Italy continues to grow and is the only one with a primary surplus in the G-7

37 billion euros of state surplus in the two-year period 2025-2026

According to the European Commission, the Italian economy in the next two years (2025-2026) will grow by 1% in the first year and by 1.2% in the second. The increase in Italian cumulative GDP over the two years will therefore be approximately 2.2%, equal to that of France and Japan and higher than that of Germany (+2%). Therefore, no return to a "bottom of the table" Italy, as some prophesied, after the super growth of our country in the period 2020-2024 (+5.4%, the strongest among the European G-7 countries).

But there is an even more important aspect to underline. And that is, again according to data from the European Commission, Italy managed to grow during and after Covid more than many other similar economies despite without having a demographic expansion, on the contrary, with a decline in the population which constitutes a unique case among the major Eurozone and G-7 countries and which, unfortunately, is destined to continue. However, despite this, as we have seen, Italy will be able to grow quite well even in the two-year period 2025-2026.

Our per capita GDP growth beats everyone

It is a fact that in 2025 our population will decrease further: precisely by 0.2%% and in 2026 by 0.3%. The three other major economies of the Eurozone (Germany, France and Spain) and the three other major non-EU economies of the G-7 (USA, Japan and the United Kingdom) will instead continue to have a constant increase in population which will in itself contribute to a non-negligible extent to the growth of their economies. The population of Spain, for example, will increase by 1% in 2025 and 0.8% in 2026; those of the United States and the United Kingdom, respectively, of 0.8% and 0.7% in both years.

Of course, a demographic decline is not a positive factor, especially from a long-term perspective. But, from another angle, managing to grow the GDP despite a sharp decline in the population is like winning a nine-man football match or a boxing match with one hand tied behind your back. And the "miracle" of Italy lies precisely in this.

In fact, excluding the population push from economic growth, Italy's GDP per inhabitant was not only second in increase only to that of the United States in 2020-2024 (respectively +6.6% and +9.9% compared to 2019, with France stuck at +1.7% and Germany even down by -1.5%), but will even be slightly higher than the American one in 2025-2026 (+2.9% versus +2.8%), as well as that of all other countries. In terms of average annual growth, Italy (with +1.3%) will even be the only one, together with the United States (with +1.8%), which will achieve an increase in its GDP per capita of more than 1% in the entire period 2019-2026. Instead, all the other countries considered will record "zero point" growth: Spain and Japan (+0.8% average per year), France (+0.5%), United Kingdom (+0.2%), Germany (even 0%).

AVERAGE REAL ANNUAL GROWTH OF GDP PER CAPITA: 2020-2026

(% changes compared to 2019)

Source: elaboration by M. Fortis on data and forecasts from the European Commission

Italy returns to a primary surplus

Also according to data from the European Commission, in 2024 Italy will return to having a positive primary public budget (i.e. before interest payments), equal to 0.1% of GDP, the only G-7 country to achieve this. Not only that. The Italian State will be the only one to present a primary budget surplus also in the two-year forecast period 2025-2026, to be precise, a cumulative surplus of 37.4 billion euros, equal to 1.6 percentage points of GDP. On the other hand, the other G-7 countries will continue to accumulate enormous primary state deficits in 2025-2026: Germany -69.5 billion euros; UK -£72.5 billion; France -160.2 billion euros; United States -1,479 billion dollars; Japan -48 trillion yen (the Commission does not provide data for Canada).

CUMULATIVE PRIMARY STATE BUDGET OVER THE TWO-YEAR PERIOD 2025-2026

(State budgets excluding interest expenditure, in billions of euros)

Source: elaboration by M. Fortis based on data from the European Commission

On a longer forecast horizon, then, the October "Fiscal Monitor" of the International Monetary Fund had already certified that, in addition to the two-year period 2025-2026, also in the three-year period 2027-2029, Italy will continue to be the only G-7 country capable of presenting a positive primary state budget, together with Germany, which however will return to a surplus only in 2027. In particular, from From 2027 to 2029, Italy will accumulate a primary state surplus equal to 3.2 percentage points of GDP, better than Germany itself (+1.5%) and significantly better than the other five G-7 countries, which will remain in deficit: Canada (-1.1% cumulative); United Kingdom (-2.2%); United States (-7.5%); Japan (-7.6%); France (-9.1%).

