Italy in gloomy growth forecast, insists no budget impact

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Rome (AFP)

The Italian government revised down its growth forecast for 2016 on Friday but swore the gloomy figures would not have an impact on the country's budget.

Finance Minister Pier Carlo Padoan said the updated forecast for the country's gross domestic product (GDP) growth is 1.2 percent, down from a previous forecast of 1.6 percent. It is now expected to reach 1,4 percent in 2017 and 1.5 percent in 2018.

"Growth is accelerating compared to 2015, which was a positive year of growth after three years of recession," Padoan said at a press conference with Prime Minister Matteo Renzi following a cabinet meeting.

Renzi said that the government was being intentionally cautious with its outlook: "for the first time for years the forecast is more intelligent, more prudent" thanks to "the scrupulousness" of the finance ministry, he said.

He also ruled out a "corrective move" to adjust the country's budget, saying "there will be no manoeuvres".

Padoan said growth "has been stimulated by the effect of government measures and is accompanied by a continuous improvement in public finances both in terms of the deficit/GDP ratio and of debt, which will reduce from 2016".

The government forecasts its huge public debt burden will drop from 133 percent of GDP in 2015 to 132.4 percent in 2016 and 130.9 percent in 2017, reaching 123.8 percent in 2019.

The deficit is forecast to stand at 2.3 percent of GDP in 2016 and 1.8 percent in 2017.

"We are confident" the deficit level "is compatible with the flexibilty (afforded by the EU) and the exceptional circumstances that relate to the marked deterioration in the international environment," Padoan said.

He also moved to stave off criticism over the country's economic performance, saying that the "government's economy policies are producing tangible results".

"It's not true that the reformatory drive is losing energy. The benefits of the reforms can be seen first and foremost on the job market, where the combination of the Jobs Act (labour reform) and tax relief is beginning to bear fruit".

The government said it expected the unemployment rate to drop to 11.4 percent from 11.9 percent in 2015, then to 10.8 percent in 2017 and 10.2 percent in 2018.