IMF Country Report No. 22/255


IMF Country Report No. 22/255

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IMF Country Report No. 22/255



August 2022

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2022 Article IV consultation with Italy, the following documents have been released and are included in this package:

  • A Press Release summarizing the views of the Executive Board as expressed during its July 27, 2022 consideration of the staff report that concluded the Article IV consultation with Italy.

  • The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on July 27, 2022, following discussions that ended on May 17, 2022, with the officials of Italy on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on July 12, 2022.

  • An Informational Annex prepared by the IMF staff.

  • A Statement by the Executive Director for Italy.

The documents listed below have been or will be separately released.

Selected Issues

The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.

Copies of this report are available to the public from

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© 2022 International Monetary Fund

Press Release


IMF Executive Board Concludes 2022 Article IV Consultation with Italy


Washington, DCAugust 1, 2022: On July 27, 2022, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Italy.

The Italian economy rebounded vigorously from the COVID-related drop in output and has avoided economic scarring. Employment and labor force participation have fully recovered, and banks’ nonperforming loans have continued to decline and their capital positions have strengthened. Nevertheless, the economy is now facing major new challenges. The war in Ukraine and COVID-related disruptions to global supply chains have pushed up energy prices and inflation more broadly and intensified shortages of key products, even as global demand is slowing. Ensuring an adequate supply of energy is a priority. A severe drought across the Northern part of the country will further pressure food prices and exacerbate energy security challenges. Yields on Italian government bond have risen and spreads have widened on the prospective tightening of monetary policies and political uncertainty amid a weakened global outlook. Reinvigorating trend growth is essential to strengthen public finances in order to meet social, climate and other goals, while also moderating the high level of public debt.

Growth is projected to moderate sharply and remain subdued owing to the war in Ukraine, monetary policy tightening, continued supply chain disruptions and higher and more persistent inflation. In all, the economy is forecast to expand by 3 percent in 2022, mostly on strong carryover from last year, with a further slowdown to around 3/4 percent in 2023. Annual average inflation is expected to peak in 2022 at 63/4 percent and to moderate gradually thereafter. In subsequent years, as energy prices moderate, growth is forecast to pick up, reinforced by public investment spending under the National Recovery and Resilience Plan (NRRP).

Uncertainty surrounding the baseline forecast is high, and downside risks could materially affect the outlook, complicating the task of reducing public debt. A further spike in energy prices and/or a rapid tightening of financial conditions could compress growth, and weigh on fiscal consolidation efforts. Difficulties delivering NRRP investments and reforms would reduce support for demand, weaken longer-term productivity enhancements and delay EU financing. Sustained high inflation could erode recent external competitiveness gains. A complete suspension of Russian energy imports in the coming months could reduce output significantly this year and next relative to the baseline.

Executive Board Assessment2

Executive Directors commended the authorities’ effective pandemic policy response, which delivered a robust and full recovery. However, major new challenges brought about by elevated energy prices related to Russia’s invasion of Ukraine, as well as tightening financial conditions, global supply chain disruptions, and political uncertainty have considerably dimmed the economic outlook. Together with longstanding weak productivity, these factors bring to the fore risks associated with Italy’s high public debt.

Directors underscored the need for sustained, decisive improvements in fiscal balances, commencing this year by saving part of revenue overperformance. They commended the authorities’ pre-emptive efforts to strengthen the security of energy supplies and recommended that compensation for higher energy prices be temporary and targeted, and that price signals be retained. Rationalizing current spending, broadening the tax base, strengthening tax compliance, and implementing growth-enhancing reforms—including public administration, civil justice, and competition—are needed to achieve and maintain a sizable primary surplus to keep public debt on a firmly downward path.

Directors welcomed the resilience of the banking sector to the pandemic shock but suggested caution given the highly uncertain outlook. Banks should prepare for severe downside scenarios and temporary capital conservation may be warranted in specific cases, including to cope with potential weakening of asset quality. Continued close monitoring, including of smaller and weaker banks, will be important. More efficient debt restructuring to help firms avoid financial distress would also be necessary. Directors commended the progress in implementing the FSAP recommendations and encouraged prioritizing key remaining recommendations.

Directors welcomed the authorities’ commitment to their National Recovery and Resilience Plan and commended the timely implementation of Next Generation EU-related targets and milestones. They recommended continued steadfast progress to lift labor productivity, investment, and potential growth, as well as accelerate the green transition. Efficient execution of public investment and strong reform momentum will be essential for success. Improving carbon tax design, making green investment incentives more cost-effective, and streamlining approval procedures for investments in renewables would help accelerate decarbonization and strengthen energy security. A number of Directors saw merit in a coordinated EU approach on carbon taxation. Directors encouraged a continued strengthening of the anti-corruption and AML/CFT frameworks.

