EuroWire, ROME: Italy’s public budget deficit came in at 3.1% of gross domestic product in 2025, improving from 3.4% a year earlier but remaining above the European Union’s 3% reference ceiling, according to data published by national statistics agency ISTAT. The deficit, measured as general government net borrowing, amounted to 70.286 billion euros. ISTAT also said the economy expanded by 0.5% in real terms last year, matching the subdued pace indicated in earlier official projections.
In current prices, GDP rose 2.5% to 2.258 trillion euros, while the primary balance, which excludes interest payments, improved to a surplus of 0.7% of GDP from 0.5% in 2024. Tax and compulsory social contribution receipts increased to 972.5 billion euros, and the overall tax burden rose to 43.1% of GDP from 42.4%. The figures were released as part of ISTAT’s annual national accounts data on output, borrowing, debt and the main components of public finance.
The 2025 result also marked a miss against Rome’s effort to bring the deficit back within the bloc’s ceiling. Italy’s 2024 draft budgetary plan had projected a deficit of 3.3% of GDP for 2025, and the government’s 2026 draft budgetary plan later pointed to an updated 3.0% path for last year before targeting 2.8% in 2026. The final 3.1% outturn kept the deficit above the threshold even as the annual gap narrowed.
Deficit stays above EU threshold
That matters because Italy remains under the European Union’s excessive deficit procedure. The Council of the European Union opened the procedure in July 2024 after Italy posted a 7.4% deficit in 2023. In January 2025, the Council recommended that Italy end the excessive deficit situation by 2026 and keep nominal net expenditure growth within agreed limits of 1.3% in 2025 and 1.6% in 2026. The 2025 outturn therefore remains a central benchmark for Brussels’ fiscal monitoring.
Italy’s debt burden also increased in 2025. ISTAT put public debt at 3.095 trillion euros, equivalent to 137.1% of GDP, up from 134.7% in 2024. That rise came alongside a positive primary balance, underscoring the weight of interest costs in the headline deficit. The data showed that stronger tax intake improved revenue, but not enough to offset broader pressures on the public accounts and bring the deficit ratio below the EU ceiling.
Growth remains modest as debt rises
The national accounts data showed an economy that continued to expand, but only modestly. Gross fixed capital formation rose 3.5% in volume, final consumption expenditure increased 0.9% and exports gained 1.2%, while imports rose 3.6%. National demand excluding inventories contributed 1.5 percentage points to growth, but net exports and inventory changes reduced the overall result. By sector, value added increased in industry, construction and services, while agriculture, forestry and fishing edged lower.
For the government, the 2025 figures provide the latest official baseline for fiscal policy after a year in which the budget gap narrowed but did not fall below the EU benchmark. They also frame the next stage of Italy’s effort to align deficit reduction with weak growth, rising debt and higher interest costs. With real GDP growth at 0.5% and the deficit still above 3%, the latest data leave Italy with a clearer but still demanding fiscal starting point for 2026.