, persistently weak productivity growth, high public debt and strong competition from emerging market economies create longer-term challenges.
“Pursuing the reforms under the National Recovery and Resilience Plan is essential to strengthen Italy’s growth prospects,” OECD Chief Economist Stefano Scarpetta said, presenting the Survey in Rome alongside Italy’s Director General of the Treasury Riccardo Barbieri. “Further efforts are needed to improve outcomes for young people and other under-represented groups in the labour market, remove obstacles holding back business growth and secure competitive energy supplies.”
Italy can put public debt on a more prudent downward path by pursuing the planned fiscal consolidation over the coming years. While spending pressures from population ageing, higher defence requirements and the climate transition add to the challenge, greater efficiency in public spending, combined with containing pension costs and higher labour market participation, would help create fiscal space and support stronger economic performance. Strengthening tax compliance and reforms to make the tax system more efficient would raise revenues with less impact on growth.
Despite the success of Italy’s larger firms, many small and micro firms struggle to grow or to adopt new technologies, weighing on the economy’s overall productivity and growth. A more streamlined regulatory and fiscal environment, stronger support for research and development, and the promotion of better managerial practices would help firms scale up and compete more effectively.
Italy is facing a shrinking workforce, yet 16% of young people are not in employment, education or training (NEET) as of 2024, and some are looking for opportunities abroad. Smoother school-to-work transitions, stronger, high-quality vocational and adult training systems, and more effective labour market policies would help better mobilise Italy’s young people and improve their economic opportunities.
Energy costs are higher than in many OECD countries due to Italy’s dependence on imported fossil fuels. They weigh on business competitiveness and household living costs. Lowering administrative barriers to investment in renewable energy and transmission, together with accelerating the shift from fossil fuels to electricity, would help reduce costs, cut emissions, and ensure more secure energy supply.
See the full OECD Economic Surveys: Italy with chapters on (1) Maintaining the reform momentum and strengthening the public finances, (2) Engaging youth in the labour market amid population ageing, (3) Securing sustainable energy and competitive electricity supplies, (4) Enhancing business dynamism to raise productivity.
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