According to GDP calculations, as measured by purchasing power parity (PPP), Italy is ranked as the 8th largest economy in the world in 2006, behind the United States, Japan, Germany, China, India, UK, and France, and is the fourth largest in Europe. This capitalistic enconomy remains divided into a developed industrial north, dominated by private companies, and a less developed agricultural south.

Most new materials needed by industry are more than 75% of energy requirements are imported. Over the past decade, Italy has pursued a tight fiscal policy in order to meet the requirements of the Economic and Monetary Union and has benefited from lower interest and inflation rates. Italy joined the Euro from its conception in 1999.

Italy has a smaller number of world class multinational corporations than other economies of comparable size. Instead, the country's main economic stength has been its large base of small and medium size companies. Many of these companies manufacture products that are technologically moderately advanced and therefore face increasing competition from China and other emerging Asian economies which are able to undercut them on labor costs.