Italy Saw Modest Growth in Q1, Supported by Olympics, Central Bank Estimates

Italy’s Q1 Economic Growth Driven by Olympics, Faces Inflation Risks

Overview of Italy's Economic Performance and Challenges in Early 2024

Q1 Growth Supported by Winter Olympics

MILAN, April 17 (Reuters) - The Italian economy posted modest growth in the first quarter, supported by the Winter Olympics in February which drew a major influx of tourists, the country's central bank said on Friday.

"There are indications gross domestic product continued to grow at a moderate pace in the first quarter, sustained by activity in services, particularly those aimed at firms," the Bank of Italy said in its quarterly economic bulletin.

It provided no numerical estimate for first quarter GDP data, which will be published by statistics institute ISTAT on April 30.

The euro zone's third-largest economy grew by 0.3% in the fourth quarter of last year from the previous three months.

Impact of Milano-Cortina Winter Olympics

The Milano-Cortina Winter Olympics "are estimated to have made a positive contribution (to first quarter growth), as shown by data on the presence of foreign tourists and on international flights," the bulletin said.

Risks and Forecasts for the Italian Economy

Downside Risks from Global Uncertainty

Citing conflict in the Middle East, which has pushed energy prices higher and increased global uncertainty, the Bank of Italy flagged significant downside risks to consumption and investment this year.

Growth Outlook Adjustments

The central bank confirmed forecasts it issued earlier this month, when it cut Italy's growth outlook for 2026 and 2027 to 0.6% and 0.5% respectively.

Inflationary Pressures and Sectoral Impact

Friday's bulletin also highlighted upside risks for inflation, driven by surging oil and gas prices for a country that is heavily dependent on imports for its energy needs.

Rising costs will also weigh on the competitiveness of energy-intensive sectors, such as chemicals, metals and paper products, which account for about 16% of Italy's goods exports - a share similar to that of Germany, the bank warned.

International and Domestic Policy Implications

IMF Forecasts and Government Challenges

The International Monetary Fund this week cut its growth forecasts for Italy to 0.5% in both 2026 and 2027, citing the fallout from the Middle East conflict.

The weakening outlook makes life harder for Prime Minister Giorgia Meloni's government which is trying to balance the need to support growth against compliance with EU budget rules.

(Writing by Alessia Pé, editing by Gavin Jones)