On Wednesday, Italy reaffirmed its commitment to controlling its budget deficit despite cutting its economic growth projections due to market uncertainty linked to US trade tariffs.
According to Economy Minister Giancarlo Giorgetti, the cabinet-approved multi-year economic plan projects a 3.3% budget deficit for 2025, matching the target set in September.
Prime Minister Giorgia Meloni’s administration also upheld its objective of reducing the deficit below the European Union’s 3% of GDP limit by 2026, maintaining a target of 2.8%.
The economic plan projects that the eurozone’s third-largest economy will grow by 0.6% this year, only half of the 1.2% growth target set last September.
For 2026, growth is expected to reach 0.8%, a downward revision from the earlier 1.1% estimate. The forecast also anticipates a continued 0.8% growth rate in 2027, Reuters reports.
While Giorgetti addressed reporters in Rome, US President Donald Trump announced a 90-day suspension of many of the broad trade tariffs unveiled the previous week. This unexpected move added a new layer of uncertainty to the Italian government's economic projections.
“We cut our growth forecasts in line with the market consensus, the news that has come out a few minutes ago could lead them to be raised again,” Giorgetti commented.
Italy’s economy has shown minimal growth since mid-2024, with GDP inching up just 0.1% in the fourth quarter compared to the previous quarter, following stagnation in the third.
Meanwhile, global financial markets have plunged since President Trump’s 2nd April announcement of wide-ranging tariffs targeting both allies and adversaries worldwide.
Over the past week, the Milan stock exchange has dropped by roughly 15%, while Italian bond yields have seen a sharp increase.
In contrast, US markets rallied immediately following President Trump's announcement of a temporary suspension of tariff hikes, though the news came after European markets had already closed for the day.
Under President Trump's plans announced last week, Italy, owing to its significant trade surplus with the US, would face a general 20% tariff, alongside other European Union member states.
Meanwhile, Italy remains under the European Commission’s Excessive Deficit Procedure, and its newly outlined budget framework is designed to both satisfy EU fiscal requirements and align with the bloc’s recently updated budgetary rules.
Italy's public debt, proportionally the second-highest in the eurozone after Greece, is now projected to reach 136.6% of GDP this year, slightly below the 136.9% forecast made in September.
The debt level is expected to rise to 137.6% in 2026 before dipping slightly to 137.4% in 2027.
Economy Minister Giorgetti also confirmed that the government will proceed with its previously announced plan to sell off state assets valued at approximately €20 billion, although he noted that ongoing market volatility necessitates a cautious approach.