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Italian Economy 2025 Prospects: How It Will Play and What to Expect

The Italian economy is preparing to experiment. Moderate growth period In the biennium 2024-2025. This is confirmed by data. The Istat report was published on December 5, 2024.which analyzes the growth rate, consumption and employment trends, current situation, last year’s dynamics and finally brings out that Economic prospects of the country.

What are Italy’s economic prospects in the coming years?

Italy’s economic prospects for the next few years highlight one. Limited but positive growthWith GDP growth forecast 0.5 percent in 2024 and 0.8 percent in 2025. These growth rates, though modest, indicate a sustained recovery, with the primary drivers alternating between foreign and domestic demand.

The GDP growth rate in 2024 is Fueled primarily by net foreign demandwith a positive contribution of +0.7 percentage points. This means that Italy will continue to benefit from exports despite a slight decrease in domestic demand, which will contribute negatively with -0.2 points. However, in 2025, it is expected that Domestic demand becomes the main driver of growth.With an increase of +0.8 percentage points, improvement in internal conditions, such as a strengthening labor market and rising real wages.

What will Italy’s economy look like in 2025?

According to Istat estimates, in 2025 Private household consumption will remain one of the key drivers of growth. Their expansion will accelerate slightly in 2025 (+1.1%). Better employment and higher wages. Hence, the increase in consumption is associated with strengthening consumer confidence and increasing purchasing power.

On the employment front, The job market will continue to improve.With growth in work units (AWU) equal to +1.2% in 2024, significantly higher than GDP growth. This will significantly reduce the unemployment rate, which will fall to 6.5% in 2024 from 7.5% in 2023. In 2025, a further slight decrease (6.2 percent) is expected.

Furthermore, in 2025, despite the stimulus from the National Recovery and Resilience Plan (PNRR) and interest rate cuts, investment growth is expected to remain at zero, a sign of a certain stagnation. Gross fixed investment, which recorded strong growth (+8.7%) in 2023, is actually already set to slow in 2024, with an expected growth of just 0.4%. This reflects the end of tax incentives for construction, which had boosted investment in previous years.

Finally, InflationWhich increased sharply in 2023, will decline in 2024 thanks to lower prices of energy commodities. Household spending will fall significantly (+1.1% in 2024, compared to +5.1% in 2023), But prices are expected to recover for 2025 (+2.0%).is linked to the stability of income and consumption.

The real Italian economic situation

And An increase in GDP (Gross Domestic Product) indicates growth in the economy.ie more production of goods and services. When GDP increases, employment often increases as well, as businesses need more workers to meet the increased demand for products and services. This is reflected in an improving labor market, with more jobs and, in general, a lower unemployment rate.

However, when the economy grows and demand increases, The price may also increase. This happens because as more people work and earn money, the demand for goods and services increases, but if production cannot meet the demand, prices rise. Inflation can reduce purchasing power. The number of families, that is, the amount of goods and services they can afford with their salaries, even if the latter is increasing.

The fact is that The growth rate of investment is zero.Finally, this is an important fact to consider, because it means that despite economic growth and employment growth, investment (in machinery, infrastructure, research, etc.) will not increase further.

In summary, rising GDP and higher employment are positive indicators, but if price increases (inflation) and investment do not increase as expected, The economy cannot be on a solid foundation. for long-term growth. A lack of investment can hinder the modernization of the economy, reduce competition and slow innovation, limiting the potential for future growth.

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