ROME, Italy / AsiaWire.IO / – According to fresh forecasts from the Bank of Italy, the nation’s gross domestic product is projected to increase by 1% in 2026. This update was included in the bank’s latest Economic Bulletin, published on October 16. The central bank anticipates a slowdown to 0.7% growth in 2027 and a slight rise to 0.8% in 2028. It also warned that rising oil prices and accelerated inflation could still threaten the economic expansion.
The 2026 forecast is 0.4 percentage points higher than the projections made in June. The estimate for 2027 was increased by 0.3 points, whereas the 2028 figure was reduced by 0.1 points. When adjusted for working days, growth for 2026 stands at 0.9%. These projections are based on data available as of October 9. The 1% estimate aligns with the government’s Draft Budgetary Plan.
The bank noted that Italy’s economy was less impacted by the Middle East crisis in the first two quarters of 2026 than initially expected. This was the main reason for raising the forecast. Additionally, investments related to digital and energy transitions contributed positively. Tourism also performed strongly during the summer months. Employment is forecast to continue rising during this period. The unemployment rate is expected to stay near 6% throughout the forecast period.
Scenario of Decline Shows Zero Growth Potential
The central bank presented an alternative scenario that assumes less favorable conditions. A significant rise in crude oil prices coupled with rising inflation could keep growth at zero for 2026. Under such circumstances, Italy’s economy could contract by 0.3% in both 2027 and 2028. The bank identified the Middle East conflict as a key source of uncertainty. Prolonged tensions could lead to higher and more persistent inflation.
Their baseline assumptions project oil prices to average $114 per barrel in the last quarter of 2026. Gas prices are expected to be €76 per megawatt hour during that period. Both are anticipated to decline over the subsequent two years. Interest rates are set to increase gradually, affecting business and household loans. The European Central Bank raised its deposit rate to 2.5% in September.
Inflation and Consumer Spending Trends
Inflation is predicted to average 3.2% this year, primarily driven by energy costs. It should decrease to 2.4% in 2027 and further to 1.7% in 2028. Core inflation, which excludes energy and food, is expected to stay around 2% throughout the period. The bank forecasts household spending will slow down in late 2026 and into 2027. Rising prices will impact real incomes during this time.
Spending is projected to recover later in the forecast. Business investment will likely slow significantly in 2028 due to higher financing costs. Exports are expected to benefit from demand in Italy’s main markets. However, their growth will lag behind global trade. International trade is bolstered by high-tech goods associated with AI, in which Italian companies have limited participation. The bank plans to revise its projections in December as part of the Eurosystem exercise.