ROME:Italian Economy Minister Vittorio Grilli expects the economy to contract by 2.1 per cent this year and remain flat next year as the worsening global crisis hits the prospects of a recovery, the daily Corriere della Sera said yesterrday.
The forecasts underline the government’s increasing pessimism about the recession Italy has already been in for at least a year, undermining its efforts to rein in its 2 trillion euro public debt.
Just last month Grilli said Italy’s gross domestic product would shrink less than 2 percent this year, compared with an earlier forecast of a 1.2 percent contraction, and he dampened any hopes of a pickup next year.
“For 2013, the signs are for flat growth,” he told a cabinet meeting on Friday, according to the Corriere.
The economy ministry declined to comment.
Earlier this month, statistics agency ISTAT reported that Italy, the euro zone’s third-largest economy, had seen an annual contraction of 2.5 percent in the second quarter.
Italy’s economy has been the most sluggish in the euro zone for more than a decade and has been at the centre of the bloc’s debt crisis, with its borrowing costs flirting with levels that risk becoming unsustainable in the long term.
Grilli said this month that worsening growth meant that Italy was likely to miss its target for a nominal budget deficit of 1.7 per cent of GDP in 2012, 0.5 per cent in 2013 and 0.1 per cent in 2014.
However the government, which is planning a series of reforms intended to boost growth, reiterated its target for a balanced budget in structural, or growth-adjusted terms, in 2013, in line with its promises to the European Union.
On Friday, the cabinet met for over nine hours to discuss the reform agenda in the months remaining before elections expected around April next year. It set out a series of objectives including liberalising services, cutting red tape and hiring thousands of new teachers.
