Fabio Panetta: Overview of economic and financial developments in Italy
Concluding remarks by Mr Fabio Panetta, Governor of the Bank of Italy, at a meeting for the presentation of the Annual Report 2025 – 132nd Financial Year, Rome, 29 May 2026.
Ladies and Gentlemen,
Last year the global economy was unexpectedly resilient. GDP grew by 3.4 per cent, half a point more than expected, despite the ongoing conflicts in Ukraine and Gaza, tighter US tariffs and the hostilities in the Middle East.
US growth exceeded 2 per cent. Artificial intelligence (AI) was a driving force behind this momentum: the construction of data centres supported investment, and the rise in the equity prices of the companies that are spearheading this transformation increased financial wealth and boosted consumption.
China also contributed significantly to the global expansion, growing by 5 per cent. Faced with weak domestic demand, Chinese firms responded to US tariffs by lowering prices in foreign markets and diversifying their trade outlets. This is an effective strategy in the very short term, but a fragile one in the long run, as it does not address domestic deflationary pressures and fuels new protectionist responses.
Global economic activity also benefited from the easing of monetary conditions made possible by the disinflationary environment.
Optimism prevailed in financial markets, resulting in high equity valuations, low risk premia and the search for yields in less transparent segments. The appreciation of gold and bitcoin and the rapid expansion of private credit pointed to the risk of valuations being overly optimistic in some areas of the market.
These signals became more apparent between 2025 and 2026. The instruments that had benefited more from the expansionary phase gave back some of their gains and valuations started to incorporate risks that investors had long underestimated.