Growth USA is revised upwards to +2.1% in 2025 (from +1.5%), due to better momentum in 2024, which left a larger positive legacy in the current year. Last year the US economy was driven by household consumption, while investment lost momentum. In early 2025, wage momentum seems to have weakened and inflation expectations have risen, with falling confidence anticipating a downturn in consumption. The pace of growth in the US economy is expected to slow until Q3 2025, recovering momentum at year-end and in 2026 as interest rates fall. Inflation, on the rise, remains above target (+3.0% p.a. in January) and in line with expectations. The Fed has cut rates by one point so far, to the 4.25-4.50% range. Between this year and next, they will fall by another point: a more gradual path of reduction than was assumed six months ago, which will also have the effect of widening (by a little) the differential with ECB rates in the average 2025, exerting pressure to strengthen the dollar against the euro. In the same direction, US import duties and the persistent growth gap expected in favour of the US economy will act.

The GDP growth of theEurozone is expected to be +0.8% in 2025 and +1.0% in 2026, following +0.7% in 2024. Monetary tightening and still high inflation will still weigh on the economy this year, which will gradually bite less and less, favouring an upturn that will still be modest. Monetary easing so far has amounted to -1.50 points, with inflation still above 2.0% (+2.4% in February, up from +1.7% in September), as are 1-year expectations. Market expectations are for a further rate cut of half a point this year to the neutral rate (2.0%), while inflation is expected to fall below +2.0% by the ECB next year.

Despite the excellent performance of the Spanish economy (+3.2%), mainly linked to real estate and tourism, sustained growth in the area is not to be expected in the near future due to the persistence of some structural brakes. First of all, Germany's crisis does not appear cyclical: it was the country with the greatest dependence on Russian gas (more than Italy) and with the greatest weight of energy intensive sectors on the total added value and therefore suffers most from price increases; it has the greatest economic connections with Eastern Europe, affected by the conflict in Ukraine; it is the European country most exposed to China in terms of exports (6.3% Germany, 2.6% Italy) with which it realised large trade surpluses until the pandemic, which it will hardly be able to achieve in the future given that China is reducing imports from western countries, for geopolitical reasons, and has become an increasingly autonomous manufacturing producer; it is the country, in Europe, most specialised in automotive (20.6% of manufacturing, before the crisis), which is precisely the sector most in crisis. The injection of public resources for defence and infrastructure, however, may facilitate recovery in the short and medium term.

Another factor that continues to hold back growth in the region 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). The ups and downs of the conflict between Ukraine and Russia seem to be driving price fluctuations at this stage. Higher gas prices are also driving up electricity prices, more so in Italy: 150 euro/mwh in February, compared to 128 in Germany, 123 in France, 108 in Spain.

Furthermore, over the last 10-15 years, Europe has been 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 gap accumulated with the US since 2007 is more than 70 percentage points of GDP. And it is mainly due to the stagnation of labour productivity, which has almost come to a standstill in Europe (+0.2% per year on average in 2019-2023) while it continues to grow in the US at the rate of 1.5% per year on average since the 1980s.

The low productivity Europe derives from lower investment (especially 'productive' investment, i.e. net of construction) than in China and the US: on average, around 1.1 GDP points per year less in the EU than in the US. Looking at the investments in R&D since 2000, the accumulated gap with the US amounts to more than 17 GDP points. The low investments are partly due to a general undercapitalisation and low capitalisation of European companies compared to the other two big blocs. Among the world's top ten joint-stock companies, six are US and three are Chinese. The top European company is in 25th place. The low dynamism of financial capital in the EU is a brake on company size growth and investment. Suffice it to say that the US stock market in 2021 was about three times larger than the European one, accounting for 227% and 81% of GDP respectively.

Failure to complete the single european market and the lack of harmonisation of certain rules are among the main causes of these delays, because they create barriers to trade in goods and services within the EU: according to IMF estimates, these factors can increase production costs for manufacturing goods by 44%, for services by 110%. 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%.

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, world 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. China, with coal, now supplies 60% of the world's emissions and will not reach neutrality before 2060 with coal use only expected to halve by 2040. The US will slowly abandon gas to protect economic growth. For Europe, decarbonisation must proceed by balancing security, economic growth and environmental sustainability. The Italian economy is already among the most sustainable in Europe and the world. Manufacturing has significantly reduced its emission intensity over the last 15 years. The choices made so far at European level only meet the goal of sustainability, but put both European growth and security at serious risk. For this reason, it will be necessary to review several mechanisms, such as the ETS and CBAM, which entail significant competitive disadvantages for European companies.

The growth expectations of emerging economies remain high: +4.4% this year (up from +4.2% in 2024) and +4.5% in 2026 and thus their weight in world GDP continues to grow: the group of 10 'BRICS+' countries is expected to reach 38.0% in 2025. China continues to grow at a rate close to +5.0% per year, but domestic demand remains weak: industrial production in December 2024 outpaced retail sales and the unemployment rate rose again. And inflation remains low (0.7% this year), which is why fiscal and monetary policy are expansionary. India, which is growing steadily at +6.5% per year, could benefit from a diversion of trade flows from China as a result of US tariffs.

