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Italy’s economy constrained by low productivity, shortage of highly skilled professionals—IMF

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3 months ago

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Italy’s economy has remained relatively resilient despite global economic uncertainty, and its public finances turned out better than expected last year, recording a primary surplus of 0.4 percent of GDP. Nonetheless, trade tensions have added to risks, not least because Italy is a large exporting economy. Longer-term growth in the European Union’s third-largest economy is constrained by low productivity, a shortage of highly skilled professionals, and an aging and declining population, Italy’s mission chief, Lone Christiansen, told IMF Country Focus.
What explains Italy’s resilience and what is the overall outlook?
Lone Christiansen: Investment was one of the key factors that supported growth of 0.7 percent last year, in particular through strong implementation of the National Recovery and Resilience Plan—NRRP for short. The labor market also performed well, with more jobs with permanent contracts. And despite the increase in trade uncertainty this year, the share of employed people as a percentage of the working age population rose to a record high. The fact that Italy’s export goods and destinations are diverse is also helping to protect the economy to some degree. That said, exports’ central importance is inevitably exposing the economy to global trade uncertainty. As discussed in the IMF’s latest report on the Italian economy, that is why we project growth to slow to 0.5 percent this year, before strengthening to 0.8 percent in 2026 when most of the NRRP infrastructure investments are expected to be completed.
How would continued geopolitical tensions, trade disruptions, and other pressures affect the country?
Christiansen: Several challenges and risks loom, many from the outside. One is trade uncertainty and new tariffs on exports to the United States. In fact, recent data already indicate that trade is being impacted. The intensification of regional conflicts, which raise commodity prices, is also a risk, because Italy depends on imported energy. And extreme weather could harm agriculture and tourism. Two long-term issues also hamper growth: population aging and weak productivity. The working-age population is projected to decline by double digits between 2024 and 2050. This compounds Italy’s long-standing weak productivity problems, with fewer people with the right skills to support innovation.
How can Italy address these two challenges?
First, double down on reforms to boost labor force participation and productivity. We delved into the economic impact of Italy’s demographic trends and suggested several measures to support growth, including boosting women’s participation in the labor force (for example, by increasing childcare availability and removing tax disincentives for dependent spouses). We also suggest policies to lift human capital—such as through education and on-the-job training. More broadly, increasing productivity will need to go beyond people. We find  that small innovative Italian firms struggle to become large ones. It is therefore important to develop policies that help the private sector produce and adopt innovation more quickly, so that the most promising companies can continue to grow. Continuing these efforts would help lift growth. We estimate that a package of reforms that increases women’s participation in the labor force, raises skill levels, and increases productivity could boost average annual growth by between 0.1 and 0.4 percentage points during 2025–2050. Italian authorities are making progress on this agenda. NRRP implementation is well underway, with important measures such as judicial reforms to reduce court backlogs and improving tax compliance. Investments are enhancing the railway system and school infrastructure.
Why is the IMF recommending further fiscal consolidation and how can the country achieve it?
Christiansen: Last year’s strong fiscal performance led to a 0.4 percent primary surplus (revenues minus expenses, before interest payments), which was a strong start. Looking ahead, the government is committed to bringing down its high public debt (around 135 percent of GDP last year), and its medium-term fiscal-structural plan shows this commitment. Why recommend faster fiscal consolidation? We project the interest rate on public debt will exceed economic growth, making debt reduction harder over time. There will also be pressure for more spending on pensions and healthcare as the population ages. We therefore recommend delivering somewhat more consolidation than planned this year and next—reaching a primary surplus of 3 percent of gross domestic product by 2027. Doing so will help reduce debt and increase investor confidence.

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Economy

Nigeria champions African-Arab trade to boost agribusiness, industrial growth

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December 5, 2025

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The Arab Africa Trade Bridges (AATB) Program and the Federal Republic of Nigeria formalized a partnership with the signing of the AATB Membership Agreement, officially welcoming Nigeria as the Program’s newest member country. The signing ceremony took place in Abuja on the sidelines of the 5th AATB Board of Governors Meeting, hosted by the Federal Government of Nigeria.

The Membership Agreement was signed by Eng. Adeeb Y. Al Aama, the CEO of the International Islamic Trade Finance Corporation (ITFC) and AATB Program Secretary General, and H.E. Mr. Wale Edun, Minister of Finance and Coordinating Minister of the Economy, Federal Republic of Nigeria. The Agreement will provide a strategic and operational framework to support Nigeria’s efforts in trade competitiveness, promote export diversification, strengthen priority value chains, and advance capacity-building efforts in line with national development priorities. Areas of collaboration will include trade promotion, agribusiness modernization, SME development, businessmen missions, trade facilitation, logistics efficiency, and digital trade readiness.

The Honourable Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, called for deeper trade collaboration between African and Arab nations, stressing the importance of value-added Agribusiness and industrial partnerships for regional growth. Speaking in Abuja at the Agribusiness Matchmaking Forum ahead of the AATB Board of Governors Meeting, the Minister said the shifting global economy makes it essential for African and Arab nations to rely more on regional cooperation, investment and shared markets.

