Overview
The UBS research note released this week highlights that Italy’s economy has outperformed its Eurozone peers, with real GDP growth exceeding that of the Eurozone, Germany and France since 2019. The outperformance is attributed primarily to robust investment spending backed by fiscal stimulus measures.
Economic Growth and Labour Market
During the same period, Italy’s unemployment fell to its lowest level in decades, corporate leverage declined, and the net international investment position turned positive for the first time since the 1980s. These indicators underscore a strengthening macro‑economic environment.
Investment and Construction as Growth Drivers
Fixed (public and private) investment has accounted for the majority of Italy’s economic expansion since 2019. Construction activity, in particular, has been a key engine, with construction value‑added rising sharply and representing roughly one‑third of the increase in gross value added.
Fiscal Stimulus: Superbonus and RRF
The growth surge has been supported by two major fiscal programmes: the Superbonus housing‑renovation scheme and the European Union’s Recovery and Resilience Facility (RRF). Italy is slated to receive €194 billion from the RRF between 2021 and 2026, of which about 85 % has already been disbursed. Although the Superbonus programme has largely been phased out, construction activity remains resilient due to continued RRF spending and a backlog of previously allocated funds. A final RRF disbursement is expected by the end of 2026, and unspent RRF resources could continue to underpin economic activity through 2027.
Outlook
The note forecasts Italian GDP growth slowing to 0.5 % in 2028 as the impact of RRF‑funded investment diminishes. While estimates of Italy’s potential growth rate have improved relative to pre‑pandemic levels, they still lag behind the Eurozone average.
Political Stability
The analysis also points to greater political stability in the current decade. The incumbent government could become the longest‑serving post‑war administration, with parliamentary elections required by December 2027.
Market Implications
Stronger economic performance has translated into gains for Italian equities, narrower sovereign bond spreads, and improved banking sector fundamentals. Index data show the IT40 up 0.31 % and the 10‑year government bond yield at +1.92 %.