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Italy has emerged as one of the strongest-performing major economies in the Eurozone, driven largely by robust investment spending and government-backed stimulus programs, according to a recent UBS research report.
Since 2019, Italy’s real GDP growth has surpassed that of the broader Eurozone, as well as key economies such as Germany and France. The country has also achieved significant labor market improvements, with unemployment falling to its lowest level in decades. At the same time, Italian companies have reduced leverage, while the nation’s net international investment position has turned positive for the first time since the 1980s.
UBS highlighted fixed investment as the primary engine behind Italy’s economic expansion over the past several years. Construction activity, in particular, has played a major role, contributing roughly one-third of the increase in the country’s gross value added. The sector benefited significantly from the government’s Superbonus housing renovation incentive and funding provided through the European Union’s Recovery and Resilience Facility (RRF).
Italy is expected to receive a total of €194 billion from the RRF between 2021 and 2026, with approximately 85% of the funds already distributed. Although the Superbonus program has largely been phased out, construction activity remains resilient due to ongoing RRF-related investments and the continued use of previously allocated funds.
According to UBS, one final RRF payment is expected before the end of 2026, while unspent funds could continue supporting economic growth into 2027. However, Italy’s GDP growth is projected to slow to around 0.5% by 2028 as the impact of RRF-funded projects gradually fades.
The report also pointed to improvements in Italy’s long-term economic outlook, noting that estimates of potential growth have increased compared with pre-pandemic levels, though they remain below the Eurozone average.
Beyond economic factors, UBS cited greater political stability as a positive development. The current administration could become Italy’s longest-serving post-war government, with parliamentary elections required by December 2027.
Italy’s stock market has also benefited from these trends. Stronger economic growth, tighter sovereign bond spreads, and healthier banking sector fundamentals have helped support Italian equities in recent years, reinforcing investor confidence in the country’s economic prospects.
