The Confindustria Studies Centre presented the Report forecast 'Energy, green deal and tariffs: the obstacles to the Italian economy and European':

ITALY SLOWS DOWN IN 2025 BUT REGAINS MOMENTUM IN 2026

In 2024, Italian output grew by +0.7% per yearThis was due to rather widespread contributions across the components: household consumption (+0.2%), gross fixed capital formation (+0.1%), collective consumption (+0.2%) and net exports (+0.4%), which compensated for the decumulation of inventories. In Q1 2025, economic indicators point to a phase still characterised by a weak expansion. Italian GDP in 2025 is expected to grow almost in line with what was observed in 2024: +0.6%. In 2026, however, it is expected to regain momentum, at +1.0%. For 2025, there is a downward revision of -0.3 percentage points attributable, in large part, to weakness in the second half of 2024 and the worsening macroeconomic environment in which opposing forces.

In the positivewill act in 2025-2026:

• the continuation of rate cut by the ECB, which by the end of 2025 will take monetary policy to the neutral level.
• Second, the rise of the total real disposable income of householdsThis is due to the gradual recovery of per capita wages, the good contribution of non-labour income, the increase in total employment, and the decline in inflation, although the last two phenomena will subside in 2025 and 2026. Together with the expected decline in the propensity to save (from the end of 2025 and then in 2026) due to the unravelling of uncertainty, rising income is expected to continue to make a good contribution to consumption dynamics.
• Third, theimplementation of the NRPBetween 2025 and 2026, the planned resources amount to about 130 billion. Even if they are not spent in their entirety (the assumption is that half, 65 billion, will be spent), they will make an important contribution to GDP, in particular to investment in construction, which has been held back by the loss of incentives for residential construction.

Negatively:

• the lack of support for investment in plant and machinery since the Transition 5.0 plan proved ineffective in 2024 and should have little impact even in 2025.
• Yet another rising energy priceswhich does not reach the peaks of 2022, but threatens the competitiveness of Italian companies and reduces the real income of households.
• But above all, the wave of duties announced by the Trump administration, to which the Italian economy is particularly exposed, given that the US is the second largest market for our goods.

The CSC forecast scenario only incorporates the surge in uncertainty caused by the tariff announcements, with the assumption that it will last for the first half of 2025; if persistent, it would be a strong constraint on growth, as it would negatively affect domestic and international investment decisions. But it does not include the effect of further tariffs and counter-duties.

UNCERTAINTY AT AN ALL-TIME HIGH. TARIFFS WEIGH AS A TRADE CONFLICT

For Italy, in 2024, the export of goods to the US amounted to EUR 65 billionover 10% of the total. Between 2019 and 2023, the increase in this export contributed 4.5 points to the increase in total Italian exports (+30% cumulative). At sector level, the most exposed Italian industrial sectors are beverages, pharmaceuticals, motor vehicles and other transport equipment.  

The reintroduction of US duties on steel and aluminium at 25%, according to estimates by the Centro Studi Confindustria, will lead to a average drop of about -5% in steel and aluminium exports to the US, with a minimal macroeconomic impact (approximately -0.02% of Italian exports of goods).

The worst-case scenario of a protectionist escalation involving a persistent, rather than temporary, increase in uncertainty (+80% over 2024), the imposition of tariffs of 25% on all US imports, including those from Europe, and of 60% from China, and the application of retaliatory tariffs on exported US consumer goods, would have a cumulative negative impact on Italian GDP, measured as a deviation from the baseline scenario, of -0.4% in 2025 and -0.6% in 2026.

The America First Trade Policy of the second Trump administration promises to be more aggressive and unpredictable than the approach taken in the first term. It will be crucial:

• enter into negotiations with the US to reconcile mutual needs.
• But it is even more essential rapidly increasing European attractivenessto avoid capital outflows to the US, which is what is already happening and which the duties will accelerate.

Because of the repeated announcements on duties, the indices of economic and political uncertainty are at their absolute maximum at the beginning of 2025 and this adversely affects investment decisions, seriously affecting trade along global production chains.

As of 2022, more than 3,400 protectionist measures per year have been enacted globally, almost 3,000 more than before 2020. Any protectionist escalation, generated by retaliatory tariffs among the world's major economies, would undermine the very structure of international trade and production, with profound effects on global GDP.

FALLING INVESTMENTS, TURNING NEGATIVE

The investments are expected to retreat this year by -0.8% (in line with the negative trend already observed in the second half of 2024) and recover in 2026 (+0.9%), remaining essentially stagnant over the two-year period. This weakness is driven by:

• the delayed effects of restrictive monetary policy;
• the industry crisis;
• high international uncertainty due to tariffs and geopolitical tensions;
•  the fading of tax incentives, which had been an important stimulus to unlock investment in recent years (Superbonus and Transition 4.0).
• Finally, expenditure on plant and machinery fell back throughout 2024, first due to a 'postponement' effect related to the expectation of Transition 5.0then due to the low attractiveness of the measure due to a number of operational difficulties. They are expected to remain in contraction in the first part of 2025.

