IMF sees growth cooling in Italy, urges stronger fiscal discipline

Italy’s economy expanded by 0.3 per cent in the first quarter of 2025, after posting 0.7 per cent growth in 2024 for a second consecutive year, the International Monetary Fund (IMF) statement. on Thursday.

In its review, the IMF said economic activity held up despite global trade tensions, supported by infrastructure investment under the National Recovery and Resilience Plan (NRRP) and strong net exports. Employment reached record highs and inflation rose to 2 per cent in April, while the current account surplus exceeded 1 per cent of GDP.

However, the IMF warned that persistent weak productivity, demographic pressures and external risks continue to weigh on Italy’s longer-term outlook. It projected GDP growth to moderate to 0.4 per cent in 2025 before rebounding to 0.8 per cent in 2026.

The IMF urged the government to maintain fiscal discipline and target a primary surplus of 3 per cent of GDP by 2027. It called for broader tax reforms, tighter control of spending pressures—especially on pensions—and a stronger push to complete the NRRP.

The IMF also highlighted the resilience of Italy’s banking sector but stressed the need for vigilance, especially among smaller lenders. Structural reforms to boost female labour force participation, innovation, and private investment are also needed to lift long-term growth, it said.

Attribution: Amwal Al Ghad English

Subediting: M. S. Salama