The Italian economy is the eighth largest in the world and third largest in the European Union, with a GDP of $2.1 trillion ($35,551 per capita) in 2021. Following a 9% contraction in 2020 due to the COVID-19 pandemic, Italy’s economy rebounded in 2021 with GDP growing 6.7%, and by Q2 2022 it had exceeded pre-pandemic levels. The economy is expected to grow above 3% in 2022 but below 1% in 2023, if not contract, as a result of Russia’s war against Ukraine and concomitant energy price spikes.

In 2021, Italy was the 18th largest market for U.S. goods exports, valued at $21.7 billion, and the fifth largest U.S. export market in the EU, following Germany, the Netherlands, Belgium, and France. Export values to the Netherlands (Rotterdam) and Belgium (Antwerp), however, are skewed by the ‘Rotterdam Effect,’ in which goods are valued at the port of entry, but then distributed throughout the EU.

U.S. exports to Italy are concentrated in such high-value sectors as oil and gas, pharmaceuticals, aerospace products and parts, and precious metals. The United States remains by far Italy’s largest non-EU export market with roughly a 10% share of all exports and a 20% share of all non-EU exports. In 2021, the United States was Italy’s third largest destination for exports, with U.S. goods imports from Italy totaling $61 billion, following Germany and France. The U.S. goods trade deficit with Italy was $39 billion in 2021. For services, the United States ran a surplus of $461 million.

In 2021, Italian foreign direct investment in the United States totaled $41.1 billion, supporting 98,700 American jobs. Top industry sectors for Italian FDI include industrial equipment, renewable energy, food and beverages, software and IT services, metals, and electronic components.

Italy’s cumulative inward FDI investment is well below the EU average, due largely to structural problems that affect domestic as well as foreign investment. U.S. direct investment in Italy totaled $28.1 billion in 2021, ranking ninth among EU destinations, following Spain, and one-fourth of that in France. U.S investment in Italy is concentrated in manufacturing, energy, food and beverages, and software and IT services, with significant industrial relationships in the aerospace and automotive sectors.

The current Italian government came to power following elections in September 2022, after the previous “technical government,” formed in February 2021, lost its broad political-party support. The new government is expected to continue to focus on post-pandemic economic recovery and implementation of the National Recovery and Resilience Plan (NRRP), a fund of €191.6 billion in loans and grants through 2026 awarded to Italy by the European Commission. Giorgia Meloni, leader of the Brothers of Italy party, serves as “President of the Council of Ministers” (effectively, the Prime Minister) and Sergio Mattarella serves as “President of the Republic.”

The NRRP is developed around three strategic axes – digitization and innovation, ecological transition, and social inclusion – and aims to help Italy to recover from the economic and social damage caused by the COVID-19 pandemic crisis. The program also has the stated goals of addressing structural weaknesses within the Italian economy and enhancing the capacity of its public administration. Italy received the largest share of the EU’s pandemic recovery fund.

The European Commission transferred to Italy a pre-financing payment of €24.9 billion in August 2021 and the first tranche payment of €21 billion in April 2022. Remaining tranches will be disbursed based on Italy’s progress in fulfilling the 314 quantitative “targets” and 214 qualitative “milestones” agreed by Italy and the Commission. Italy’s request for the second tranche, another €21 billion, was approved and released in November 2022.

With a population of about 60 million, Italy is the EU’s third largest consumer market. Industrial activity is concentrated in the north from Turin in the west through Milan to Venice in the east. This region is one of the most industrialized and prosperous areas in the world and accounts for more than 50% of Italy’s national income. Italy’s southern region, or “Mezzogiorno,” is less developed. The country’s 4.3 million small and medium-sized enterprises (SMEs) — many of them family-owned micro-enterprises – account for 80% of employment and one-third of GDP.