EUROPEAN COMPETITIVENESS IS TOO LOW

Eurozone GDP growth is expected to be +0.8% in 2025 and +1.0% in 2026, after +0.7% in 2024. Sustained growth in the area is not to be expected in the near future due to the persistence of some structural brakes:

• Firstly Germany's crisis does not appear cyclical.
• Another factor that continues to hold back growth in the area is the high price of energy. The gas price rose to EUR 50/mwh on average in February 2025 (42 in March), a marked upward trend from the low of EUR 26 recorded in February 2024. Above all, it is much higher than in the US (at a ratio of 4 to 1).

Europe is progressively losing competitiveness against the US and China. Since 2007, the EU has averaged growth of +1.6% per year, compared to +4.2 in the US and +10.1 in China, at current prices.

• The accumulated gap with the US since 2007 is more than 70 percentage points of GDP.
• The low European productivity comes from lower investment on average, about 1.1 GDP points per year less in the EU than in the US.
• Looking at the investments in R&Dfrom 2000 to the present, the accumulated gap with the US amounts to over 17 GDP points.
• The failure to complete the European single market and the lack of harmonisation of certain rules are among the main causes of these delaysbecause they create barriers to trade in goods and services within the EU, according to IMF estimates, these factors can increase the production costs of manufactured goods by 44%110% for services. In the US, the weight of these barriers for trade in goods between states is about 13%. If the EU could lower these barriers to the level of the US, productivity would increase by 6.7%.

THE WEIGHT OF BUREAUCRACY IS HOLDING BACK THE EUROPEAN ECONOMY. THE ENERGY CHALLENGE IS A CRUCIAL KNOT TO BE SOLVED

La regulatory proliferation is another factor holding back the European economy. A very high cost for European companies decreases the attractiveness of the EU as a place to do business: for example, a recent study estimated that compliance with the GDPR (which regulates the way companies process personal data) resulted in an average 8% decrease in profits and 2% decrease in sales; the Draghi Report indicated that between 2019 and 2024, the EU approved about 13,000 acts, more than twice as many as the US.

Finally, the energy challenge is a crucial knot to be solved. In the last thirty years, the world's energy consumption has doubled, Europe's share has fallen from 17% to 9%, and on the supply side, fossil fuels still cover more than 80% of requirements. The choices made so far at European level only meet the goal of sustainability, but put both European growth and security at serious risk. This will require a review of several mechanisms, such as the ETS and CBAM, which entail significant competitive disadvantages for European companies.

STABLE EMPLOYMENT EVEN WITH WEAK PRODUCTION. BUT FOR HOW MUCH LONGER?

Regarding theemployment, in 2025 and 2026 the pace of growth in labour input, measured in terms of full-time equivalent units (FTE), is expected to realign with that of economic activity (+0.5% and +0.7%, a pace just below that of employment in terms of heads), in contrast to what has happened in the last two years (cumulative FTE +4.7%, GDP +1.4%). This will lead to an improvement in labour productivity, after the sharp declines in previous years. In private services, the increase in average productivity is partly explained by recomposition effects, with high labour productivity compartments expanding (such as the information and communication sector) and low productivity compartments whose weight has shrunk sharply (such as arts and entertainment services).

ITALIAN INDUSTRY: THE DECLINE RISKS BECOMING STRUCTURAL

La industry crisis not only concerns Italy (-8.2% production between mid-2022 and the end of 2024), but is international and is characterised by strong sectoral heterogeneity. The automotive sector is the hardest hit in all European countries, but the decline is also marked in the fashion and metalworking sectors: if we consider manufacturing production net of these sectors, in 2024 in Italy it declined moderately (-1.5%), while it fell more in Germany (-2.6%) and grew in Spain (1.6%). Added to this are: the crisis in Germany, as in the rest of the Eurozone, weak demand throughout the Eurozone after years of high inflation and high rates, households' preference for services over goods that contributed to weak demand for industry, the high cost of energy in Europe and especially in Italy. Some of these problems may be resolved in the short to medium term (preference for services, European weakness), others are destined to last longer (cost of energy, German crisis, cars, fashion). However, it should be emphasised that in Italy the crisis in industry is a crisis of production, much less of added value (-3.5% in the same period), investments and exports, certainly not of employment, which has instead increased even in the most affected sectors. There may be several reasons behind this anomaly: a decumulation of stocks of intermediate goods; a re-composition within manufacturing towards higher value-added sectors; an improvement in the quality of production. The data to be released in the near future will clarify this for us.