Italy deficit remains at 3.1%, delaying EU procedure exit

Italy's public deficit is projected to remain above the European Union's 3% threshold, with ISTAT confirming a 2025 deficit of 3.1%. This figure prevents Italy from exiting the excessive deficit procedure this year, though officials suggest an exit remains possible by 2027.

Moody's has confirmed Italy's Baa2 rating with a stable outlook. The agency forecasts the deficit will reach 3% in 2026 and 2.9% in 2027. The public debt-to-GDP ratio is expected to stabilize around 138% during 2026 and 2027 before beginning a gradual decline. Moody's noted that while a large, diversified economy and a solid domestic investor base support the rating, high public debt limits fiscal flexibility.

Economic growth forecasts for 2026 have been revised upward to 0.8% by Moody's. Despite the continued deficit procedure, experts note that Italy retains access to certain European flexibilities for defense and energy spending. The Italian government remains committed to the fiscal trajectory agreed upon with Brussels.