Italy Economy Growth Forecast: Meloni Sees 1% GDP Growth in 2026

Italy economy growth forecast: Prime Minister Giorgia Meloni expects Italy’s economy to grow by around 1% in 2026, putting the country broadly in line with the euro zone. The forecast marks a significant improvement over the Italian government’s earlier projection of 0.6% growth and comes as economic data from the first half of the year points to a stronger-than-expected performance.

Meloni’s assessment suggests that Italy could outperform the government’s original expectations, although the country continues to face structural problems including low productivity and high energy costs. The prime minister acknowledged that these issues have limited Italy’s ability to achieve sustained economic expansion over a longer period.

Meloni Raises Italy’s 2026 Growth Outlook to 1%

Italy’s government had forecast 0.6% GDP growth for 2026 in April. Since then, the outlook has improved. The country’s budget watchdog, UPB, raised its projection to 0.9% last month.

Meloni has now gone a step further, saying that economic data from the first six months of 2026 could support full-year growth of 1%.

That would put Italy’s economic expansion broadly alongside the euro zone. Meloni said Italy’s economy was “holding up well,” while acknowledging that achieving stronger and more consistent growth remains a challenge.

Italy GDP Growth in the First Half of 2026

The Italian economy recorded moderate growth during both quarters of the first half of 2026.

• Q1 2026: GDP increased 0.3% quarter-on-quarter.
• Q2 2026: GDP increased 0.2% quarter-on-quarter.
• First-half performance: The economy maintained positive momentum despite its longer-term structural weaknesses.
• Acquired growth: Growth stood at 0.8% at the end of June.

The concept of acquired growth is particularly important for understanding Meloni’s 1% projection. It means that even if Italy’s GDP remains completely flat during both the third and fourth quarters, the economy would still record annual growth of approximately 0.8% compared with 2025.

Therefore, Italy does not need another major acceleration in the second half of the year to approach the government’s revised growth ambition.

What Is Acquired Growth and Why Does It Matter?

Acquired growth is a statistical effect that shows how much annual GDP growth would be achieved if economic output stopped changing for the rest of the year.

For Italy, an acquired growth rate of 0.8% at the end of June provides a relatively strong starting point for the full-year calculation. Any additional quarterly expansion during the second half could push the final annual growth figure closer to or potentially above 1%.

This makes Meloni’s forecast less dependent on a dramatic acceleration in the Italian economy during the remaining months of 2026. At the same time, it does not eliminate the risks that could weaken growth later in the year.

Italy’s Growth Forecast Compared With Earlier Projections

Why Italy Has Struggled to Deliver Sustained Growth

Despite the improved 2026 outlook, Italy has a long-standing growth problem. Meloni herself acknowledged that the economy has struggled for years to generate sustained and steady expansion.

Italy grew only 0.5% in 2025. The economy has also failed to exceed 1% annual growth during the past three years, despite receiving tens of billions of euros through European Union COVID-19 recovery funds.

This highlights the difference between short-term economic momentum and long-term productivity growth. A country can receive substantial investment and still struggle to raise its underlying growth potential if structural weaknesses remain unresolved.

High Energy Costs Remain a Major Challenge

One of the issues Meloni identified is the high cost of energy. Energy prices influence businesses across the economy, from manufacturing and transportation to services and smaller enterprises.

Higher energy costs can raise production expenses and reduce profit margins. Businesses may respond by increasing prices, reducing investment or delaying expansion. For an economy such as Italy’s, which has a large industrial and manufacturing base, energy competitiveness can have a significant impact on economic performance.

Lower and more stable energy costs could therefore support Italian companies by improving competitiveness and creating more room for investment.

Low Productivity Is Italy’s Bigger Long-Term Problem

Energy costs are only one part of the challenge. Low productivity has been a persistent problem for Italy and represents a more fundamental constraint on long-term economic growth.

Productivity measures how efficiently an economy converts labour and capital into goods and services. When productivity grows slowly, wages, business investment and overall economic output can also face limitations.

Meloni said that her government is working to address these structural weaknesses, but warned that the results of those efforts would become visible only over the medium term.

This is an important distinction. Policies designed to improve infrastructure, investment, technology adoption, skills and business efficiency generally cannot transform GDP growth immediately. Their benefits can take several years to appear in national economic data.

EU Recovery Funds Have Not Solved Italy’s Growth Problem

Italy has been one of the major beneficiaries of the European Union’s post-pandemic recovery programme. The funds were intended to support investment and modernise areas of the economy that could raise future growth.

