Italian Government Slashes 2025 Growth Forecast to +0.6%, Signals Fiscal Tightening Amid “Complex Situation”
Rome, Italy – April 9, 2025, 12:15 PM PDT
Italy’s government has sharply revised its economic growth forecast for 2025 down to just 0.6%, halving its previous projection of 1.2%, as announced in the latest Economic and Financial Document (DEF) approved by the Cabinet on Tuesday evening. Economy Minister Giancarlo Giorgetti described the outlook as a “complex situation,” citing a deteriorating European economic landscape and global uncertainties, including the fallout from U.S. President Donald Trump’s tariff policies. The DEF, a cornerstone of Italy’s budgetary planning, paints a sobering picture for the eurozone’s third-largest economy, projecting sluggish growth of 0.8% in both 2026 and 2027, well below earlier expectations.
The downgrade reflects a confluence of challenges: a stagnant second half of 2024, with GDP growth for the year now estimated at 0.5%, and external pressures such as weakening demand from key export markets like Germany and France, alongside the looming threat of U.S. trade barriers. Giorgetti, speaking at a press conference late Tuesday, acknowledged the “extremely problematic backdrop” not only for Italy but for Europe as a whole, pointing to Trump’s April 2 “Liberation Day” tariffs—now partially paused for 90 days except against China—as a significant wildcard. “We’re navigating a storm of uncertainty,” he said, emphasizing a prudent approach to public finances amid these headwinds.
The DEF also outlines Italy’s fiscal trajectory under the European Union’s Excessive Deficit Procedure, triggered in 2024 after a 7.2% GDP deficit in 2023. The government targets a deficit reduction to 3.3% in 2025, down from a revised 3.4% in 2024, with a goal of dipping below the EU’s 3% ceiling by 2026 at 2.8%. However, the public debt-to-GDP ratio is set to climb from 135.3% in 2024 to 139.3% by 2027, driven by lingering costs of the “Superbonus” housing tax credit scheme and rising debt-servicing expenses, which Giorgetti pegged at over €100 billion annually. “This is money taken from health, aid, and tax cuts,” he lamented, signaling potential belt-tightening measures ahead.
Domestic consumption, bolstered by a strong labor market and real wage gains, remains a faint bright spot, expected to rise 1.1% in 2025. Yet, investment is projected to falter, with the phase-out of construction incentives offsetting gains from the EU’s Recovery and Resilience Facility (RRF). Exports, critical to Italy’s economy, face a “soft-ish” outlook due to political instability in Europe and Trump’s trade stance, which has already sparked a tit-for-tat tariff escalation with China.
Opposition leaders seized on the figures to criticize Prime Minister Giorgia Meloni’s coalition. “This is the reality of their economic miracle: stagnation and debt,” said Elly Schlein of the Democratic Party, accusing the government of squandering post-Covid momentum. Meanwhile, business lobby Confindustria and the IMF have echoed the pessimism, forecasting 0.9% and 0.7% growth for 2025, respectively—both below Rome’s earlier hopes.
Giorgetti defended the DEF’s “extremely conservative” estimates, arguing they ensure compliance with EU fiscal rules while leaving room for negotiation with Brussels. “We’re not naive—we know the scenario we’re entering,” he said, hinting at forthcoming budget measures to prioritize low-income tax relief and public sector wages. As Italy braces for a lean year, the government’s focus shifts to balancing fiscal discipline with economic survival in an increasingly turbulent global environment.