Italy: Selected Economic Indicators, 2019–23

article image
Sources: Italian authorities; and IMF staff estimates.

Twelve-month credit growth, adjusted for securitizations.

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July 12, 2022


Developments. GDP has fully recovered from the pandemic crisis, but government debt has risen to very high levels. The war in Ukraine triggered a surge in energy prices and the prospect of monetary policy tightening caused government bond yields to rise sharply. Implementation of the National Recovery and Resilience Plan (NRRP), which provides large EU grants and loans conditioned on implementing a comprehensive reform and investment program, is underway.

Outlook. The war in Ukraine and tighter monetary policy are projected to slow growth sharply and keep it subdued. Growth could be further compressed by an additional spike in energy prices and/or a rapid tightening of financial conditions, which could heighten public debt sustainability concerns. A complete suspension of Russian energy imports in the coming months could reduce output significantly.


Fiscal policy: Compensation for high energy bills should be temporary, target vulnerable households and viable firms, and high wholesale prices should be passed through to end users to encourage conservation. Very high public debt and rising borrowing costs call for accelerating potential growth and steadily—but decisively—raising the primary balance. Over-performing the 2022 budget target is warranted by saving a significant part of revenue overperformance. Consistently growing non-interest current spending by 1–2 percentage points below nominal GDP and further improving tax compliance should commence in 2023, with the goal of reaching a primary surplus of 2 percent of GDP no later than 2030.

Financial and corporate sector policies: Banks should prepare for severe downside scenarios and temporary capital conservation may be required in specific instances. Any new guaranteed loan scheme should be selective, and banks should retain a sizable share of the credit risk. Identification of weak banks should continue alongside further consolidation of the sector. Streamlining debt resolution procedures would reduce debt overhangs, release trapped capital and attract new investment.

Structural policies: To accelerate the green transition, energy taxes should be based on their carbon content and equated across energy sources, while incentives for green investments should be made more cost effective. Full and timely implementation of the NRRP is critical to lift labor productivity, boost potential growth and accelerate the green transition. Reinforcing Italy’s governance framework would strengthen the financial integrity of NRRP resources.

Approved By

Mahmood Pradhan (EUR) and Jeromin Zettelmeyer (SPR)

The mission took place in Rome during May 2–17, 2022. The team comprised Rachel van Elkan (head), Ernesto Crivelli, Anna Shabunina, Guillermo Tolosa, Zhongxia Zhang (all EUR), Alan Feng (MCM), and Natalia Stetsenko (LEG). Domenico Fanizza, Cristina Quaglierini, and Francesco Spadafora (all OED) also participated. The mission met with Finance Minister Franco, Bank of Italy Governor Visco, Public Administration Minister Brunetta, senior Italian and SSM officials, and representatives from the business community and trade unions. La-Bhus Fah Jirasavetakul (EUR) and Ivana Rossi (LEG) contributed to the report, and Marta Burova and David Velazquez-Romero (both EUR) assisted in preparing the report.






  • A. Outlook and Risks

  • B. Managing the Energy Shock

  • C. Charting a Fiscal Strategy

  • D. Preserving Financial Stability

  • E. Managing Corporate Sector Risks

  • F. Policies for a Severe Scenario

  • G. Decarbonizing the Future

  • H. Structural Priorities



  • 1. Factors Affecting Wage Growth in Italy

  • 2. Policies to Achieve the Fiscal Targets

  • 3. Fiscal Recommendations from the IMF’s Buffer Stock Model

  • 4. COVID Public Guarantee Schemes


  • 1. Real Sector Developments

  • 2. Fiscal Developments and Issues

  • 3. Labor Market Developments

  • 4. External Sector Developments

  • 5. Financial Sector Developments

  • 6. Financial Sector Assets and Valuation

  • 7. Banking Sector Indicators

  • 8. Bank Loans under Moratoria and Public Guarantees


  • 1. Summary of Economic Indicators, 2019–27

  • 2. Statement of Operations—General Government (GFSM 2001 Format), 2018–27

  • 3. Summary of Balance of Payments, 2018–27

  • 4. Financial Soundness Indicators, 2014–21


  • I. Risk Assessment Matrix

  • II. Debt Sustainability Analysis

  • III. External Sector Assessment

  • IV. Select Reforms and Investments in the NRRP

  • V. Implementation of Key 2020 FSAP Recommendations

  • VI. Italy’s Anti Money Laundering and Anti-Corruption Frameworks

  • VII. Italy’s Superbonus Tax Credits

  • VIII. Supply Disruptions and the Role of Foreign Value Added

  • IX. Energy Shock: Transmission and Policy Response

  • X. Output Loss Estimates from Interruption of Russian Gas

  • XI. Progress on Past IMF Recommendations


Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.


At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here:

Italy: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Italy
Author: International Monetary Fund. European Dept.