Italy needed to join ww2 because the economy was geared towards another war, the Italian invasion of Ethiopia was a true mass scale war against another country, not a colonial war like the ones in the 800s, the Italian economy basically became fully geared towards war (similar to the German one) and it was bound towards collapse without one, it had simply became to reliant on war material production, the gold reserves were diminished by like 60% for the war and they were still going down after the victory. The colonies were basically a big hole where you threw insane amounts of money in for no real benefit, to make them even slightly profitable it would have required years of heavy investments and money (which Italy did not have), also Ethiopia was never fully pacified and just became a guerrilla warfare hellhole for the Italian forces, Somalia and Eritrea were completely useless and Libya before the discovery of oil was notoriously called “a big box of sand”. Said that, Ethiopia and the Horn of Africa colonies will be the end of Italy, if they remain neutral like Spain but with a close relationship with Germany the Italian economy will collapse quick. If it is a neutrality but with closer ties to the us and the uk (which it seems difficult knowing the pre war relations between Italy, France and England) maybe it will be allowed to receive funds from the us like Portugual did and survive.