Italy’s economic growth forecast for 2024 has been cut from 1% to 0.5% by the National Institute of Statistics, signaling challenges for the Meloni administration amidst stagnant industrial performance and weak domestic demand. The decline is linked to Germany’s economic troubles, impacting Italy’s exports. Opposition parties criticize the government, while the Ministry of Economy acknowledges the difficulties. Despite a bleak outlook, there are hopes for a slight recovery in GDP by year-end due to improved external demand and consumption.
Italy’s Economic Growth Forecast Cut in Half
Milan – A significant setback for the Meloni administration has emerged as the National Institute of Statistics (Istat) announced a drastic reduction in Italy’s economic growth forecast for 2024. The anticipated rise in gross domestic product (GDP) has been adjusted down to 0.5%, a stark decrease from the previous estimate of 1% made in June.
Despite this bleak outlook, the right-wing coalition governing Italy continues to project a 1% GDP growth for the year, even after experiencing zero growth in the third quarter. However, sources from the Ministry of Economy later conceded that the Istat data was “unfortunately not a surprise.” They acknowledged ongoing challenges within the industrial sector, which has faced negative growth for the past 18 months, and noted that this crisis is not isolated to Italy but is a broader issue impacting various regions across Europe.
Impact of Germany’s Economic Troubles
The Italian economy is grappling with “weak domestic demand” and a significant decline in industrial production, primarily influenced by the struggles of Germany, Italy’s largest export market. Germany narrowly escaped a recession, recording a mere 0.1% GDP growth in the third quarter, but its difficulties have reverberated through the Italian economy.
Istat highlights that the downturn in specific production sectors, particularly the automotive industry, has adversely affected both investments and imports. In light of being targeted by a European procedure for excessive public deficit, Italy faces immense pressure to stabilize its finances and address its mounting public debt, which is nearing 3 trillion euros.
Rome has pledged to reduce the public deficit to 2.8% of GDP by 2026, below the 3% limit established by the European Stability Pact, leaving limited scope for expansive economic policies.
The revision of economic forecasts has ignited strong reactions from opposition parties. Silvia Roggiani, a deputy from the Democratic Party, expressed that “Istat blatantly contradicts the propaganda of the Meloni government,” emphasizing that the halved growth forecasts reveal the administration’s failures. Giuseppe Conte, leader of the 5 Star Movement, echoed these sentiments, describing the situation as “alarming” and indicative of an economy in decline, as noted by the Confesercenti federation, which advocates for small and medium-sized enterprises.
Istat has also reduced its growth forecast for 2025, now projecting a GDP increase of 0.8%, down from the earlier estimate of 1.1%.
Despite facing “geopolitical uncertainties” and “protectionist pressures,” Istat anticipates a stabilization of global demand and a modest recovery in international trade for the coming year. The institute notes that “private consumption will benefit from the gradual recovery” of wages and improvements in the labor market by 2025.
The stagnation in GDP during the third quarter resulted from a decline in exports and a significant fall in industrial activity. Growth has decelerated compared to a 0.2% increase in the second quarter and remains below the eurozone average of 0.4%. In the first quarter, Italy’s GDP had risen by 0.3%.
Nevertheless, Economy Minister Giancarlo Giorgetti expressed cautious optimism in early November, asserting that “short-term growth prospects are, overall, still encouraging.” He believes that GDP is likely to rise again in the last quarter, driven by a rebound in external demand and continued growth in consumption.