Italy's economy has shown mixed signals as recent indicators reveal both rising unemployment and stagnant GDP growth. According to the national statistics bureau ISTAT, the unemployment rate climbed to 6.2% in December 2024, increasing from the upwardly revised figure of 5.9% the previous month. While analysts had predicted the jobless rate would be lower than reported, the overall employment situation remained largely stable.
Data from ISTAT indicates there were some positive aspects to the job market. The number of individuals employed increased by 274,000 compared to December 2023, reflecting a growth rate of 1.2%. Despite this, Italy still grapples with one of the lowest overall employment rates within the euro zone, falling to 62.3% from 62.4% the month prior. The youth unemployment rate remains concerning, holding steady at 19.4% for those aged 15 to 24.
Looking at the broader economic picture, the Italian economy stagnated over the fourth quarter of 2024, failing to achieve expected growth rates. The flat gross domestic product (GDP) figures represent the second consecutive quarter without growth, casting doubt on Prime Minister Giorgia Meloni's aspirations for revitalizing the economy. Notably, the GDP did show incremental improvement on a year-on-year basis, up by 0.5%.
Economists had forecasted modest growth for the quarter, with expectations of a 0.1% increase on quarter-to-quarter analysis and approximately 0.6% year-on-year growth. Analysts, including those from Prometeia, remarked, "The fourth quarter result was expected but doesn’t make it any less worrying," signaling concerns over the lack of momentum heading to 2025.
The economy's performance was negatively impacted by weak domestic demand, even as foreign trade provided some relief; exports outpaced imports during this period. The contributing sectors to GDP growth were varied: industry showed signs of expansion, whereas the service and agricultural sectors faced declines. This mixed performance highlights the fragility of the recovery, even amid the inflow of billions of euros from post-COVID recovery funds from the European Commission.
Looking to the immediate future, ING senior economist Paolo Pizzoli indicated expectations of "very weak growth" at the beginning of the year, coupled with hopes for gradual recovery through the rest of 2025. He projects overall growth for the year at around 0.7%, falling short of the government's target of 1.2%.
Geopolitical tensions and potential U.S. trade tariffs loom over the economy, adding layers of uncertainty to the Italian economic outlook. On March 3, ISTAT plans to release more detailed economic figures, potentially providing insight adjusted for atypical workdays prior to the end of the year. The previous year's additional working days may present even brighter numbers come the report.
This precarious economic atmosphere leaves Italy's policymakers grappling for strategies to stimulate growth, particularly as the challenges of deploying EU pandemic recovery funds become pertinent. The data presents mixed narratives—while employment improved slightly, the stagnation of GDP indicates significant groundwork remains for fully recovering from recent economic turmoil.
Overall, the situation calls for agile responses from the government, as experts urge immediate action to reignite sustainable growth and alleviate rising unemployment, particularly among the youth population.