In 30'-40 Italy aeronautical research was not behind UK, Germany and USA, in some cases was even more advanced.
The fascism had put a very friendly eye on aviation, even if mainly for propaganda purposes, and funds for record breaking projects were always available.
The problem was that there was no industry to backup the research, and all top level accomplisments failed to translate in mass production aircraft.
In global economics, the regime focused more on agriculture and transportation than on industrial growth, and Italy was far beyond the other 'powers' in terms of heavy industries.
As a fallout of this, fascism never really prepared the country for a war, the (wrong) assumption being that German Army would had been enough.
So, on one side you had the Macchi MC 702, designed for the Schneider cup that in 1929 set the speed record for prop driven seaplanes (709 kmh at sea level, still unsurpassed today), on the other side you have biplane fighters in service as main type.
As example, the Spitfire airframe and the Merlin engine were the practical translation of the Supermarine seaplanes for the Cup, while nothing was delivered in Italy from the airframe of the Macchi and his Fiat 2000 (and more) hp engine.
When the war showed the need of modern aircraft, the license built DB closed the gap for the engines, but still no factory had the industrial capability to tool up for mass production, and the fine series 5 was still a matter of craftmanship.
Given this background, it is no wonder that the Mc205, Fiat G55 and so on were equal or better than the best celebrated fighters in pure performance, but is also no wonder that when the Germans evaluated th G55 for mass production (it was better than the contemporery Bf109) they decided not to proceed because of the construction technique and related time/costs.
Here is a link for Italian interesting projects that were stopped by the armistice
http://worldatwar.net/chandelle/v3/v3n1/italtwin.html
cheers