ROME (Reuters) - Italy has slashed its growth estimate for this year as the war in Ukraine weighs on the economy, while confirming a previous budget deficit target of 5.6% of national output, according to a draft government document seen by Reuters.
The Treasury’s annual Economic and Financial Document (DEF) forecasts gross domestic product in the euro zone’s third largest economy will grow by 3.1%, down from a 4.7% projection made last September, the draft shows.
For 2023, the government sees GDP growth of 2.4%, down from the previous target of 2.8%.
The economy probably contracted in the first quarter, the draft of the DEF showed. It is expected to recover in the second quarter, the document says, while acknowledging growing difficulties connected with events in Ukraine.
“Economic prospects, conditioned in the last two years by the (COVID) pandemic, are now marked by uncertainty regarding the conflict between Russia and Ukraine and the consequent increase in raw material prices and financial market fluctuations,” the draft said.
A lasting war “would have strong repercussions on inflation as well as on economic growth”, it said.
In a worst-case scenario assuming serious shortages in gas supplies for Italy and other European countries, the Treasury estimates growth of just 0.6