Bank of Italy Revises Growth Outlook
The Bank of Italy reaffirmed its 2026 gross domestic product (GDP) growth projection at 0.6% and reduced its 2027 forecast to 0.4%, a downgrade from the earlier estimate of 0.5%. The central bank attributed the weaker outlook to a decline in domestic demand, which it said is being squeezed by rising energy prices and heightened geopolitical uncertainty.
Recent GDP Performance
According to data released by Italy’s national statistics bureau ISTAT, Italy’s GDP expanded by 0.3% in the first quarter of the year compared with the previous three months, representing an upward revision from an earlier figure. The Bank of Italy expects quarterly GDP to remain flat for the remainder of 2026 and to gradually return to growth in early 2027.
Inflation Outlook
The institution also signaled that inflation is expected to jump in 2026, revising its earlier estimate upward. This inflation projection is part of a coordinated exercise among euro‑zone central banks designed to support the European Central Bank’s (ECB) forecasts for the euro‑zone published in the same week.
Contextual Comparison
Italy ranks as the third‑largest economy in the euro‑zone. The Italian government, in its April outlook, had projected GDP growth of 0.6% for both 2026 and 2027, which is now higher than the central bank’s revised 2027 estimate.
Coordination with Euro‑zone Authorities
The revised projections were prepared in conjunction with other euro‑zone central banks to align with the ECB’s broader economic outlook, underscoring the collaborative nature of monetary policy within the region.