Italy's Economic Future Threatened by Demographic Decline and Talent Exodus

Impact of Demographic Changes on Italy's Economy

ROME, Jan 15 (Reuters) - Italy faces a demographic time bomb that threatens long-term growth, as a plunging birthrate and the emigration of young talent undermine the country’s economic potential, Bank of Italy Governor and ECB policymaker Fabio Panetta warned on Thursday.

Declining Birthrates

Italy has struggled with stagnant productivity and growth for the past 25 years. Prime Minister Giorgia Meloni's government has set a growth target of just 0.5% for 2025, down from 0.7% in 2024.

Emigration of Skilled Workers

Speaking at the University of Messina, Panetta said Italy's working-age population was set to shrink by more than 7 million by 2050, even assuming higher labour participation. 

Proposed Solutions

"Without a strong increase in productivity, this imbalance will inevitably translate into a decline in GDP and overall welfare", he said.

Italy recorded 370,000 births in 2024, the lowest figure since unification in 1861, and the 16th year in a row in which the number declined. Preliminary figures for 2025 point to a further decrease.   

"Low birthrates raise questions about the kind of society and economy we want to build", Panetta said.

The demographic squeeze is compounded by the outflow of skilled workers. 

“A young graduate in Germany earns on average 80% more than an Italian peer, while the gap with France is around 30%,” Panetta noted, lamenting that this brain drain deprives Italy of crucial resources.

To reverse these negative trends, Italy needs to spend more on education, improve its universities, and expand childcare services and job security for women and young people, the Bank of Italy governor said. 

(Reporting by Valentina Consiglio, editing by Alvise Armellini and Ed Osmond)