According to the rating agency Moody’s, Italy’s GDP will slow down slightly in 2026 while inflation will rise again.
The stumbling block for the Italian economy comes from the war in the Middle East, with the crisis in Iran and the Strait of Hormuz.
Italy’s GDP 2026, limited growth
Moody’s has revised its forecasts for Italian GDP for 2026 downwards, bringing them from +0.8% to +0.7%. This is a limited but significant correction since the picture was already one of moderate growth.
According to the Moody’s agency, the basic scenario remains relatively stable and a conflict is assumed to be limited in time.
However, the risk margin remains high: a prolongation of tensions could have more profound effects on economic growth. The day after the outbreak of the war we had already seen the rise in oil prices and the decline in the markets. All this while citizens are fighting against the high cost of petrol and the meteoric rise in the cost of goods and services.
For 2027, the forecast remains slightly more favourable, with GDP expected at +0.8%, a sign of possible stabilization in the medium term.
Inflation rising
Moody’s also revised its inflation estimates upwards from 1.8% to 2.1%.
The main reason is the impact of geopolitical tensions on energy prices. Italy remains particularly exposed to energy imports from the Gulf area, making the economic system vulnerable to shocks.
The war in the Middle East
The war in Iran represents the main risk factor identified by Moody’s. Even in the basic scenario, which foresees a limited duration, the effects are already being felt on economic forecasts.
The most relevant risk is that of an adverse scenario characterized by a longer and more destabilizing war. In this case, the consequences could be more serious:
- increase in energy costs;
- slowing growth;
- greater pressure on public finances.
Italy, due to its energy dependence, is among the European countries most exposed to these dynamics.
Italian public accounts promoted
Moody’s, however, confirmed an overall positive opinion on the management of Italian public finances.
The fiscal consolidation path is defined as “credible and achievable”, thanks to:
- improvement of the primary balance;
- tax revenue growth;
- progressive reduction of the deficit.
However, the great structural limit of public debt remains, which continues to represent a vulnerability factor. According to Moody’s, debt reduction will depend on two fundamental variables:
- more robust economic growth;
- constant fiscal consolidation.
A possible slowdown in GDP or a weakening of reforms could compromise this balance, increasing the risks to the sustainability of public finances.
Work and consumption
Among the favorable elements, the agency reports the improvement of the labor market, with a drop in unemployment and good stability in domestic consumption.
These factors have helped support the economy in recent years, partially offsetting weak foreign demand and more restrictive financial conditions. But alone they are not enough to guarantee sustained growth in the medium term.
Pros and cons
Moody’s maintains a stable outlook on Italy, balancing strengths and weaknesses.
Strengths:
- large and diversified economy;
- strong domestic investor base;
- membership of the European Union and the euro.
Weaknesses:
- high public debt;
- low growth;
- stagnant productivity.
