Italy’s GDP rose by 0.2% in the first quarter of 2026, on a quarter-on-quarter basis, continuing an expansion trend that commenced in the second half of last year, according to new data from Istat.
Despite the positive uplift, the future outlook remains uncertain, linked to concerns over the war in the Middle East and its effect on energy prices.
‘In the first quarter of 2026, the international economy is characterised by strong dynamism in the Asian region, a good performance from the United States, and persistent weakness in Europe,’ Istat noted.
Industrial production in Italy showed signs of improvement in March, rising 0.7% month-on-month, following a 0.2% increase in February. However, output across the first quarter as a whole remained slightly lower than the previous quarterly period, declining by 0.2%.
Employment levels
Employment, meanwhile, fell marginally in March by 0.1%, leaving the total number of employed people at 24.1 million.
According to Istat, the decline was concentrated among women, younger workers aged 15 to 24 and workers aged 50 and above. Fixed-term employees and self-employed workers also recorded decreases. Despite the monthly fall, employment over the full quarter increased slightly, by 0.1%.
Inflation accelerated sharply in April, linked to recent geopolitical developments and rising energy prices. As Istat noted, Italy’s Harmonised Index of Consumer Prices (HICP) rose by 2.9% year-on-year, compared with a 1.6% increase in March.
As a result, inflation in Italy moved close to the euro area average of 3.0% in April.
Tax reforms
The report also examined the impact of inflation on household taxation between 2022 and 2023. According to Istat’s analysis, tax reforms introduced between 2021 and 2026 more than offset the effects of fiscal drag, where inflation pushes taxpayers into higher tax brackets.
Measures including the introduction of the Universal Allowance for dependent children produced an average benefit of €40 per taxpayer, with the strongest gains recorded among low- and middle-income earners and employees.
‘The measures had a strong redistributive profile, favouring low- to middle-income earners and employees, while pensioners and higher-income earners were penalised or not fully compensated,’ Istat noted. Read more here.
