​The 2024 European Commission Country Report on Italy offers a comprehensive analysis of the nation's economic performance, fiscal health, and structural challenges within the framework of the European Semester. Following a robust post-pandemic recovery, Italy's economic growth has decelerated, with real GDP growth slowing from 4.0% in 2022 to 0.9% in 2023. This slowdown is attributed to subdued domestic demand, tighter financing conditions, and the phasing out of tax incentives. Projections indicate a modest growth of 0.9% in 2024 and a slight acceleration to 1.1% in 2025, supported by investments under the Recovery and Resilience Plan (RRP) .​

Inflation has moderated significantly, with headline inflation dropping to 0.5% year-on-year in December 2023, well below the euro-area average. This decline is primarily due to decreasing energy and commodity prices. However, core inflation remains elevated, driven by rising service prices and wage adjustments. Overall, inflation is forecasted to average 1.6% in 2024 and 1.9% in 2025 .​

Italy continues to grapple with structural challenges, including high public debt, weak productivity growth, and labor market inefficiencies. The public debt-to-GDP ratio, although reduced from its pandemic peak, remains high at 139.8% in 2023 and is projected to increase slightly in the coming years. This persistent debt burden limits fiscal flexibility and poses risks to economic stability .​

Productivity growth has been sluggish, hindered by factors such as small firm sizes, limited innovation capacity, and regional disparities. Labor market participation rates have improved but remain low, especially among youth, women, and residents in southern regions. These structural issues necessitate targeted reforms to enhance competitiveness and economic resilience .​

The implementation of the RRP is crucial for addressing these challenges. The plan includes reforms aimed at improving the efficiency of the public administration, enhancing the judicial system, and fostering digitalization and innovation. Investments under the RRP are expected to bolster infrastructure, support the green and digital transitions, and stimulate economic growth .​

In summary, while Italy has made progress in stabilizing its economy post-pandemic, significant structural challenges persist. Addressing high public debt, enhancing productivity, and implementing comprehensive reforms are essential for ensuring sustainable economic growth and resilience in the face of future shocks.​