However, the continued difficulty in achieving growth above 1% demonstrates that investment funding alone does not automatically solve structural economic problems.

The effectiveness of such programmes depends on how quickly projects are implemented, whether they improve infrastructure and productivity, and whether they encourage private-sector investment alongside public spending.

For Italy, the challenge is therefore not simply obtaining financial resources. It is converting those resources into higher productivity and sustainable economic output.

Why a 1% Growth Rate Would Still Be Significant for Italy

A 1% annual growth rate may appear modest compared with faster-growing economies, but for Italy it would represent an improvement over recent performance.

The country’s economy grew 0.5% in 2025. Reaching 1% in 2026 would therefore represent a doubling of the previous year’s growth rate.

More importantly, maintaining positive growth could strengthen business confidence and create a better environment for investment. If the improvement continues beyond 2026, it could signal that structural reforms and investment are beginning to produce results.

But 1% Should Not Be Viewed as a Breakthrough Yet

There is an important caveat. A single year of stronger growth does not necessarily mean that Italy has solved its long-term economic problems.

The country would need several years of stronger productivity, investment and output growth before it could confidently be described as having entered a new long-term growth phase.

Italy Versus the Euro Zone

Meloni’s comparison with the euro zone is politically and economically important. Italy has frequently been viewed as one of the weaker-growing major economies in Europe.

Matching euro-zone growth would therefore allow the government to argue that Italy is keeping pace with the broader monetary bloc rather than falling behind it.

However, the quality of growth matters as much as the headline number. Growth driven mainly by temporary factors would provide less reassurance than expansion supported by stronger productivity, private investment and durable business activity.

What Could Support Italy’s Economy in the Second Half of 2026?

Italy enters the second half of the year with an acquired growth cushion of 0.8%. Several factors could help push annual growth toward 1%.

• Continued domestic demand: Stable household and business spending could support economic activity.
• Investment: Public and private investment could strengthen construction, infrastructure and industrial activity.
• EU-funded projects: Continued implementation of recovery investments could support output.
• Lower economic uncertainty: Greater confidence could encourage companies to invest.
• Productivity reforms: Although their benefits are longer term, reforms could gradually improve Italy’s growth potential.

What Could Threaten the 1% Italy Growth Forecast?

The forecast is not guaranteed. Italy remains exposed to several risks, particularly because its underlying growth rate has historically been weak.

Higher energy costs could again pressure businesses and households. A weaker European economy could also reduce demand for Italian exports, while renewed financial or geopolitical uncertainty could discourage investment.

Another risk is that temporary improvements in economic activity may fade. The Q1 and Q2 growth figures were positive, but quarterly expansion of 0.3% and 0.2% is still relatively modest.

Therefore, Italy’s ability to maintain positive growth through the second half of 2026 will be important in determining whether Meloni’s 1% target becomes reality.

Why the Next Few Quarters Matter

The third and fourth quarters will provide a clearer test of Italy’s economic momentum. Because the economy already has 0.8% acquired growth, even limited expansion could bring the full-year figure close to 1%.

But stronger quarterly growth would provide a more encouraging signal than simply reaching the annual target through statistical carryover.

For economists and investors, the key question is therefore not only whether Italy achieves 1% growth in 2026, but what is driving that growth and whether it can continue into 2027 and beyond.

Italy’s Economic Outlook: Short-Term Improvement, Long-Term Test

Meloni’s latest forecast presents a more positive picture than the Italian government’s original 2026 estimate. Moving from a 0.6% official forecast to an expectation of around 1% suggests that economic performance during the first half of the year has exceeded earlier assumptions.

Yet the broader story remains more complicated. Italy has struggled to produce sustained growth above 1%, and the country continues to face structural problems involving productivity and energy costs.

The government’s challenge is therefore twofold: protect the current economic momentum while implementing policies that raise Italy’s underlying growth potential.

Bottom Line

Italian Prime Minister Giorgia Meloni expects Italy’s economy to grow by around 1% in 2026, matching the euro zone and improving significantly on the government’s original 0.6% forecast. GDP grew 0.3% in the first quarter and 0.2% in the second, while acquired growth reached 0.8% by the end of June.

The numbers give Italy a credible path toward 1% annual growth, but the bigger test lies beyond 2026. High energy costs, weak productivity and a history of slow expansion remain unresolved. If Italy can turn its current momentum into several years of stronger productivity and investment, the improvement could become more than a one-year statistical rebound.