Italy’s Central Bank Cuts 2027 Growth Forecast and Warns of Inflation Surge

The Bank of Italy lowered its economic growth forecast for 2027, warning that the country faces continued pressure from weak domestic demand, elevated energy prices and persistent geopolitical uncertainty.

The central bank now expects Italy’s economy to expand by 0.4% in 2027, down from its previous estimate of 0.5% released in early April.

Meanwhile, the bank kept its forecast for 2026 growth unchanged at 0.6%, but said economic activity is facing increasing challenges as households and businesses deal with higher costs and weaker consumption.

The updated projections were part of a coordinated review conducted by eurozone central banks to support the European Central Bank’s regional economic outlook.

Italy, the eurozone’s third-largest economy, recorded 0.3% GDP growth in the first quarter of the year compared with the previous quarter, according to revised data from the national statistics office.

However, the Bank of Italy expects economic activity to remain broadly stagnant through the remaining quarters of the year before gradually returning to growth in early 2027 as markets adjust to price shocks.

The central bank said the downward revision for 2027 mainly reflects the negative impact of higher commodity prices on household consumption and purchasing power.

The pressure on consumer spending is weakening one of the country’s traditional growth drivers, adding to concerns over Italy’s long-standing low-growth environment.

The government had previously projected economic expansion of 0.6% for both the current year and next year.

The Bank of Italy expects growth to reach only 0.7% in 2028, suggesting that the country is heading toward its sixth consecutive year of growth below 1%.

The forecast highlights the structural challenges facing the Italian economy, which has struggled with weak productivity, demographic pressures and limited growth momentum.

On the inflation front, the central bank raised its forecast significantly, expecting consumer price inflation based on EU standards to reach 3.1% this year, compared with its previous estimate of 2.6%.

For next year, inflation is expected to slow to 2.0%, still above the earlier projection of 1.8%.

The revised outlook indicates that price pressures could persist longer than previously anticipated, complicating efforts by policymakers to balance economic support with inflation control.