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Italy Cuts Growth Forecast, Sees Economy Expanding 0.7% Through 2027

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Italy’s national statistics bureau ISTAT has slightly lowered its economic growth forecast for 2026, projecting gross domestic product (GDP) growth of 0.7%, down from the 0.8% estimate issued in December. The agency also expects the economy to expand by 0.7% in 2027, supported by stronger-than-expected performance in the first quarter, when GDP rose 0.3% from the previous three months.

Despite the downgrade, ISTAT’s outlook remains somewhat more optimistic than forecasts from the European Commission, IMF, OECD and the Bank of Italy, all of which expect growth between 0.5% and 0.6% over the next two years. Prime Minister Giorgia Meloni’s government also revised its projections lower in April, citing rising energy costs and ongoing tensions in the Middle East.

ISTAT warned that geopolitical uncertainty continues to pose risks to the economy, particularly developments related to the conflict in the Middle East. The statistics bureau also improved its labour market outlook, forecasting an average unemployment rate of 5.5% this year and in 2027, lower than its previous estimate of 6.1%. Italy’s economy grew 0.5% in 2025, marking a third consecutive year of growth below 1%.

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AI Boost No Cure-All for Soaring Public Debt

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An artificial intelligence-driven productivity surge could ease pressure on debt-laden advanced economies, but economists caution it will not solve deep-rooted fiscal challenges. With public debt already exceeding 100% of GDP across most wealthy nations and projected to climb further due to ageing populations, defence spending and climate costs, AI-fuelled growth may only buy governments time rather than repair strained public finances.

Early estimates shared by the Organisation for Economic Co-operation and Development suggest that stronger productivity and employment gains from AI could reduce debt levels across member economies by about 10 percentage points from projected levels by 2036. In the United States, some economists see debt rising more slowly — to around 120% of GDP over the next decade — if AI meaningfully lifts growth and tax revenues. However, ratings agency S&P Global Ratings is not yet factoring in a major improvement in public finances.

Demographics remain the biggest constraint. Ageing populations and entitlement spending continue to drive debt higher, and uncertainty surrounds whether AI-led gains will translate into higher wages, employment and tax revenues. Economists warn that without fiscal discipline, even a sustained productivity boom may not offset mounting borrowing costs or prevent market pressure if growth disappoints.

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