In this already complex context, the duties announced by the US. 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 to enter into negotiations with the US to reconcile mutual needs. But it is even more essential to quickly increase European attractiveness to avoid capital outflows to the US, which is already happening and which the duties will accelerate. The impacts of the duties on individual Italian and European manufacturing sectors are not easy to determine: they will depend on many factors, including the rate and duration of the duties, the price elasticity of demand, and the exposure of individual countries to the US. We will face a further reconfiguration of bilateral trade and a revision of supply chains on a global scale. According to IMF estimates, a possible generalised increase in US tariffs of 10% would reduce world GDP by -0.8%, with an uneven impact between areas: more profound in the US, less so in the Eurozone. For Italy, exports of goods to the US in 2024 amounted to EUR 65 billion, more than 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.

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 PNRRBetween 2025 and 2026, the planned resources amount to about 130 billion. Even if not all of them will be spent (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. Support for investment in plant and machinery, on the other hand, is not expected, as the Transition 5.0 Plan proved ineffective in 2024 and is expected to have little impact in 2025 as well.

On the negative side, two factors are at play. Firstly, the umpteenth 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 reintroduction of US duties on steel and aluminium at 25%, according to estimates by Centro Studi Confindustria, will lead to an average drop of about -5% in steel and aluminium exports to the US, with a minimal macroeconomic impact (about -0.02% of Italian goods exports).

Any protectionist escalation involving a persistent, rather than temporary, increase in uncertainty (+80% over 2024), the imposition of duties 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 Italy's GDP, measured as a deviation from the baseline scenario, of -0.4% in 2025 and -0.6% in 2026.

On the supply sideItalian GDP dynamics will be driven in the two-year period by the services and only in 2026 also by industry; in contrast, construction declined. Already in 2024 the total added value was supported mainly by services and a little by construction, more than compensating the reduction in PA and industry. The constructions on the housing side will be more affected by the reduction of incentives. Those on the non-housing side, on the other hand, are expected to benefit from NRP resources and cheaper bank loans. Industry value added is only expected to recover in the coming year (+1.0%), after a still weak 2025 (-0.1%). This is due to the recovery of goods exports, the easing of monetary tightening in the Eurozone, and an increase in real disposable income, which helps the recovery of domestic consumption of goods. Over the course of 2024, industrial production showed a gradual slowdown in the decline, to a more moderate -0.4% in Q4, and cyclical indicators confirm that a slow stabilisation is underway.

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, which contributed to weak demand for industry; and the high cost of energy in Europe and especially in Italy. Some of these problems could 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.

On the demand sideGDP growth in 2025 will be driven mainly by consumption and to a lesser extent by net exports. Only gross fixed capital formation will contribute negatively (-0.2%). In 2026, consumption will still be the driving force, complemented by an upturn in investment, while the contribution of net exports will be almost zero.

The dynamics of consumption of households was modest in 2024 (+0.4%), boosted by the aforementioned rise in real disposable income, but held back by the increase in the propensity to save to an average level of 9.4% in the first three quarters, well above long-run values. This is due to the high uncertainty about the international scenario, which is expected to decrease in the second half of 2025. Consumption is therefore expected to accelerate this year (+0.8%) and next year (+1.0%), supported by steadily rising real income. Lower interest rates and credit will also contribute. Meanwhile, the gap between the dynamics of consumption of goods and services seems to have closed.

The investments are expected to retreat this year by -0.8% (in line with the negative trend pattern 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 caused by: 1) the delayed effects of the restrictive monetary policy; 2) the crisis in industry; 3) the high international uncertainty, due to duties and geopolitical tensions; 4) the weakening of tax incentives, which had represented an important stimulus capable of unlocking investment in recent years (Superbonus and Transition 4.0).

Investment in non-residential buildings continued to grow in 2024 (+9.6%) supported by NRP resources. Without these resources, more than 13 billion, the growth of buildings would have been around +3.0%. Based on the thrust of the planned PNRR resources (21.8 billion in 2025 and 22.8 in 2026) and assuming an absorption rate equal to that of 2024 (the 82%), investments in buildings are expected to grow at a sustained rate this year and next (+7.5% and +4.9%). In contrast, those in dwellings are halted by the weakening of incentives. Finally, expenditure on plant and machinery is set back for the whole of 2024, firstly due to a 'postponement' effect linked to the expectation of Transition 5.0, then due to the lack of attractiveness of the measure because of a series of operational difficulties. It is expected to remain in contraction in the first part of 2025.

The dynamics of exports Italian goods and services, after a weak growth in 2024 (+0.4%), will consolidate in the two-year forecast period at a slightly higher pace (+1.3% in 2025 and +1.8% in 2026), well below the average pre-pandemic rates (+3.3% in 2014-2019).

The drop in goods exports over the last two years (-1.4% in 2023 and -0.3% in 2024) is concentrated in intermediate products, due to the crisis in industrial activity across Europe. For Italian sales abroad, the only positive contribution came from consumer goods. Stable manufacturing exports in 2024 (-0.1% at constant prices), but the result of a polarisation between high-growth sectors ("other manufacturing products" +16.3%, pharmaceuticals +8.4% and foodstuffs +8.1%) and those in sharp decline ("other transport equipment" -13.6%, motor vehicles -12.1% and refined petroleum products -11.4%).