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Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.


Italy's economy was heavily impacted by the global financial crisis and only emerged from recession in 2015; however, the country was one of the most affected by the COVID-19-induced crisis. After losing almost 9% in 2020, Italy’s GDP rebounded by an estimated 5.8% in 2021, on the back of private consumption and higher investments. The Italian economy is expected to embark on a stable and sustained expansion path this year (+4.2%), thanks to investments financed by EU’s Recovery and Resilience Facility (RRF), the easing of supply shortages, and an expansive budgetary policy. For 2023, the IMF forecasts a growth of 1.6% (2.3% according to the European Commission), a rate still sizeably higher than Italy’s long-term average.

The country’s primary budget (which excludes interest payments) is structurally positive; however, the interest cost on the government’s debt weighs heavily on Italy’s accounts, with the general government budget being structurally in deficit. This trend was exacerbated by the COVID-19-induced crisis (estimated at 4% of GDP in 2021 by the European Commission), which prompted a reduction in revenues from both direct and indirect taxes, as well as by increased government expenditure. Overall, the general government balance was negative by 7.1%. The global recovery and the phasing-out of COVID-related support measures should favour a gradual decrease of the deficit over the forecast horizon (3.8% this year and 3.3% in 2023 - IMF). The historically-high debt-to-GDP ratio spiked by more than 20pp in 2020, decreasing only marginally in 2021 (154.8%). Interest expenditure is set to steadily decline as a share of GDP in light of favourable financing conditions, benefiting the debt-to-GDP ratio which is expected to be around 150%. Being a net importer of energy, Italy’s inflation was pushed by rising global energy costs over the course of 2021, with headline inflation above 1.7%. A similar rate should be recorded this year (1.8%) before the index starts to decrease in 2023 (1.2% - IMF).

The unemployment rate, which has been on the rise since the global financial crisis, started dropping in recent years; however, it spiked in the aftermath of the global pandemic crisis, reaching 10.3% in 2021. The end of pandemic-relief measures (including the general dismissal ban and job retention schemes for workers in the manufacturing and construction sector) are expected to cause a marginal increase of the unemployment rate this year (11.6%), before falling to 11.4% by 2023 (9.2% as per the EU Commission estimates), amid a gradual rise in labour supply. Italy has high levels of youth unemployment (29.8% as of Sept. 2021 according to ISTAT), and regional inequalities between the highly industrialised and dynamic North and the poorer, rural southern “Mezzogiorno” areas are still high. Furthermore, Italy has to face a falling birth rate and a declining population. Italy’s GDP per capita (PPP) was estimated at USD 43,376 by the IMF in 2021, just below the EU-27 average (Eurostat).

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 2,005.141,884.942,120.232,272.272,369.65
GDP (Constant Prices, Annual % Change) 0.3-8.96.23.82.2
GDP per Capita (USD) 33,521e31,60435,58538,16939,831
General Government Balance (in % of GDP) -0.9-5.9e-7.1-3.8-3.3
General Government Gross Debt (in % of GDP) 134.6155.8e154.8150.4149.4
Inflation Rate (%) 0.6-0.11.71.81.2
Unemployment Rate (% of the Labour Force) 10.09.3e10.311.611.4
Current Account (billions USD) 64.2866.8678.8280.8384.24
Current Account (in % of GDP) 3.23.53.73.63.6

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

Italy is one of the main agricultural players in the EU, being the biggest European producer of rice, fruits, vegetables and wine. The agricultural sector represents 2% of Italian GDP and is heavily reliant on the import of raw materials utilised in agricultural production due to the country’s limited natural resources (Italian imports of raw materials are responsible for more than 80% of the country’s energy). The primary sector employs 4% of the workforce (World Bank, latest data available), and is comprised of around 1.3 million farms of which almost half have a small agricultural output (European Commission). The country has 12.8 million ha of agricultural land and its main crops include cereals (particularly wheat), corn, barley, rice and oats. Italy is also the first world producer of wine and the first producer of tobacco in Europe.

Italy is a primary industrial country, with the secondary sector accounting for 21.6% of GDP and employing 26% of the active population (World Bank, latest data available). The country’s industrial activity is concentrated in the northern part of the country, including cities such as Turin, Milan and Venice. Much of the Italian industry is comprised of small and medium-sized family businesses, with the majority of Italian industrial companies having less than 50 employees. Italy is the largest global exporter of luxury goods (clothing, cars, etc.). Other major Italian industries include precision machinery, motor vehicles, chemical products, pharmaceuticals, electrical items, fashion and clothing. The country has suffered from deindustrialisation (especially during the global financial crisis), but it remains Europe's second-largest manufacturing power and the seventh-largest worldwide.

