The Italian economy is moving slowly, too slowly: the Parliamentary Budget Office in the October Economic Note photographs a country that is advancing at a snail’s pace.
In fact, in the third quarter, GDP was “almost stagnant”, substantially unchanged compared to the previous three months. A result that confirms the difficulties that had already emerged in the spring, when the product slipped by -0.1%, the first contraction in almost three years.
Italian exports suffering
According to the PBO, some improvements could only be glimpsed in the final part of the year, but growth for the whole of 2025 remains stuck at 0.5%. A macroscopic forecast that walks on a tightrope suspended above the void of a highly fragmented international context, where geopolitical tensions, protectionism and trade wars rewrite the rules of the game every week.
If the Italian locomotive slows down, much of the blame comes from foreign trade. The first quarter of 2025 had benefited from a “pre-duties” surge, linked to exports to the United States, but spring has reversed the picture: exports down by 1.9% and recent indications that speak of a black August, with sales in clear retreat.
The scenario worsens in light of two explosive factors:
- appreciation of the euro against the dollar (+13% since the beginning of the year) which erodes competitiveness;
- US tariffs and protectionism, the heaviest effects of which we will only have to deal with in the coming months.
Upb calculates a possible “additional burden” of up to 30% for American importers, a huge blow on European and Italian companies, especially those in the North-East and the sectors most exposed to Made in Italy.
Stable inflation, but stagnant wages
A not entirely dark picture comes from prices: Italian Nic inflation remains at 1.6%, lower than the Eurozone average. A breath of fresh air then? Not exactly. Contract wages slowed to 3.2% year-on-year in the second quarter, with a downward trend in the private sector and a recovery in the public sector.
The final balance is a difficult truth to digest: real wages remain 8.8% lower than 2020 levels. A distance that translates into consumption that is still slowed down and in a propensity to save that continues to bite the economy.
The occupation resists but does not run
The job market is holding up, at least apparently. Employment growth barely touched 0.1% in the third quarter. In detail:
- the number of employees is decreasing;
- self-employed workers increase (slightly);
- the presence of 50-64 year olds is growing, thanks to the increase in pension requirements;
- the share of young workers decreases;
- the inactive are growing.
Signs that tell of a changing demographic and a market that is struggling to attract and retain a new workforce.
The crisis does not only affect Italy
In the great theater of the world economy, Italy is not alone and even the large institutions navigate by sight. The International Monetary Fund improves its forecasts for 2025 but cuts those for 2026. Central banks, amid fears of inflation and a timid easing of financial conditions, are keeping their foot on the brakes.
Germany is slowing down, the Eurozone is slowing down, the United States is monitoring it hoping not to skid. Commodities remain cheaper than recent peaks, although volatility threatens a return to the roller coaster.
The contexts that could worsen further concern:
- more volatile energy prices;
- growing geopolitical conflicts and tensions;
- increasingly pervasive US tariffs;
- low confidence among families and businesses;
- unfavorable euro-dollar exchange rate.
