Rome, May 29, 2025 – The International Monetary Fund (IMF) has urged Italy to maintain fiscal discipline and press forward with structural reforms, warning that the country’s economic outlook remains fragile despite recent gains.
In its Staff Concluding Statement following the 2025 Article IV Consultation, the IMF said Italy’s economy grew moderately in 2024, supported by infrastructure spending under the National Recovery and Resilience Plan (NRRP) and a positive trade balance. Employment hit a record high and inflation reached 2% in April, but deep-rooted structural weaknesses persist.
Growth outlook uncertain
Real GDP rose 0.3% in the first quarter of 2025, but the IMF expects growth to slow to 0.4% for the year, citing global trade tensions, weak productivity, and a shrinking workforce. While investment linked to the NRRP is expected to help, the IMF noted that regional inequalities and low female labour participation continue to weigh on long-term prospects.
It projects medium-term growth to hover around 0.7%, hampered by slow productivity gains and demographic decline.
Fiscal improvements welcome but more needed
A stronger-than-expected 2024 fiscal performance saw Italy return to a primary surplus and halve its deficit. The IMF welcomed the improvements in tax compliance and the strength of the labour market, but said more work is required to put debt on a firm downward path.
It recommends achieving a primary surplus of 3% of GDP by 2027. This would require additional measures, including rationalising tax breaks, scrapping the flat tax on self-employed income, and updating property values in the cadastre.
The IMF also warned that public spending pressures, especially on pensions, must be contained. Raising the effective retirement age and avoiding early retirement schemes would support both fiscal sustainability and the labour market.
Banks resilient but risks remain
The IMF said Italy’s banking sector remains well-capitalised and profitable, though risks tied to trade tensions and exposure to sovereign debt require continued monitoring. It also called for stronger oversight of less significant institutions and improvements in IT security.
With cyber threats and global financial instability on the rise, the IMF said it is vital that Italian banks remain vigilant.
Reforms vital to lift productivity
Italy must move quickly to implement its NRRP commitments and develop a follow-up reform programme to unlock growth. The IMF highlighted the need to boost human capital, improve access to finance, and support female employment.
It urged reforms that support private sector innovation, ease firm growth, and encourage investment. Removing tax breaks for small firms, applying the new insolvency code, and expanding access to risk capital are key steps.
Energy transition and climate risk
The IMF called climate change a macro-critical issue for Italy, given the importance of agriculture and tourism. It warned that more ambitious policies are needed to meet 2030 targets and reduce reliance on energy imports.
Strengthening energy infrastructure, streamlining permits for renewables, and integrating more deeply into EU electricity markets were identified as priorities.
