ROME, Italy / AsiaWire.IO / – The Bank of Italy has increased its forecast for the country’s gross domestic product to 1% in 2026, up from previous estimates. The anticipated growth rate is expected to slow to 0.7% in 2027 before slightly rising to 0.8% in 2028. The central bank revealed these figures in its October 16 edition of the Economic Bulletin, also cautioning that a renewed surge in crude oil prices might undermine the year’s growth prospects.
This upward revision for 2026 reflects an increase of 0.4 percentage points from the projections issued in June. The outlook for 2027 has been raised by 0.3 points, whereas the estimate for 2028 was reduced by 0.1 points. The bank’s June forecast anticipated 0.5% growth in 2026 and 0.4% in 2027. These updated figures are based on data available up to October 9. When adjusted for working days, the 2026 growth rate reaches 0.9%.
The bank attributes the upgrade primarily to a lesser-than-expected impact from the Middle East crisis during the first half of the year. Additionally, investments related to digital and energy transitions have supported economic activity. Summer tourism also contributed positively to growth. The 1% estimate for 2026 aligns with the figures in the government’s Draft Budgetary Plan. Employment is projected to continue increasing, with unemployment nearing 6%.
Oil Price Shock Could Lead Italy into Contraction
The central bank issued a warning that economic uncertainty remains elevated. A significant increase in crude oil prices, combined with rising inflation, could result in zero growth this year. In this adverse scenario, the economy might contract by 0.3% in both 2027 and 2028. The bank identified the ongoing conflict in the Middle East as a key source of uncertainty for the outlook. Energy prices continue to be the primary risk channel for Italy’s economy.
The baseline scenario assumes that oil prices will average $114 per barrel in the fourth quarter of 2026, with natural gas prices at €76 per megawatt hour during the same period. Both are expected to decrease over the subsequent years. The bank forecasts that the rise in market interest rates will gradually affect borrowing costs for households and businesses. The European Central Bank raised its key interest rates in September.
Inflation to Subside by 2028, According to Projections
Consumer inflation is forecasted to average 3.2% in 2026, primarily driven by energy costs. The bank expects inflation to slow to 2.4% in 2027 and further decline to 1.7% in 2028. Core inflation is projected to remain around 2% throughout this period. Household consumption is expected to weaken in the latter half of 2026 and into 2027, as rising prices erode real incomes.
The bank anticipates a recovery in consumption toward the end of the forecast horizon. Investment is expected to experience a sharp slowdown in 2028 due to increasing financing costs. Exports will benefit from sustained demand in Italy’s primary markets, although their growth is predicted to lag behind global trade trends, which are increasingly driven by high-tech products such as AI goods. Italy’s participation in this sector remains limited, the bank noted.