Italy's Economic Outlook

ROME (Reuters) – Italy will likely end this year with an annual economic growth rate of 0.7%, according to Economy Minister Giancarlo Giorgetti, who expressed concerns about a potential slump in the industrial sector.

Speaking at a political event organized by Prime Minister Giorgia Meloni's Brothers of Italy party, Giorgetti indicated that this estimate was adjusted for the number of days worked. The government had previously set an unadjusted growth target of 1% for this year.

Giorgetti noted that the economic struggles of Germany were negatively impacting Italy's economy, with the industrial sector being the primary area of concern. "We see signs of a nosedive," he commented.

Despite the downward revision of GDP estimates, Giorgetti assured that the government’s public finance targets remain unchanged. Italy aims to reduce its deficit below the European Union's 3% of GDP cap by 2026, down from the targeted 3.8% for this year.

Part of the lower-than-expected growth can be attributed to delays in utilizing the European Union's post-COVID recovery funds, which have weighed on the economy. Italy is expected to receive 194.4 billion euros ($203.81 billion) in low-interest loans and grants from the Recovery and Resilience Facility (RRF) by 2026, the highest amount among member states.

During the same event, EU Affairs Minister Tommaso Foti announced that Italy plans to replace some projects that may not be completed by the 2026 deadline with new initiatives that can be finished on time. “We are heading towards a rescheduling next February,” Foti noted.

To bolster the economy, the government intends to reduce the IRES corporate tax for companies making new investments and hiring, contingent upon certain conditions. The initiative is projected to cost around 400 million euros, which Giorgetti stated will be offset by seeking additional contributions from banks.

Italy anticipates raising over 5 billion euros from the financial sector over the next three years through existing measures incorporated in the government’s 2025 budget.

($1 = 0.9538 euros)