UPDATE 1-Italy to trim 2011 GDP forecast -govt source

Published 09/22/2010, 10:30 AM
Updated 09/22/2010, 10:32 AM

* Govt to trim 2011 growth forecast slightly

* 2010 forecasts remain substantially unchanged

* New forecasts due in coming days

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By Gavin Jones

ROME, Sept 22 (Reuters) - Italy will slightly lower its official forecast for economic growth next year when the Treasury issues new projections in the days ahead, a government source told Reuters on Wednesday.

The official, who asked not to be named, said the 1.5 percent forecast for 2011 gross domestic product growth would be revised down "a little", a move which should bring the government more into line with most independent forecasters.

The official said there would be little if any change to the forecasts for this year for GDP growth, currently seen at 1.0 percent, and the budget deficit, seen at 5.0 percent of GDP.

"The 2010 growth and deficit forecasts will be pretty much in line with the current ones," the official said.

Employers' confederation Confindustria sees Italy posting growth of 1.3 percent next year, while the Bank of Italy is more downbeat, forecasting just 1.0 percent growth both this year and next.

Recent data has suggested the recovery is slowing in the euro zone's third-largest economy, after firm growth of 0.5 percent in the second quarter.

Industrial orders fell in both June and July, and industrial output edged up just 0.1 percent in July, below expectations.

The Organisation for Economic Cooperation and Development has forecast Italy's economy will contract slightly in the third quarter. Most economists expect a marked slowdown but believe that growth will remain in marginally positive territory.

The Treasury's forecasting document, called the DPF, was originally due to be released by September 15. Officials now say it will be issued before the end of the month.

Italy has come through the economic crisis without the turmoil that has hit countries like Greece or Spain but unemployment and weakening incomes combined with months of political squabbling and a series of corruption scandals have weakened Silvio Berlusconi's centre-right government.

The DPF will also contain updated forecasts for the public debt, currently seen at 118.4 percent this year and 118.7 percent in 2011.

These levels are among the highest in the euro zone, but markets have focused on Italy's relatively contained budget deficit and low household indebtedness compared with many of its partners.

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