According to the Bank of Italy, after +0.3% in the first quarter, the Italian economy slowed down in the spring. The new projections indicate a GDP increase of 0.6% in 2026, while inflation would rise to 3.1% due mainly to energy price increases. The labor market remains solid, but consumption, investments and confidence are affected by international uncertainty.
Italy is growing, but remains below the necessary pace
The Italian economy does not stop, but proceeds at a short pace. This is the photograph that emerges from the Economic Bulletin no. 3 of 2026 of the Bank of Italy: in the first three months of the year the GDP grew by 0.3%, as in the previous quarter, supported by exports, investments and consumption, but in the spring months the picture became more fragile.
The new element is the return of energy as the dominant variable. Tensions in the Middle East, the rise in oil and gas prices and uncertainty over trade flows have cooled families’ spending decisions and companies’ capital accumulation. Growth remains positive, but more exposed: it doesn’t take much for consumption, investments and confidence to lose momentum.
For 2026, the Bank of Italy estimates GDP growth of 0.5% in the basic scenario adjusted for working days. Considering the better performance of the first quarter compared to initial expectations, growth for the year would rise to 0.6%. In 2027, GDP is expected to increase by 0.4%, then accelerate to 0.9% in 2028.
Italy is not in recession, but remains in low growth, vulnerable to external shocks and still too dependent on energy, exports, confidence and public and private investments.
The first quarter held up thanks to exports, investments and incentives
The positive thing is that the start of the year was better than expected. In the first quarter the product increased by 0.3%. The growth was driven, above all, by exports of goods and services, also favored by temporary factors such as the Winter Olympic Games and the sale of goods linked to shipbuilding.
Investments also continued to grow. Non-residential construction and transport contributed, supported by incentives for the purchase of low-emission commercial vehicles. Household consumption accelerated, especially in the durable goods component, also helped by incentive measures for the renewal of the vehicle fleet.
Part of the growth in the first quarter arises not from a spontaneous and robust expansion of demand, but also from temporary elements and incentives. This explains why the second quarter is read with greater caution.
More cautious families in spring
In the first quarter, families spent more, supported by the recovery of disposable income and a substantially stable propensity to save. In the spring the dynamic would change.
According to the Bank of Italy, consumption slowed significantly in the second quarter. The reason is not just psychological. Rising energy prices reduce real disposable income.
Uncertainty does not always block consumption, but it makes it more selective. We buy necessary goods, we take advantage of incentives, we try to protect savings, but the propensity to spend where the perceived risk is highest is reduced.
Inflation at 3% in the second quarter, 3.1% for the year
Price pressure has started to rise again. In the second quarter, inflation reached 3%, driven above all by the energy component. The increase in fuel prices was the most immediate channel of transmission of the shock, while the impact on electricity and gas bills has been limited for now.
In its June projections, the Bank of Italy expects average inflation of 3.1% in 2026, higher than previous estimates. The return towards 2% would be expected in the next two years: 2% in 2027 and 1.9% in 2028.
For families this means one concrete thing: even if inflation is not at 2022 levels, purchasing power remains under pressure.
Energy, the hidden cost for Italy
The Bulletin highlights a decisive point for Italy: the rise in energy prices not only weighs on bills, but also on the country’s external accounts. The Bank of Italy estimates that the higher cost of oil and gas will lead to an increase in the energy deficit by around half a point of GDP in 2026, with the same consumption.
This is a very relevant figure because it translates energy into a loss of national income. This reduces company margins, household disposable income, competitiveness and room for growth.
The energy issue, therefore, is not just environmental or geopolitical. It is a question of the national portfolio. Every shock on oil and gas affects Italy more than other countries because the production and domestic system remains exposed to energy imports.
