Rising fuel costs linked to the Iran conflict are forcing Rome to reconsider its GDP outlook, raising pressure on the budget and prompting calls for EU flexibility.
Italy is considering lowering its forecast for economic growth as fuel prices rise, fueling the global energy crisis amid the war in Iran.
In a statement, Economy Minister Giancarlo Giorgetti noted that the slowdown in growth is primarily due to external temporary factors, among which is the energy crisis.
“The deterioration of the economic growth forecast is limited and mainly tied to external temporary factors, in particular the energy crisis”
– Giancarlo Giorgetti
He added that the available data do not indicate a structural worsening of Italy’s economy.
The government expects GDP growth this year to slow from 0.7% to around 0.6% or 0.5%, and next year from 0.8% to around 0.6% or 0.7%.
Such a downward revision could complicate bringing the budget deficit back to 3% of GDP as early as this year, compared with 3.1% previously.
According to Giorgetti, the EU should temporarily ease the deficit requirements for national budgets in the event of a renewed escalation of the US-Iran conflict.
Italy’s Prime Minister Giorgia Meloni continues to work on rebooting her government’s program after last month’s referendum defeat over judicial reform, the issue of which was driven by rising energy prices and her ties to U.S. President Donald Trump.
All in all, the situation shows that high fuel prices will continue to pressure Italy’s economy and the state budget in the near term.
Economic consequences and prospects
Rising fuel costs affect consumer demand and business expenses, which could slow growth and impact government revenues. The government is considering ways to support households and businesses and potential temporary steps regarding deficit obligations in response to external shocks.
What lies ahead
In light of the current challenges, Italy is trying to balance economic growth with budgetary demands, while seeking stability in external conditions and reducing the energy crisis’s impact on households and businesses.