Italian Economy Minister Vittorio Grilli expects the economy to contract by 2.1 percent this year and remain flat next year as the worsening global crisis hits the prospects of a recovery, the daily Corriere della Sera said on Saturday. 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 percent of GDP in 2012, 0.5 percent in 2013 and 0.1 percent in 2014.