The key numbers from the Bank of Italy Bulletin
| Indicator | Given | What it means for families and businesses |
|---|---|---|
| GDP Italy, first quarter 2026 | +0.3% | The economy is still growing, but at a moderate pace |
| GDP estimate 2026 | +0.6% considering the good first quarter | Positive but weak growth |
| Base scenario GDP 2026 adjusted for working days | +0.5% | The pace is also contained in the official forecasts |
| GDP 2027 | +0.4% | No real acceleration in the short term |
| GDP 2028 | +0.9% | Gradual recovery, still below 1% |
| Second quarter inflation | 3.0% | Energy and fuel are once again pushing prices |
| Average inflation 2026 | 3.1% | Purchasing power still under pressure |
| Inflation 2027 | 2.0% | Expected return towards the goal |
| Energy deficit 2026 | +0.5 points of GDP | Higher cost of imported energy |
| Private contractual salaries April-May | over +2% per year | Wages recovering, but still moderate |
| Olympic spending on tourism and audiovisual rights | approximately 0.8 billion | Temporary positive effect on service exports |
| Net foreign position | +351 billion, 15.5% of GDP | Italy remains a net creditor abroad |
Work is holding up, but wages remain moderate
The most solid part of the Italian picture remains the labor market. Employment increased in the first quarter and, according to preliminary data, growth continued also in the spring months. The unemployment rate fell further, reaching a new historic low, while participation remained almost stable.
Italy arrives at this slowdown phase with more employed people and an overall favorable job market.
Contractual wages have grown moderately and, according to the Bank of Italy, this trend should continue in the coming months.
Non-farm private sector contractual wages increased more than 2% year-over-year in April and May. Hourly wages actually rose at a faster pace, especially in private services, favoring a gradual recovery in real terms after the sharp contraction in the 2021-2023 period. However, wage growth remains limited, also due to the reduced share of collective agreements awaiting renewal.
Businesses between investments, energy and credit
For businesses the picture is mixed. Investments continued to grow in the first quarter and, in 2026 as a whole, Bank of Italy surveys still signal an expansion in spending on fixed investments. Structural factors linked to the digital and energy transition contribute to supporting accumulation.
The conditions are not simple. Rising energy prices, weak household demand and geopolitical uncertainty reduce visibility. Businesses are investing, but do not yet consider the context favorable.
On the financial front, business credit continues to expand. Between February and May the dynamics strengthened, driven by short and medium term loans. However, the rates on new loans to companies increased and the conditions for accessing bank credit worsened slightly in the second quarter.
Mortgages and loans: stable demand, rates slightly increasing
Even for families, credit remains in positive territory. The dynamics of loans remained stable and the demand for mortgages for the purchase of homes remained unchanged in the first quarter after seven consecutive quarters of increase.
After a long phase of growth in requests, the mortgage market seems to be entering a pause phase. There is not a collapse, but a stabilization. The banks left the offering criteria unchanged in the mortgage sector, while they tightened them slightly for consumer credit.
Interest rates on new mortgages increased modestly, less than those on loans to businesses.
Exports and tourism: Italy is holding up, but energy is opening a hole
On the foreign front, the Italian picture shows two sides. On the one hand, exports of goods in volume remained almost constant in the two-month period April-May, despite the decline in sales to the Middle East. On the other hand, the increase in energy prices worsens the country’s energy balance.
International tourism was only temporarily affected by the Middle Eastern conflict. The presence of travelers from the Middle East, an area that accounts for 2.5% of foreign tourist spending in Italy, decreased sharply in March and April. However, attendance from other non-EU countries showed a marked recovery already in May and June, returning close to the levels of the previous year.
Public accounts: deficit decreasing, debt still rising in 2026
The Bulletin also highlights the path of public finance. Based on the 2026 Public Finance Document, net debt is expected to decrease in the four-year period 2026-2029. Net spending growth rates would be in line with European commitments, with the exception of 2027.
The debt/GDP ratio, however, would increase in 2026, and then reduce in the following years. The European Commission judged the state of progress of the Italian deficit reduction process within the Excessive Deficit Procedure to be adequate overall.
An Italy that holds, but does not accelerate
The Economic Bulletin talks about a country that does not give in, but struggles to accelerate. Employment is holding up, tourism is holding up, exports have not stopped, credit continues to flow and investments remain growing, but families and businesses are moving more cautiously, inflation is rising, energy is once again a burden.
The key word is vulnerability. Italy grows little because every external shock quickly enters the budgets of families, businesses and the state.
The Bulletin does not say it in an alarmist tone, but the conclusion is clear: the Italian economy is still standing, but the safety margin has narrowed.
