Italy: Q4 GDP growth beats expectations
Economy picks up in Q4: According to a preliminary estimate, Italy’s GDP expanded 0.3% on a working day and seasonally adjusted quarter-on-quarter basis in Q4, following 0.2% growth in the prior quarter. The reading was slightly above market expectations.
In annual, seasonally and calendar-adjusted terms, the economy expanded 0.8% in Q4, following a 0.6% expansion in the prior quarter. As a result, over 2025 as a whole, GDP growth picked up to 0.7% from 2024’s 0.5%, but remained below the past decade average of 1.1%.
Domestic demand buttresses GDP growth: A full breakdown of GDP by expenditure is not yet available, but the statistical office cited domestic demand as the main driver of growth. Past cuts to interest rates by the ECB likely supported fixed investment, and lower unemployment and inflation rates in Q4 compared to Q3 should have aided private consumption. That said, the statistical office noted that net exports fell.
On the production side, the agricultural, industrial and services sectors strengthened.
A complete breakdown will be released on 4 March.
Economic growth to stabilize: Our Consensus is for sequential GDP growth to remain broadly stable around Q4’s rate in Q1 2026: Past interest rate cuts should support fixed investment and private spending; the latter will also be boosted by softer inflation.
In 2026 as a whole, GDP growth is projected to inch above 2025 levels, supported by resilient public spending and private consumption, the latter driven by below-target inflation and a historically low unemployment rate. That said, Italy’s economy is set to expand at a rate below the euro area average, with fixed investment growth set to soften.
Panelist insight: Commenting on the outlook, Sofia Tozy, analyst at Credit Agricole stated:
“Looking ahead to 2026–2027, the Italian economy is entering a new phase without having overcome the vulnerabilities inherited from previous shocks. Households remain financially fragile and are maintaining high savings, while companies are operating with compressed margins and only partially restored price competitiveness, despite lower energy costs. In this fragile environment, the economy remains exposed to potential US tariff shocks and their global spillovers. While disinflation and improved financial conditions are stabilizing activity, they are not triggering a genuine catch-up dynamic. Growth is therefore expected to remain limited at 0.5% in 2026 before edging up to 0.8% in 2027.”