The reality is that Italy can boast an extraordinary past and future history of primary state surpluses. In fact, from 1995 to 2029 (also considering the forecasts of the European Commission and IMF), i.e. in 35 years, ours will be the only country in the G-7 and the EU capable of presenting a primary state budget in surplus for a total of 30 years, with the exception only of 2009 (global financial crisis) and the four-year period 2020-2023 (pandemic and post-pandemic years). For a historical comparison, in the same period (1995-2029) France will be in primary surplus only for 4 years (the last was in 2001), the United States for 9 years (the last in 2007), Spain for 11 years (the last in 2007), Germany for 19 years.

Number of years in which G-6 countries presented positive primary balance sheets: 1995-2029

Source: elaboration by M. Fortis on European Commission and IMF data and forecasts

With regards to more recent years, it should also be noted that Italy, together with Germany, will be the country whose public debt/GDP ratio has increased the least during the Covid period and in the following years up to 2026. In fact, Italy's debt will show +5.7 percentage points of GDP compared to 2019; that of Germany +4.2%. But with one fundamental difference: compared to 2019, Germany's GDP in 2026 will have grown much less than ours, as already mentioned previously. In the meantime, all the other G-7 countries will see their debt/GDP ratios increase dramatically in 2020-2026 (compared to 2019): Japan +13.5%; United Kingdom +17.5%; France +19%; United States +20%.

In monetary value, Italian public debt was the third largest in the G-7 before the pandemic, after the gigantic ones of the United States and Japan. In 2020, however, our debt was surpassed by the French one and in 2021 also by the British one and is now only the fifth largest G-7 debt in absolute value.

Another fundamental aspect, which commentators often do not take into account, is the growth of public debt net of interest (i.e. the "new" debt, deriving from primary budgets and annual stock-flow adjustments), an indicator in which Italy is particularly virtuous. In 2026, Italy's debt (already including the impact of the stock-flow adjustments which in the last period will incorporate the aftermath of the super building bonuses) will be approximately 260 billion euros higher than that of 2019, net of interest expenditure. This certainly does not make us happy, because this increase was mainly due to various costly economic policy errors in recent years that would have been necessary and possible to avoid (citizen's income, quota 100, missing spending ceilings and controls on super building bonuses). However, the similar increase in France, for comparison, will be as much as 827 billion, i.e. more than three times higher than ours. And the increases in value of the “new” debts of the US, UK and Japan will also be enormous.

The reality is that, since we stopped implementing the forced austerity imposed on us by Brussels (which increased rather than decreased the debt/GDP ratio), with the Renzi and Gentiloni governments our public debt has finally decreased (from 134.7 to 133.6). Then it remained essentially stable in the two-year period 2018-2019. Finally, the data and the latest projections from the European Commission tell us that over the very difficult time period 2020-2026 (shaken by pandemics and wars) Italy is the G-7 country whose debt/GDP ratio excluding interest will have grown less compared to the pre-Covid situation of 2019: only +1.8 points of GDP (already incorporating the deferred costs of the super construction bonuses). Italy will do better even than Germany (+2.9 points), while the debts net of interest of the United Kingdom (+9.2 points), the United States (+10.6 points), Japan (+10.8) and France (+12.9 points) will skyrocket.

Ultimately, in a world increasingly full of debt, in recent years Italy has incurred and is incurring much less debt than others and has started to grow again. Furthermore, it is now a net foreign creditor country. Even the rating agencies, which have never been gentle towards us, are perhaps realizing this, even if not all of them yet and with due awareness.