The service sector constitutes two-thirds of Italian GDP (66.7%) and employs 70% of the country’s workforce. Tourism - one of the fastest growing and most profitable industries in Italy - comprises the largest part of the service sector (Italy is the fifth most visited country internationally and the third most visited in Europe): according to the national statistical agency ISTAT, tourism and its related activities generate 6% of the economy’s added value. Nevertheless, the sector was severely impacted by the COVID-19 pandemic, which caused a 40% contraction in tourism revenues (Bank of Italy). Business-related services also play an important role in the country’s economy. It is estimated that more than half of Italy’s 5 million companies are active in the tertiary sector.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 3.9 25.9 70.2
Value Added (in % of GDP) 2.0 21.5 66.8
Value Added (Annual % Change) -6.0 -10.2 -8.1

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Euro (EUR) - Average Annual Exchange Rate For 1 USD 0.940.890.850.890.88

Source: World Bank - Latest available data.

 

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Foreign Trade

Italy has an export-oriented economy and is the 8th largest exporter and importer worldwide, with trade making up 55% of its GDP (World Bank, latest data available). According to the latest figures by ISTAT, large exporting companies (1,996 units with at least 250 employees) accounted for 49.0% of national exports, medium-sized companies (50-249 employees) for 30.6% and small companies (less than 50 employees) for 20.4%. The country’s main exports include medicaments, cars and vehicle parts, refined petroleum, and trunks, suit-cases, vanity-cases. Italy is also the second-largest wine exporter in the world. The country is dependent on imports for its energy needs, hence petroleum and gas products are among the main items in Italy’s import bills, after cars and above medicaments. Among the manufacturing product groups in which Italy holds the largest shares of world merchandise exports in 2020 are: terracotta building materials (24.05%); tanned and processed leather, travel goods, handbags, leather goods and saddlery, prepared and dyed furs (14.55%); bakery and farinaceous products (13.29%); cut, shaped and finished stones (11.28%); tubes, pipes, hollow profiles and related accessories of steel, excluding cast steel (10.69%); leather goods, excluding clothing, and similar (10.56%); tanks, reservoirs, radiators and containers of metal (9.61%) and beverages (9.52% - data by ISTAT).

Italy’s main trading partners are Germany (12.8%), France (10.3%), the U.S. (9.8%), Switzerland (5.8%) and the UK (5.2%). The main countries of origin for Italian imports are Germany (16.3%), China (8.7%), France (8.5%), the Netherlands (5.9%) and Spain (5.3% - data by WTO).

Since the sovereign debt crisis in 2010 and after several years of registering a trade deficit, Italy has changed direction and has recorded positive trade balances in recent years. According to WTO data, in 2020 the country exported goods worth USD 496.16 billion (-7.7% year-on-year), while imports decreased at a faster pace (-11%), totalling USD 422.8 billion. In the same year, Italy exported services for a total value of USD 86.5 billion, while its imports amounted to USD 91.6 billion. The overall trade surplus for goods and services stood at around 3.7% of GDP (from 2.4% one year earlier - World Bank). Looking at the first ten months of 2021, data from ISTAT shows that exports went up 18.6% compared to the same period in 2020, while imports increased by 23.1%.

 
Foreign Trade Values 20162017201820192020
Imports of Goods (million USD) 404,445453,122503,240475,006422,875
Exports of Goods (million USD) 461,524507,418549,526537,718496,120
Imports of Services (million USD) 103,990113,272124,609121,60591,618
Exports of Services (million USD) 101,402110,828122,632120,49086,532

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20162017201820192020
Foreign Trade (in % of GDP) 55.458.660.360.155.3
Trade Balance (million USD) 65,75961,79854,14867,30677,315
Trade Balance (Including Service) (million USD) 61,42857,61050,62166,30871,912
Imports of Goods and Services (Annual % Change) 3.96.13.4-0.7-12.6
Exports of Goods and Services (Annual % Change) 1.95.42.11.6-13.8
Imports of Goods and Services (in % of GDP) 26.027.928.928.425.8
Exports of Goods and Services (in % of GDP) 29.330.731.431.729.5

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20212022 (e)2023 (e)2024 (e)2025 (e)
Volume of exports of goods and services (Annual % change) 12.99.44.73.13.0
Volume of imports of goods and services (Annual % change) 13.510.25.23.73.4

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Italy is a member of the following international economic organisations: IMF, European Union, ICC, European Economic Area, WTO, Central European Initiative (CEI), G-7, G-8, G-10, G-20, OECD, among others. For the full list of economic and other international organisations in which participates Italy click here. International organisation membership of Italy is also outlined here.
Free Trade Agreements
The complete and up-to-date list of Free Trade Agreements signed by Italy can be consulted here.
 

