The Italian economy is the eighth largest in the world and third largest in the European Union, with a GDP of $2.17 trillion ($36,810 per capita) in 2022. The economy proved surprisingly resilient to high energy prices and inflation in 2022, growing 3.7%; however, growth slowed in mid-2023 due to rising interest rates, weakening global export demand, and the rollback of pandemic-era fiscal support. Economic growth in both 2023 and 2024 is expected to be below 1%.
Two-way trade in goods and services between the United States and Italy reached a record high of $117 billion in 2022. Italy is the 19th largest market for U.S. exports of goods and services, valued at $37.1 billion, and the sixth largest U.S. export market in the EU, following Germany, the Netherlands, Ireland, France, and Belgium. Export values to the Netherlands (Rotterdam) and Belgium (Antwerp), however, are skewed by the ‘Rotterdam-Antwerp 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, precious metals, machinery, and pharmaceuticals. The United States remains by far Italy’s largest non-EU export market with roughly a 10% share of all exports and a 22% share of all non-EU exports. In 2022, the United States was Italy’s second largest destination for exports, after Germany, with U.S. imports from Italy totaling $80.2 billion. The U.S. trade deficit with Italy was $43 billion.
In 2022, Italian foreign direct investment in the United States totaled $46.2 billion, supporting 99,800 American jobs, making it the 16th largest source of investment. Top industry sectors for Italian FDI include industrial equipment, renewable energy, food and beverages, electronic components, software and IT services, and metals.
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 $26.1 billion in 2022, ranking tenth among EU destinations, following Norway, and one-third of that in Spain. 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 has continued 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. To date, the European Commission has transferred to Italy nearly half of the total, but Italy has struggled to spend the funds on schedule. Remaining tranches will be disbursed based on Italy’s progress in fulfilling hundreds of quantitative “targets” and qualitative “milestones” agreed by Italy and the Commission. Italy requested the fourth tranche, €16.5 billion, in September 2023.
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 3.7 million small and medium-sized enterprises (SMEs) — many of them family-owned micro-enterprises – account for 75% of employment and one-third of GDP.
Political Environment
Visit the State Department’s website for background on the country’s political and economic environment.