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Quick Facts
- Population:
- GDP (PPP):
- $2.7 trillion
- 0.1% 5-year compound annual growth
- $46,161 per capita
- Unemployment:
- Inflation (CPI):
- FDI Inflow:
- Public Debt:
Italy’s economic freedom score is 62.3, making its economy the 69th freest in the 2023 Index. Its score is 3.1 points lower than last year. Italy is ranked 36th out of 44 countries in the Europe region, and its overall score is above the world average.
Despite repeated attempts at reform, moves toward greater economic freedom, including short-term fixes, have been uneven and relatively ineffective. Persistent corruption severely undercuts confidence and trust in the government. Increases in the debt burden, aggravated by structural weaknesses, are undermining long-term competitiveness. The informal sector accounts for a considerable amount of economic activity.
Background
Italy is a charter member of NATO and the European Union. The unity government of former EU banker Mario Draghi collapsed in July 2022, and Brothers of Italy’s Giorgia Meloni won the September elections and was sworn in as Italy’s first female prime minister on October 22. The populist 5 Star Movement split in June over disagreements about support for Ukraine. Key challenges include migration, the higher cost of living, and rising energy costs. Private companies dominate the highly developed industrial North; unemployment is higher in the less-developed, highly subsidized agricultural South. Tourism accounts for 13 percent of GDP.
Rule of Law
The overall rule of law is well respected in Italy. The country’s property rights score is above the world average; its judicial effectiveness score is above the world average; and its government integrity score is above the world average.
Government Size
The top individual and corporate tax rates are, respectively, 43 percent and 24 percent. The tax burden equals 42.9 percent of GDP. Three-year government spending and budget balance averages are, respectively, 53.6 percent and –6.1 percent of GDP. Public debt equals 150.9 percent of GDP.
Regulatory Efficiency
Organization of new production remains cumbersome. Regulatory complexity causes delays and increases the cost of entrepreneurial activity. Labor market rigidities discourage dynamic job growth, and the informal labor market accounts for a large proportion of employment. The most recent available inflation rate is 1.9 percent.
Open Markets
The trade-weighted average tariff rate (common among EU members) is 3.2 percent, and more than 600 EU-mandated nontariff measures are in force. Foreign investment is not generally screened, and the economy is largely open. The financial sector is stable, but nonperforming loans remain a problem.