Published by Global Banking & Finance Review®
Posted on February 4, 2026
3 min readLast updated: February 4, 2026
Add as preferred source on GoogleItaly's UPB revises 2026 GDP growth to 0.7% and lowers 2027 outlook. Key drivers include domestic demand and post-COVID funds.
By Giuseppe Fonte
ROME, Feb 4 (Reuters) - Italy's economy is estimated to grow by 0.7% both this year and next, the parliamentary budget watchdog UPB said on Wednesday, upgrading its 2026 estimate and slightly lowering next year's outlook.
In October, UPB had estimated growth of 0.4% and 0.8% for 2026 and 2027, respectively.
The budget watchdog has confirmed its 2025 GDP growth estimate of 0.5%. National statistics bureau ISTAT will release the 2025 data on March 2.
The new estimates are broadly in line with the government's, which last September set a GDP growth target of 0.7% for 2026 and 0.8% for 2027.
This year's main growth drivers are domestic demand and the flow of billions of euros in post-COVID funds, UPB said, adding that its economic framework now factors in "less penalizing assumptions" for exports and consumer price trend.
"Exposure to downside risks remains high, mainly due to the global environment as well as financial market sentiment and climate change," UPB said.
Italy has spent roughly 110 billion of the 194 billion euros in post-COVID funds it is entitled to over six years to 2026, according to the latest government estimates.
These funds have probably prevented Italy from falling into recession, economists say, though they have done little to transform the economy.
Italy's total factor productivity, a measure of economic efficiency, fell by 1.2% in 2024 and by 1.6% the year before, the latest data from ISTAT showed.
"Wage growth remains moderate, meaning that the negative gap in real wages compared to the pandemic period (in 2020) remains wide," UPB said.
It also warned that extreme weather events such as the massive landslide that hit the Sicilian town of Niscemi could re-occur, with a damaging economic impact.
"Phenomena that are particularly severe or localized in areas with a high density of manufacturing facilities would also have significant effects on the national economy as a whole."
A further risk factor is sudden changes in risk appetite on financial markets, given the country's huge public debt, UPB said.
Italy's debt -- the second highest in the euro zone after Greece's -- is seen rising by the Treasury to 137.4% of GDP in 2026 from 136.2% in 2025, before marginally declining next year.
(Reporting by Giuseppe Fonte, editing by Gavin Jones)
Economic growth refers to an increase in the production of goods and services in an economy over a period, often measured by the rise in GDP.
Financial markets are platforms where buyers and sellers engage in the trade of assets such as stocks, bonds, currencies, and derivatives, facilitating capital flow in the economy.
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