Italy's Trade Surplus Narrows Amid Shifting Global Demand Dynamics

The Italian trade surplus in February 2025 declined to €4.707 billion, marking a 15.4% year-over-year contraction compared to February 2024’s €6.034 billion surplus. This narrowing reflects a slowdown in export momentum and rising import pressures, signaling challenges in sustaining the country’s external competitiveness. While Italy’s trade performance has historically relied on non-EU markets, the data underscores vulnerabilities tied to global supply chains, energy costs, and sectoral imbalances.

Export Growth Slows, Imports Rise

Exports in February 2025 grew by only 2.8% year-on-year, down sharply from the 2024 pace of 1.7%, while imports rose by 0.8%, reversing a 6.1% decline in February 2024. The narrowing surplus is thus driven by weaker export expansion and a rebound in import volumes, particularly for energy, machinery, and metals. For instance, natural gas imports surged in January 2025, contributing to that month’s deficit.

The pharmaceutical sector, which had boomed in late 2024 (with exports up 35.5% year-on-year in December), saw its growth moderate in early 2025. Meanwhile, imports of capital goods—a proxy for domestic investment—remained resilient, suggesting underlying economic activity.

Non-EU Trade: The Double-Edged Sword

Italy’s trade surplus with non-EU countries remains critical to its external position. In February 2024, non-EU exports grew 2.1% year-on-year, while imports fell 10.4%, creating a €6.739 billion surplus. In February 2025, however, non-EU exports expanded by only 1.5%, while imports rose 3.2%, trimming the surplus to an estimated €5.8 billion. This decline reflects global demand softness, particularly in emerging markets, and rising input costs for Italian exporters.

Energy and Inflation Pressures

Import prices, especially for non-EU goods, have stabilized after years of declines. In February 2024, import prices were down 5.5% year-on-year, but by early 2025, inflationary pressures—driven by energy costs and raw material scarcity—reversed this trend. For example, natural gas prices surged by 18% in early 2025 compared to 2024, straining import budgets.

Policy and Investment Implications

The narrowing surplus poses risks to Italy’s fiscal and external stability. A weaker trade balance could amplify the current account deficit, increasing reliance on foreign capital. Investors should monitor:
1. Export resilience: Sectors like pharmaceuticals (e.g., firms like Recordati or Chiesi) and machinery (e.g., Caterpillar’s Italian operations) may offer growth opportunities if global demand recovers.
2. Energy costs: Utilities like Enel or Eni could face margin pressures unless energy efficiency improves.
3. Trade policy shifts: The EU’s push for self-sufficiency in critical minerals and semiconductors may reshape Italy’s trade dynamics.

Conclusion: A Fragile Balance

Italy’s trade surplus narrowing in February 2025 signals a pivotal moment. While the projected rebound to €6.700 billion by year-end 2025 hints at stabilization, the underlying trends demand caution. Investors must weigh the strengths of high-value sectors like pharmaceuticals against vulnerabilities in energy and intermediate goods. The key question remains: Can Italy’s export-led growth model adapt to rising global headwinds, or will it succumb to inflation and supply chain fragility? The answer will shape both trade balances and investment outcomes in the years ahead.

Data sources: ISTAT, European Central Bank, and author’s calculations.