I made an account just to answer this question (I was going to make one later anyway, but whatever).

The shortest answer to your question is this: Ethiopia.

A longer answer follows.

Mussolini had grand designs on 'reforming the Roman Empire', and that was focused mostly towards Africa (and to a somewhat lesser degree, the Balkans). In simplified terms, Italy invaded Ethiopia in early 1935, in the Second Italo-Ethopian War. Mussolini believed this war would be swift and relatively cheap, however it wasn't until 1939 (a year you will note as the official beginning of the Second World War), four years later that Italy was finally truly victorious (they had claimed victory in 1936 after successfully taking the capital of Ethiopia, but serious fighting continued for another three years). By this time he had over 20,000 of his soldiers killed, and almost 200,000 more wounded or missing. Bearing in mind that Italy "only" had a standing army of some 500,000 at the onset of this particular war, that represented a huge portion of their military forces. But that wasn't where the problems ended.

Mussolini once again made an estimate (or rather an assumption) regarding the war against Ethiopia that it would be relatively cheap. Some 6 billion lire, and once again he was wrong - the war would end up costing nearly 5 times as much (33 billion lire). Additionally, Italy had intervened in the Spanish Civil War (along with several others, most notably Nazi Germany) in order to instill and prop up a fascist dictatorship, which had cost him a number of troops as well, and, more importantly (from a purely strategic standpoint), just shy of 14 billion lire.

Why does this matter? Well, that is a total of 47 billion lire, which was more than the Italian government took in annual taxes and almost a third of their GDP at the time (you often hear defense spending used as a percentage of GDP).

This effectively crippled the Italian economy, and they had absolutely no choice but to massively wind-down military production and capability for three years. In fact, so bad it was that it could be argued that, even in 1942, there were never truly ready for war.

It wasn't that he had done nothing for the 20 or so years preceding World War Two. It was that he had done too much in committing his military to expensive and drawn out wars across Africa, whereas the Third Reich had mobilised their economy to gear up fully committed to a long war in Europe without really taking part in any serious military action during this period of militarisation and rearmament, with the single exception of committing a relatively small number of troops (between 10-14 thousand) to the Spanish Civil War.