2022 Index of Economic Freedom

Italy

OVERALL SCORE65.4
WORLD RANK57
Rule of Law

Property Rights81.7

Judicial Effectiveness78.6

Government Integrity57.3

Government Size

Tax Burden57.7

Government Spending20.6

Fiscal Health49.0

Regulatory Efficiency

Business Freedom73.8

Labor Freedom70.4

Monetary Freedom86.2

Open Markets

Trade Freedom79.2

Investment Freedom80.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 59.6 million
  • GDP (PPP):
    • $2.5 trillion
    • -8.9% growth
    • -0.9% 5-year compound annual growth
    • $40,861 per capita
  • Unemployment:
    • 9.3%
  • Inflation (CPI):
    • -0.1%
  • FDI Inflow:
    • $-388.0 million

Italy’s economic freedom score is 65.4, making its economy the 57th freest in the 2022 Index. Italy is ranked 33rd among 45 countries in the Europe region, and its overall score is below the regional average but above the world average.

The Italian economy slowed from 2017 through 2019, contracted in 2020, and resumed growth in 2021. A five-year trend of generally improving economic freedom has continued. Led by notable jumps in scores for rule of law (property rights, judicial effectiveness, and government integrity), Italy has posted an overall 2.9-point gain in economic freedom since 2017 and has climbed into the top half of the “Moderately Free” category. Monetary freedom, trade freedom, and investment freedom are strong, but the economy remains heavily burdened by government spending.

IMPACT OF COVID-19: As of December 1, 2021, 133,931 deaths had been attributed to the pandemic in Italy, and the government’s response to the crisis ranked 16th among the countries included in this Index in terms of its stringency. The economy contracted by 8.9 percent in 2020.

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Background

Italy is a charter member of NATO and the European Union. Former Prime Minister Giuseppe Conte’s coalition collapsed in January 2021 over disagreements about how to spend EU coronavirus recovery funds, of which Italy is a chief beneficiary. Former EU banker Mario Draghi became prime minister in February and heads a unity government. Italy remains on the front lines of Europe’s migration crisis, and Lega Nord, which favors strict controls on immigration, remains the nation’s most politically popular party. Italy’s diversified economy is bifurcated between the highly developed industrial North, dominated by private companies, and a less-developed, highly subsidized agricultural South where unemployment is higher. Tourism accounts for 13 percent of GDP, and the sector’s current struggles are an economic albatross.

Rule of Law

Property Rights 81.7 Create a Graph using this measurement

Judicial Effectiveness 78.6 Create a Graph using this measurement

Government Integrity 57.3 Create a Graph using this measurement

Real property rights are protected, and the recording system for mortgages is reliable. The legal system enforces property and contractual rights, but it is cumbersome and notoriously slow and can be vulnerable to political interference. A bloated and self-interested bureaucracy slows efforts to enforce anticorruption laws. Corruption and organized crime continue to be significant impediments to investment and economic growth.

Government Size

The top individual income tax rate is 43 percent, and the top standard corporate tax rate is 24 percent with qualifying banks and financial institutions taxed at 27.5 percent. The overall tax burden equals 42.5 percent of total domestic income. Government spending has amounted to 51.4 percent of total output (GDP) over the past three years, and budget deficits have averaged 4.4 percent of GDP. Public debt is equivalent to 155.6 percent of GDP.

Regulatory Efficiency

Business freedom would be higher if it were not for Italy’s many layers of redundant bureaucracy and the amount of time that compliance with regulatory processes requires. Taxes on labor income are relatively high. The government banned most layoffs in response to COVID-19. A new package of subsidized incentives to encourage sales of state-of-the-art combustion-engine cars as well as electric and hybrid vehicles has been enacted.

Open Markets

As a member of the EU, Italy has 46 preferential trade agreements in force. The trade-weighted average tariff rate (common among EU members) is 2.9 percent with 640 EU-mandated nontariff measures in force. A decree that strengthens the screening of foreign direct investment in strategically important areas has been adopted. Restructuring and consolidation of the banking sector continue, and the number of nonperforming loans has declined.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Switzerland84.22.3
2Ireland820.6
3Luxembourg80.64.6
4Estonia801.8
5Netherlands79.52.7
6Finland78.32.2
7Denmark780.2
8Sweden77.93.2
9Iceland77-0.4
10Norway76.93.5
11Germany76.13.6
12Lithuania75.8-1.1
13Latvia74.82.5
14Czech Republic74.40.6
15Austria73.8-0.1
16Cyprus72.91.5
17United Kingdom72.7-5.7
18Georgia71.8-5.4
19Malta71.51.3
20Bulgaria710.6
21Portugal70.83.3
22Slovenia70.52.2
23Slovak Republic69.73.4
24Belgium69.6-0.5
25Poland68.7-1.0
26Spain68.2-1.7
27Croatia67.64.0
28Romania67.1-2.4
29Hungary66.9-0.3
30Albania66.61.4
31France65.90.2
32North Macedonia65.7-2.9
33Italy65.40.5
34Armenia65.3-6.6
35Serbia65.2-2.0
36Bosnia and Herzegovina63.40.5
37Azerbaijan61.6-8.5
38Greece61.50.6
39Moldova61.3-1.2
40Kosovo60.1-6.4
41Montenegro57.8-5.6
42Turkey56.9-7.1
43Russia56.1-5.4
44Ukraine54.1-2.1
45Belarus53-8.0
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