(MENAFN- AFP) Italy's centre-left government has reacted to fresh evidence of a stalling economy by slashing its growth forecasts for this year and next.
Speaking late Tuesday after a lengthy post-dinner cabinet meeting on updated budget plans for 2017, Prime Minister Matteo Renzi said he was now making a "prudent" prediction of growth of 0.8 percent for this year and one percent for 2017.
That compares with figures of 1.2 percent and 1.4 percent forecast by the government in April. The downward revisions follows data indicating that the economy ground to a halt in the first half of this year.
Independent economists say Italy will struggle to hit even the revised targets given weak domestic demand and the crisis facing the country's debt-laden banks.
The OECD club of industrialised countries is predicting 0.8 percent growth for both this year and next.
Renzi said Italy's budget deficit would fall to 2.4 percent of GDP this year, from 2.6 percent in 2015, and a maximum of 2.0 percent next year.
The latter figure is slightly above the 1.8 percent target Italy has been set by the European Commission, which is urging Rome to cut year-on-year spending faster to reduce a debt mountain equivalent to more than 132 percent of the entire economy.
And the 2016 budget deficit rate of 2.4 percent is a slight upward revision from the original forecast of 2.3 percent.
Renzi said Italy would be seeking only limited 'flexibility' in the interpretation of EU budget rules - equivalent to a maximum 0.4 percent of GDP in the assessment of its spending plans to cover the exceptional costs of the migration crisis and the deadly August earthquake in the centre of the country.
"Europe owes a serious debt to Italy," for its handling of the migrant crisis, said Renzi.
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