ITALY: ISTAT Revises 2025 GDP Projection Lower As Trade and Consumption Drag

ISTAT has revised its 2025 domestic GDP projection down to 0.6% from 0.8% in the December forecast round. This is in line with domestic media reports back in April. Given the impressive BTP/Bund tightening observed in recent weeks, it's important to keep Italian macroeconomic expectations and outturns in mind. A weaker GDP outlook would make it harder for the Government to achieve its 3.3% 2025 budget deficit projection, all else equal. 

• The external (i.e. tariff) environment was obviously key to the downward GDP revision, with imports (-0.6pp) and exports (-1.2pp) being marked lower alongside consumption (-0.5pp). On the other hand, investment projections were revised up 1.2pp.
• 2026 growth is expected at 0.8%. ISTAT notes that "the increase in GDP over the two-year forecast period would be entirely supported by domestic demand net of inventories (+0.8 and +0.9 percentage points, respectively), while net foreign demand would contribute negatively in both years (-0.2 and -0.1 p.p.)".
• "The forecast scenario for net foreign demand assumes a reduction in the climate of uncertainty surrounding U.S. trade policy in the second half of 2025. Nevertheless, a negative impact of tariffs on global trade and international growth prospects is still assumed".
• Despite the downward revision, the strong labour market is expected to continue supporting positive consumption growth (0.7% in 2025 and 2026). On investment, ISTAT writes that "Investment growth, which accelerated in 2025 (+1.2%, up from +0.5% in 2024), is expected to benefit from the strong performance in the first quarter. However, a substantial stagnation is likely to follow in the second half of the year, before a slight further acceleration is recorded in 2026 (+1.7%), in conjunction with the final phase of the NRRP".
• Full forecast table below: