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flag Italy Italy: Economic and Political Overview

In this page: Economic Outline | Political Outline | COVID-19 Country Response


Economic Outline

Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Italy's economy was heavily impacted by the global financial crisis and only emerged from recession in 2015; however, the country was one of the most affected by the COVID-19-induced crisis. After rebounding by 6.6% in 2021, the economy grew an estimated 3.2% in 2022 (IMF) thanks to solid growth in the first three quarters of the year, exceeding pre-COVID-19 levels in the second quarter of the year. Nevertheless, high energy prices impacted production in energy-intensive industries already in the last quarter of 2022, while falling real incomes due to high inflation, increasing interest rates and subdued export market growth contributed to a slowdown in the economy. Such conditions are expected to continue into 2023, as the Italian economy is forecast to enter a period of contraction, with a tangible recovery not to be expected before the second half of 2023. Overall, the IMF projects a negative growth of 0.2% this year and a rebound to 1.3% in 2024 when private consumption is set to pick up again.

The country’s primary budget (which excludes interest payments) is structurally positive; however, the interest cost on the government’s debt weighs heavily on Italy’s accounts, with the general government budget being structurally in deficit. The 2022 budget included deficit-increasing measures, consisting of a further reduction of the tax wedge on labour and several fiscal packages to mitigate the economic and social impact of high energy prices (valued at 2.6% of GDP by the EU Commission). Overall, the budget deficit was estimated at 5.7% in 2022, whereas in 2023 and 2024 the general government deficit is forecast to decrease to 3.6% of GDP (IMF). Italy has one of the highest debt-to-GDP ratios in the world, estimated at 147.2% in 2022 when interest expenditure increased to 4% of GDP (from 3.6% one year earlier), due to higher bond yields. The IMF expects public debt to remain stable this year (147.1% of GDP) before decreasing slightly in 2024 (146.1%). Being a net importer of energy, Italy’s inflation was pushed by rising global energy costs, reaching a record level of 8.7% in 2022. Consumer price inflation is expected to come down only gradually as energy price caps are phased out in 2023 and recent increases in energy and food prices are triggering wider price pressures. For 2023, the IMF forecasts the inflation rate at 5.2%, before falling further to 1.7% in 2024.

The unemployment rate, which has been on the rise since the global financial crisis, started dropping in recent years; however, it spiked in the aftermath of the global pandemic crisis. Overall, it decreased to 8.8% in 2022 (from 9.5% one year earlier - IMF). More recently, labour demand is decreasing in more energy-intensive sectors such as manufacturing and construction, hence the unemployment rate is expected to increase to 9.4% this year. Italy has high levels of youth unemployment (23.7% as of Sep. 2022 according to ISTAT), and regional inequalities between the highly industrialised and dynamic North and the poorer, rural southern “Mezzogiorno” areas are still evident. Furthermore, Italy has to face a falling birth rate and a declining population. Italy’s GDP per capita (PPP) was estimated at USD 51,062 by the IMF in 2022, just below the EU-27 average (USD 53,960).

Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 2,012.012,186.082,284.082,365.542,443.49
GDP (Constant Prices, Annual % Change)
GDP per Capita (USD) 34,08537,14638,92640,43741,902
General Government Balance (in % of GDP) -1.9-2.1-3.4-3.4-2.7
General Government Gross Debt (in % of GDP) 144.4143.7143.2142.8141.9
Inflation Rate (%) n/a6.
Unemployment Rate (% of the Labour Force)
Current Account (billions USD) -24.5215.2619.7628.9836.44
Current Account (in % of GDP) -

Source: IMF – World Economic Outlook Database, Latest data available.

Note : (E) Estimated data


Main Sectors of Industry

Italy is one of the main agricultural players in the EU, being the biggest European producer of rice, fruits, vegetables and wine. The agricultural sector represents 1.9% of Italian GDP and is heavily reliant on the import of raw materials utilised in agricultural production due to the country’s limited natural resources (Italian imports of raw materials are responsible for more than 80% of the country’s energy). The primary sector employs 4% of the workforce (World Bank, latest data available), and is comprised of around 1.3 million farms of which almost half have a small agricultural output (European Commission). The country has 12.8 million ha of agricultural land and its main crops include cereals (particularly wheat), corn, barley, rice and oats. Italy is also the first world producer of wine and the first producer of tobacco in Europe. According to figures by Eurostat, the value of Italian agricultural production in 2021 increased by 6% with a total output of EUR 61.2 billion (the second-highest in Europe after France).

Italy is a primary industrial country, with the secondary sector accounting for 22.5% of GDP and employing 26% of the active population (World Bank, latest data available). The country’s industrial activity is concentrated in the northern part of the country, including cities such as Turin, Milan and Venice. Much of the Italian industry is comprised of small and medium-sized family businesses, with the majority of Italian industrial companies having less than 50 employees. Italy is the largest global exporter of luxury goods (clothing, cars, etc.); other major Italian industries include precision machinery, motor vehicles, chemical products, pharmaceuticals, electrical items, fashion and clothing. The manufacturing sector alone accounts for 15% of GDP (World Bank). The country has suffered from deindustrialisation (especially during the global financial crisis), but it remains Europe's second-largest manufacturing power and the seventh-largest worldwide. Data by ISTA shows that in 2021 Italy’s industrial output grew by 11.8% year-on-year, overtaking its pre-pandemic level.

