Italy raises 2010 growth forecast, cuts 2011-source-UPDATE 1
Friday October 01, 2010 11:49:08 AM GMT
* Italy 2010 GDP forecast lifted to 1.2 percent - source
* Forecast for 2011 cut to 1.3 percent from 1.5 percent
* Maintains budget deficit forecasts
* Official forecast expected after Wednesday cabinet meeting
(Adds background, details)
By Giuseppe Fonte
ROME, Sept 29 (Reuters) - Italy has raised its official forecast for economic growth this year but has trimmed its view for 2011, a government source said on Wednesday ahead of the expected release of revised estimates.
The Treasury has raised its forecast for 2010 to 1.2 percent from a previous estimate of 1.0 percent but cut its 2011 view to 1.3 percent from 1.5 percent previously, according to the source, who spoke on condition of anonymity.
For 2012, the Treasury expects growth of around 2 percent. The government also maintained its budget deficit forecasts at 5 percent of gross domestic product in 2010, 3.9 percent next year and 2.7 percent in 2011, the source said.
The official revisions to the government forecasts are expected to be announced after a cabinet meeting on Wednesday.
Italy faces a period of sluggish growth after emerging from its worst post-war recession and the new forecasts underline the uncertainty facing the euro zone's third largest economy.
Prime Minister Silvio Berlusconi, whose government has been engaged in months of bitter feuding after a split in the ruling centre-right party, faces a confidence motion in parliament that could trigger new elections.
He is expected to win the vote but the dispute with his former party ally Gianfranco Fini has seriously hampered any drive to reform the economy.
Employers' federation Confindustria sees growth in 2011 of 1.3 percent but the Bank of Italy has been more pessimistic, forecasting just 1.0 percent this year and next.
Recent data has suggested that recovery is slowing in Italy with weak industrial output data from both June and July.
On Wednesday, economics research institute ISAE's regular business confidence index dropped much more sharply than expected in September, hit by worries over weak demand and concerns over the overall economic situation. [ID:nRMETKE61A]
Italy has come out of the economic crisis in better shape than some countries and despite a huge public debt, has so far avoided the turmoil that has swept across other heavily indebted countries like Greece and Spain.
The forecasting document due to be released by the Treasury will also contain updated estimates for the public debt, which is currently seen at 118.4 percent of gross domestic product this year and 118.7 percent next year.
Those levels are among the highest in the euro zone but markets have so far concentrated on Italy's relatively contained public deficit and low household indebtedness compared with many of its euro zone partners.
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