Italy’s Debt Burden Is Rising: What Lies Ahead for the Economy

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Italy enters 2025 with a picture of resilience tempered by deep structural constraints. While the economy managed to remain stable in 2024, the outlook for the coming year points to modest growth weighed down by high public debt, weak productivity and demographic pressures.

Muted economic growth outlook

According to the European Commission, Italy’s real GDP growth is expected to reach only 0.4% in 2025. This modest expansion highlights the limited growth capacity of the economy amid subdued demand and long-standing structural inefficiencies. Inflation is forecast at around 1.7%, a relatively low level that eases cost-of-living pressures but does little to stimulate broader economic momentum.

Labor market constraints

Italy’s labor market continues to show signs of weakness. Unemployment is projected to hover around 6.2%, remaining above the eurozone average. This indicates persistent difficulties in job creation, particularly for younger workers and in less developed regions, and reflects the broader challenge of low productivity growth.

Public debt as a structural burden

One of Italy’s most pressing challenges remains its public debt, which is expected to stay at an elevated level of around 136.4% of GDP. Such a heavy debt burden places significant strain on fiscal policy and limits the government’s ability to support growth through public spending. Even with EU recovery funds, high debt continues to pose risks to long-term financial stability.

Productivity and demographic pressures

Despite financial support from the European Union, Italy has struggled to reverse decades of weak labor productivity growth. Population ageing further compounds the problem by shrinking the workforce and increasing pressure on social welfare systems. Without structural reforms, these trends are likely to continue constraining Italy’s economic potential.

Living standards and social challenges

Italy maintains high life expectancy levels, with women living on average to 84 years and men to 79 years. However, the gap between overall life expectancy and healthy life expectancy remains significant. More than 20% of the population lives in poverty, particularly in southern regions, highlighting deep social disparities that undermine domestic demand and long-term growth.

As reported by International Investment experts, Italy in 2025 is experiencing modest economic growth constrained by high public debt, low productivity and demographic challenges. Without decisive structural reforms, the country risks falling further behind more dynamic eurozone economies despite short-term stability.