The service sector constitutes almost two-thirds of Italian GDP (65.2%) and employs 70% of the country’s workforce. Tourism - one of the fastest growing and most profitable industries - comprises the largest part of the service sector (Italy is the fifth most visited country internationally and the third most visited in Europe): according to the national statistical agency ISTAT, tourism and its related activities generate around 6% of the economy’s added value. Nevertheless, the sector did not return to its pre-COVID level yet (in the period Jul-Sep 2022 the number of visitors was still 4.7% lower than in 2019). Business-related services also play an important role in the country’s economy. It is estimated that more than half of Italy’s 5 million companies are active in the tertiary sector.

Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 4.1 26.6 69.3
Value Added (in % of GDP) 2.0 23.0 64.8
Value Added (Annual % Change) -1.8 2.0 4.7

Source: World Bank, Latest data available.


Find more information about your business sector on our service Market Reports.

Indicator of Economic Freedom


The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

World Rank:
Regional Rank:

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation


Business environment ranking


The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

World Rank:

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024


Country Risk

See the country risk analysis provided by Coface.


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Political Outline

Current Political Leaders
President: Sergio Mattarella (since 3 February 2015 - elected for a second term in January 2022)
Prime Minister (President of the Council of Ministers): Giorgia Meloni (since 22 October 2022)
Next Election Dates
Presidential: 2029
Legislative: September 2027
Current Political Context
The government formed by politicians and technocrats led by former ECB president Mario Draghi lost its majority in July 2022 after M5S, Lega and Forza Italia withdrew their support. Snap elections were held in September.
The election saw a wide victory of the centre-right coalition which included Lega and Forza Italia and was led by the right-wing party Fratelli d’Italia. In a record-low voter turnout, Giorgia Meloni's party became the largest in Parliament with 26% of the votes, and its leader became the first female prime minister.
Notwithstanding previous anti-EU rhetoric, the right-wing coalition is expected to avoid confrontations with the EU over economic policy also due to the importance of EU funding in the frame of the Recovery and Resilience Facility.
The main opposition parties are the centre-left Partito Democratico and the Five Star Movement, who had turned down the coalition offer of the centre-left coalition.
Main Political Parties
The Italian Parliament is based on a multi-party system, with the main political forces being:

- Fratelli d'Italia (FdI, Brothers of Italy): right-wing, nationalist, conservative
- Partito Democratico (PD): centre-left
- Five Star Movement (M5S): anti-establishment, centre-left, catch-all political movement
- Lega: right-wing, populist, Euro-sceptic
- Forza Italia (FI): centre-right, liberalism
- Italia Viva (IV): centre-left, liberal
- Azione (Action): centre-liberal
- Alleanza Verdi e Sinistra (Greens and Left Alliance):  left-wing political alliance, a federation of two political parties, Italian Left (SI) and Green Europe (EV)
- Liberi e Uguali (LeU, Free and Equal): left-wing
- +Europa (+Eu, More Europe): pro-European, social liberalism.

The main coalitions in the latest election were the composed of Fratelli d'Italia, Lega and Forza Italia (right/centre-right); PD, Alleanza Verdi e Sinistra and +Europa (centre-left); and the "Terzo Polo" formed by Italia Viva and Azione. The Five Star Movement did not enter any coalition.
Type of State
Republic based on a parliamentary democracy.
Executive Power
Italy is a parliamentary republic, hence the President of the Republic's role is mostly cerimonial. He is the chief of state and is indirectly elected for a 7-year term.
The Prime Minister (officially the President of the Council of Ministers) is the head of the government and holds executive power, which includes the implementation of the law and the running of the everyday business of the country. The Prime Minister is appointed by the President and confirmed by the Parliament, on the basis of the support of the majority. He or she has a five year term of office. The Council of Ministers is appointed by the Prime Minister and approved by the President.
Legislative Power
Legislative power in Italy is bicameral and both chambers possess significant powers and prerogatives. The Senate (Senato della Repubblica) has 200 members (plus senators for life), while the Chamber of Deputies (Camera dei deputati) has 400members. Universal suffrage has been part of Italian elections since the writing of the Constitution in 1948, but Italian electoral law has shifted substantially over the years. The electoral system was modified in 2005, in 2015 and once again in 2017. In a 2020 referendum, voters approved a constitutional law that would amend the Constitution by reducing the number of MPs in the Parliament from 630 to 400 in the Chamber of Deputies and from 315 to 200 in the Senate (the modifications took effect with the last general election held in 2022).
The executive branch of government depends directly or indirectly on the support of parliament, often expressed by a vote of confidence. The prime minister cannot dissolve the parliament, as such power is attributed to the President. Italian citizens enjoy considerable political rights.

Indicator of Freedom of the Press


The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:

Indicator of Political Freedom


The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Political Freedom:
Civil Liberties:

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House


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COVID-19 Country Response

Travel restrictions
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.
Import & export restrictions
A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
The summary of the EU’s economic response to the COVID-19 pandemic is available on the website of the European Council.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) in Italy, please consult the country's dedicated section in the IMF’s Policy Tracker platform.
Support plan for businesses
For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.


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Latest Update: November 2023