He highlighted projections showing Arab-Africa trade could grow by more than US$37 billion in the next three years and urged partners to prioritize value addition rather than raw commodity exports. He noted that Nigeria’s growing industrial base and upcoming National Single Window reforms will support efficiency, investment and private-sector expansion.

“This is a moment to turn opportunity into action”, he said. “By working together, we can build stronger value chains, create jobs and support prosperity across our regions”, Edun emphasized. “As African and Arab nations embark on this journey of deeper trade collaboration, the potential for growth and development is vast. With a shared vision and commitment to value-added partnerships, we can unlock new opportunities, drive economic growth, and create a brighter future for our people.”

Speaking during the event, Eng. Adeeb Y. Al Aama, Chief Executive Officer of ITFC and Secretary General of the AATB Program, stated: “We are pleased to welcome Nigeria to be part of the AATB Program. Nigeria stands as one of Africa’s most dynamic and resilient economies in Africa, with a rapidly expanding private sector and strong potential across agribusiness, energy, manufacturing, and digital industries. Through this Membership Agreement, we look forward to collaborating closely with Nigerian institutions to strengthen value chains, expand regional market access, enhance trade finance and investment opportunities, and support the country’s development priorities.”

The signing of this Agreement underscores AATB’s continued engagement with African countries and its evolving portfolio of programs supporting trade and investment. In recent years, AATB has worked on initiatives across agribusiness, textiles, logistics, digital trade, export readiness under the AfCFTA framework, and other regional initiatives such as the Common African Agro-Parks (CAAPs) Programme.

With Nigeria’s accession, the AATB Program extends it’s presence in the region and adds a key partner working toward advancing trade-led development and fostering inclusive economic growth.

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Economy

FEC approves 2026–2028 MTEF, projects N34.33trn revenue 

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2 days ago

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December 4, 2025

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Federal Executive Council (FEC) has approved the 2026–2028 Medium-Term Expenditure Framework (MTEF), a key fiscal document that outlines Nigeria’s revenue expectations, macroeconomic assumptions, and spending priorities for the next three years. The approval followed Wednesday’s FEC meeting presided over by President Bola Tinubu at the State House, Abuja. The Minister of Budget and Economic Planning, Senator Atiku Bagudu made this known after the meeting.

The Minister said the Federal Government is projecting a total revenue inflow of N34.33 trillion in 2026, including N4.98 trillion expected from government-owned enterprises. Bagudu said that the projected revenue is N6.55 trillion lower than earlier estimates, adding that federal allocations are expected to drop by about N9.4 trillion, representing a 16% decline compared to the 2025 budget.

He said that statutory transfers are expected to amount to about N3 trillion within the same fiscal year. On macroeconomic assumptions, FEC adopted an oil production benchmark of 2.6 million barrels per day (mbpd) for 2026, although a more conservative 1.8 mbpd will be used for budgeting purposes. An oil price benchmark of $64 per barrel and an exchange rate of N1,512 per dollar were also approved.

Bagudu said the exchange rate assumption reflects projections tied to economic and political developments ahead of the 2027 general elections. He said the exchange rate assumption took into account the fiscal outlook ahead of the 2027 general elections.

The minister said that all the parameters were based on macroeconomic analysis by the Budget Office and other relevant agencies. Bagudu said FEC also reviewed comments from cabinet members before approving the Medium-Term Fiscal Expenditure Ceiling (MFTEC), which sets expenditure limits. Earlier, the Senate approved the external borrowing plan of $21.5 billion presented by President Tinubu for consideration The loans, according to the Senate, were part of the MTEF and Fiscal Strategy Paper (FSP) for the 2025 budget.

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Economy

CBN hikes interest on treasury Bills above inflation rate

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2 days ago

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December 4, 2025

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The spot rate on Nigerian Treasury bills has been increased by 146 basis points by the Central Bank of Nigeria (CBN) following tight subscription levels at the main auction on Wednesday. The spot rate on Treasury bills with one-year maturity has now surpassed Nigeria’s 16.05% inflation by 145 basis points following a recent decision to keep the policy rate at 27%. 

The Apex Bank came to the primary market with N700 billion Treasury bills offer size across standard tenors, including 91-day, 182-day and 364 day maturities. Details from the auction results showed that demand settled slightly above the total offers as investors began to seek higher returns on naira assets despite disinflation.

Total subscription came in at about N775 billion versus N700 billion offers floated at the main auction. The results showed rising appetite for duration as investors parked about 90% of their bids on Nigerian Treasury bills with 364 days maturity. The CBN opened N100 billion worth of 91 days bills for subscription, but the offer received underwhelming bids totalling N44.17 billion.

The CBN allotted N42.80 billion for the short-term instrument at the spot rate of 15.30%, the same as the previous auction. Total demand for 182 days Nigerian Treasury bills settled at N33.38 billion as against N150 billion that the authority pushed out for subscription. The CBN raised N30.36 billion from 182 days bills allotted to investors at the spot rate of 15.50%, the same as the previous auction.

Investors staked N697.29 billion on N450 billion in 364-day Treasury bills that was offered for subscription. The CBN raised N636.46 billion from the longest tenor at the spot rate of 17.50%, up from 16.04% at the previous auction.

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