Italy ends 2024 on a high with surprise budget surplus

Rome: Close-up of euro banknotes with a small Italian flag and leather wallet, sign of Italy’s public finances and economic surplus.

For the first time in several years, Italy has ended a quarter with its books in the black. The final three months of 2024 saw the country post a public surplus of 0.4 per cent of GDP, a sharp turnaround from the 6.6 per cent deficit recorded at the end of 2023.

According to national stats agency ISTAT, this isn’t just a lucky break — it’s the result of a solid rise in tax revenue and a notable drop in government spending, particularly around tax relief schemes. In short, more money came in than went out, and for once, Italy’s balance sheet is looking a little healthier.

Tax pressure has edged up slightly, hitting 50.6 per cent of GDP — but that’s largely down to a stronger inflow of revenue, up 3.4 per cent, while spending dipped by 8.3 per cent.

On a broader scale, Italy’s annual deficit has fallen more than expected, coming in at 3.4 per cent of GDP for 2024, down from 7.2 per cent in 2023. That’s also better than the government’s own target of 3.8 per cent — not a bad look for Prime Minister Giorgia Meloni and her team.

But let’s not break out the prosecco just yet. Rome is still under pressure from Brussels to clean up its finances further. With a public debt approaching €3 trillion, there’s little wiggle room. The goal? Bring the deficit down to 2.8 per cent by 2026 to stay within the EU’s 3 per cent cap. For 2025, the government is aiming for a deficit of 3.3 per cent.

On the growth front, it’s steady — but not spectacular. Italy’s economy grew by 0.7% in 2024, matching the rate seen in 2023. The final quarter saw a tiny 0.1 per cent uptick, but there was no growth at all in Q3.

Looking ahead, the government is betting on 1.2 per cent growth in 2025, and slightly less in 2026. But those forecasts might need revising. With Trump’s latest trade war heating up, countries like Italy — which rely heavily on exports — could feel the squeeze.

Case in point: Italy’s trade surplus with the US hit €38.9 billion last year, which could draw unwanted attention in Washington. Tariff hikes may be on the horizon.

The Italian cabinet is expected to review its economic strategy next week — and in the current climate, a cautious but flexible plan might be the safest route forward.