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Italy’s 2024 public finances data reveal positive
picture
4 March 2025
Italy’s primary balance for 2024 proved to be better than expected,
mitigating the increase in the public-debt ratio.
ITALY’S PRIMARY BALANCE IMPROVED SIGNIFICANTLY IN 2024
PERCENTAGE OF GDP
2 180
0 170
Primary balance
-2 160
Public debt (rs)
-4 150
-6 140
-8 130
2019 2020 2021 2022 2023 2024
Source: Istat, The Investment Institute by UniCredit
THE CONTEXT
Istat has published annual data on Italy’s finances for 2024, which conveyed positive news. The budget deficit declined
significantly from 7.2% of GDP to 3.45% (compared to the government’s forecast of 3.8%) and the public-debt-to-GDP
ratio rose by just 0.7pp to 135.3%. The resumption of an upward trend in the short term was widely expected.
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The Investment Institute Coffee Break
by UniCredit 4 March 2025
THE DATA
Our chart illustrates the progress of Italy’s public finances from 2019-2024. The eye-catching
achievement is the improvement in the primary balance from a large deficit to a small surplus
(0.4% of GDP) last year. A significant reduction in capital expenditure, which was inflated by
the impact of the housing bonus in the period 2021-2023, contributed to the sharp decline,
while a slightly better revenue figure explained the positive surprise. Interest expenditure was
3.9% of GDP, with the cost of overall debt at close to 3.0%. Despite the good news in terms of
the primary balance, the public-debt-to-GDP ratio rose in 2024 following three consecutive
years of sizeable declines. This was due to 1. slower nominal GDP growth, as price increases
moderated last year and 2. a higher cash deficit related to housing tax credits accumulated in
the previous three years.
OUR VIEW
Italy’s budget-deficit dynamic is moving in the right direction, and this will help the country in
its downward adjustment process. Last autumn, the government committed to lowering the
deficit to 2.8% of GDP by 2026, which we regard as achievable. This implies improving the
primary surplus towards 1% of GDP, which would bring it closer to the 30-year average of about
1.5% of GDP. As the constructive market view on Italy’s sovereign yield is expected to support
debt affordability, the main risk is related to growth, as the complex geopolitical situation
might weaken economic activity. We now expect real GDP to expand by 0.7% this year, much
less than the government’s 1.2% forecast last autumn. This will also be crucial for the
dynamics of the debt ratio and the budget deficit. The debt ratio is expected to rise until 2026,
when the negative impact of the housing bonus will start to fade – this is already factored in
by investors and rating agencies.
OTHER THINGS TO NOTE
The trade war escalates
At 6:01 CET, US tariffs against Canada, Mexico and China came into effect. The US
administration has imposed a 25% tariff on imports from Canada and Mexico and a 20%
tariff (rather than 10% as initially announced) on imported goods from China. Canada and
China have already announced retaliatory measures. Canada will impose 25% tariffs on
selected US goods (initially worth CAD 30bn but rising to CAD 125bn at a later stage). China
has announced a 15% tariff on US agricultural goods and has banned exports to some
defense companies.
Challenging environment for oil
Oil prices have declined, with Brent falling to USD 71/bbl, its lowest level since the
beginning of December. The risk-off environment, as tariffs come into effect, and the
announcement that OPEC+ will increase production from April have weighed on oil prices.
The price of oil has declined by almost 5% so far this year, underperforming the Bloomberg
commodity index, which has risen by more than 4%.
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The Investment Institute Coffee Break
by UniCredit 4 March 2025
Author
Dr. Loredana Maria Federico, Chief Italian Economist, (UniCredit, Milan), loredanamaria.federico@unicredit.eu
Editors
Edoardo Campanella, Director and Chief Editor of The Investment Institute (UniCredit Milan)
edoardo.campanella@unicredit.eu
Francesco Maria Di Bella, FI Strategist (UniCredit, Milan), francescomaria.dibella@unicredit.eu
UniCredit S.p.A
The Investment Institute by UniCredit, Piazza Gae Aulenti, 4, I-20154 Milan
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The Investment Institute Coffee Break
by UniCredit 4 March 2025
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