Italy’s Economy Stagnates in Q3, Missing Growth Forecasts

Italy’s economy stagnated in Q3 2026, with GDP unchanged from the previous quarter, falling short of market expectations for 0.1% growth, according to preliminary data. Year on year, GDP increased by 0.8%, also below the 0.9% forecast. Despite the weak quarterly performance, acquired growth stood at 0.8% at the end of September, meaning that Italy’s economy would expand by the same rate for the full year even if output remains flat in Q4. The figures highlight the challenge facing Prime Minister Giorgia Meloni’s government as it seeks to strengthen economic growth. Earlier this month, the government revised its GDP forecasts upwards, targeting expansion of 1% in 2026 and 0.8% in 2027, compared with previous estimates of 0.6% for both years. Italy’s economy grew by 0.6% in 2025, while the government expects growth to accelerate to 0.9% in 2028.

The Italian GDP expanded by 0.2% on the second quarter of 2026, easing from the 0.3% growth in the earlier period and aligned with the preliminary estimate. It marked four consecutive quarters of growth in the Italian economy, despite the economic headwinds in the June quarter as the outbreak of war in the Middle East triggered a global energy shortage and lifted borrowing costs. Private consumption expanded by 0.4% on the quarter, offsetting a 0.1% contraction in government expenditure as Rome attempts to reign in spending to comply with EU fiscal rules. In the meantime, gross fixed investment rose by 0.3% as a 7.4% surge in non-residential development offset a 7% drop in residential construction. Meanwhile, net-foreign demand contributed negatively to the GDP, with a 0.8% jump in exports and a 1.7% rise in imports, weighed by expensive energy purchases from abroad. The Italian GDP was set to grow 0.8% this year should there be no growth for the rest of the year.

The Italian GDP expanded by 0.2% in the second quarter of 2026, ahead of the median consensus of a 0.1% to mark the fourth consecutive period of growth. The result reflected some resilience to adverse macroeconomic developments in the period as the outbreak of war in the Middle East triggered a surge in fuel and natural gas prices, lifting borrowing costs faced by households, businesses, and the government. The expansion was supported by services, offsetting a contraction in both agriculture and industry. On the demand side, domestic consumption offset the negative impact from net foreign demand, with higher energy prices weighing on import turnover. The Italian economy recorded by a carry-over growth rate of 0.8% in H1, firmly above the bank of Italy forecasts of 0.5% for 2026.