Italy GDP Growth 2026: Minister Sees Near 1% Expansion, But Structural Issues Remain

Italy's 2026 GDP Growth Could Approach 1%, Says Minister The Italian economy may expand more than previously anticipated in 2026, with growth potentially approaching 1% of GDP, according to Economy Minister Giancarlo Giorgetti. Speaking at the closing day of the Teha Cernobbio Forum, Giorgetti indicated that GDP would exceed the 0.6% growth outlined in the government's planning documents, noting that 0.8% growth has already been secured and that favorable indicators could push the figure close to 1%. Pietro Reichlin, an economist and professor at LUISS University, described the estimate as realistic but cautioned that it does not signify a turning point for the Italian economy. He pointed to structural issues such as low productivity and unfavorable demographic trends as persistent drags on growth. The assessment comes ahead of the drafting of the 2027 Budget Law and is accompanied by positive fiscal news: tax revenues rose in the first seven months of 2026. According to the Finance Department of the Ministry of Economy and Finance (MEF), the state collected EUR346.1 billion in taxes from January to July, an increase of EUR9.4 billion (2.8%) compared to the same period in 2025. Reichlin explained that higher GDP typically leads to increased revenues, supported by positive employment data. More workers and higher wages broaden the tax base, boosting income tax receipts under normal conditions. MEF estimates show direct taxes reached EUR200.7 billion (+3.2%) and indirect taxes totaled EUR145.5 billion (+2.2%) during the period. Personal income tax (Irpef) revenues amounted to EUR138.5 billion (+2.7%), while VAT revenues reached EUR100.3 billion (+3.8%). Excise duties on energy products fell to EUR12.7 billion (-8.5%), partly due to temporary reductions aimed at mitigating high energy prices. Reichlin warned against over-celebrating the growth figure, noting that the improvement is widespread across the European Union but Italy remains at the lower end alongside Germany and France. He highlighted that Spain's growth is stronger, partly due to significant migrant inflows boosting employment, a trend also benefiting Italy. However, he stressed that employment growth is insufficient to offset low productivity, resulting in more workers but little added value. The economist traced Italy's backwardness to very low productivity dating back to the late 1990s, a characteristic shared with other peripheral EU countries. Without addressing this issue, he argued, wage increases and prosperity gains are unlikely. The higher revenues in the first seven months cannot automatically be considered available for next year's budget. It remains to be determined how much of the increase is structural and can fund new measures. Reichlin cautioned against illusions regarding the 2027 budget, emphasizing that revenues alone are not enough to keep public accounts in order, control inflation, and manage the deficit while also financing spending or costly measures. He predicted a very cautious budget law with little room for maneuver. Demographic trends also undermine growth, with an ageing population and falling birth rates placing pressure on public finances through pensions and healthcare, naturally increasing spending. Reichlin concluded that even reducing the tax burden on labor and businesses, as international organizations advise, would have positive effects but would need to be offset by other revenue sources, the origins of which remain unclear.