Main Partner Countries

Main Customers
(% of Exports)
2020
Germany 12.8%
France 10.3%
United States 9.8%
Switzerland 5.8%
United Kingdom 5.2%
See More Countries 56.1%
Main Suppliers
(% of Imports)
2020
Germany 16.3%
China 8.7%
France 8.5%
Netherlands 5.9%
Spain 5.3%
See More Countries 55.3%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
President: Sergio Mattarella (since 3 February 2015)
Prime Minister (President of the Council of Ministers): Mario Draghi (since 13 February 2021)
Next Election Dates
Presidential: 2022
Legislative: May 2023 (Senate and Chamber of Deputies)
Current Political Context
The coalition government led by Giuseppe Conte, formed by the Five Star Movement and the Democratic Party (along with the parliamentary group Free and Equal and Italia Viva), collapsed at the beginning of 2021. Former President of the European Central Bank Mario Draghi was given a mandate by President Sergio Mattarella to form a government in February. Draghi’s government enjoys broad political support in parliament, as right-wing party Lega and Berlusconi’s Forza Italia decided to join the coalition with the previously ruling parties in light of the difficult economic and social situation in the country, which was one of the first and worst hit by the Covid-19 crisis.
Meanwhile, conservative right-wing party Fratelli d’Italia opted to remain in the opposition and has been gaining momentum in electoral polls.
Main Political Parties
The Italian parliament is based on a multi-party system, with the main political forces being:

- Five Star Movement (M5S): anti-establishment, catch-all political movement
- Partito Democratico (PD): centre-left
- Lega Nord: right-wing, populist, Euro-sceptic
- Fratelli d'Italia (FdI, Brothers of Italy): right-wing, nationalist, conservative
- Forza Italia (FI): centre-right, liberalism
- Italia Viva (IV): centre-left, liberal
- Liberi e Uguali (LeU, Free and Equal): left-wing
- Più Europa (+Eu, More Europe): pro-European, social liberalism.
Executive Power
Italy is a parliamentary republic, hence the President of the Republic's role is mostly cerimonial. He is the chief of state and is indirectly elected for a 7-year term.
The Prime Minister (officially the President of the Council of Ministers) is the head of the government and holds executive power, which includes the implementation of the law and the running of the everyday business of the country. The Prime Minister is appointed by the President and confirmed by the Parliament, on the basis of the support of the majority. He or she has a five year term of office. The Council of Ministers is appointed by the Prime Minister and approved by the President.
Legislative Power
Legislative power in Italy is bicameral and both chambers possess significant powers and prerogatives. The Senate (Senato della Repubblica) has 321 members (315 elected plus six senators for life), while the Chamber of Deputies (Camera dei deputati) has 630 members. Universal suffrage has been part of Italian elections since the writing of the Constitution in 1948, but Italian electoral law has shifted substantially over the years. The electoral system was modified in 2005, in 2015 and once again in 2017. In a 2020 referendum, voters approved a constitutional law that would amend the Constitution by reducing the number of MPs in the Parliament from 630 to 400 in the Chamber of Deputies and from 315 to 200 in the Senate (the modifications shall take effect after the next general elections).
The executive branch of government depends directly or indirectly on the support of parliament, often expressed by a vote of confidence. The prime minister cannot dissolve the parliament, as such power is attributed to the President. Italian citizens enjoy considerable political rights.
 

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COVID-19 Country Response

COVID-19 epidemic evolution

To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Italy, please visit the website of the Ministry of Health with the official data on the progress of the epidemic in the country. The Civil Protection Department is entrusted with the interventions coordination necessary to deal with the emergency on the national territory. It provides a daily epidemiological update, which includes key national figures. It also offers more precise data on the epidemic on the government’s data platform available here. 
For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.

Sanitary measures

To find out about the latest public health situation in Italy and the current sanitary measures in vigour, please consult the Italian government platform and the website of the Ministry of Health, including the up-to-date information on the containment measures put in place and public health recommendations.

Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions
For the information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the website of the Italian Customs and Monopolies Agency.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Italy on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

For the information on the economic recovery scheme put in place by the Italian government to address the impact of the COVID-19 pandemic on the national economy, please visit the website of the Italian Ministry of Economy and Finance. The information on the Italian economic emergency plan (D.L. “Cura Italia”) is available here (in Italian).
The information on the EU’s economic response to COVID-19 and the actions to minimise the fallout on the EU member states’ economies of the COVID-19 outbreak is available on the website of the
European Council.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Italian government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Italy in the IMF’s Policy Tracker platform.

Support plan for businesses

For the information on the local business support scheme established by the Italian government to help small and medium-sized companies to deal with the economic impacts of the COVID-19 epidemic on their activity, please consult the website of the Italian Ministry of Economy and Finance.
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the OECD's SME Covid-19 Policy Responses document.

Support plan for exporters

To find out about the support plan for the Italian exporting companies put in place by the Italian government, please consult the Italian Ministry of Economic Development – Decreto liquidità. For more information visit the SACE SIMEST website – Garanzia Italia (thanks to the "Liquidity" Decree, SACE will support Italian exporting companies by issuing guarantees at preferential conditions, counter-guaranteed by the State).

 

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