UPDATE 3-Italy cuts debt forecasts as economy recovers from COVID crisis

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*GDP growth seen this year 6.0%, in 2022 4.7%

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*Pre-pandemic level of GDP seen by middle of next year

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*Budget deficit targeted at 9.4% of GDP this year

* PM Draghi promises “strongly expanded” budget for 2022 (released after forecasts submitted, adds Draghi quote)

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ROME, Sept 29 (Businesshala) – Italy on Wednesday lowered its public debt forecast for the year to 153.5% of national output from its previous outlook of 159.8% set in April, hit by the COVID-19 crisis. The economic recovery was stronger than expected. .

The latest target, contained in the Treasury’s twice-annual forecast exercise, would mark a fall from a post-war record of 155.6% of registered GDP in 2020. The declining trend is projected to continue at 149.4% in 2022.

The Economic and Financial Document (DEF) forecast Italian economic growth at 6.0% this year, a partial recovery after a record contraction of 8.9% in 2020, when the economy was hit by the COVID-19 lockdown.

“The economic picture is much better than what we ourselves thought it would be in the spring,” Prime Minister Mario Draghi told reporters after his cabinet signed the document.

“There is trust in Italy, in each other and in the rest of the world as well,” he said.

Economic output will recover upwards from its pre-pandemic levels in mid-2022 thanks to another year of strong growth, penciled in at 4.7%.

In the near term, the third quarter of this year will see growth of 2.2% from the previous three months, followed by a 2.7% expansion in the second quarter, forecast DEF.

Draghi said the latest forecasts confirmed that the best way to reduce Italy’s massive public debt, proportionally the most in the euro area after Greece, was to boost growth.

He promised that the government’s 2022 budget presented next month would be “strongly expansionist”.

The document highlighted several risks to the growth outlook, including the possible emergence of new COVID variants, raw material shortages and the recent rise in energy prices.

Nonetheless, it said that pre-pandemic conditions, economic reforms and a planned withdrawal of the EU’s billion-euro recovery funds should ensure that growth and employment remain “far above the trend seen in the last decade”.

Italy has been the slowest economy in the euro area since the beginning of the monetary union.

The budget deficit in the DEF is targeted at 9.4% of GDP this year, a change from last year’s level of 9.6% and lower than April’s forecast of 11.8%.

The deficit is projected to narrow to 5.6% next year and to 3.3% in 2024, still well above the 3% limit set in the EU’s Stability Treaty, which is currently suspended due to the COVID-19 crisis.

Under an unchanged policy scenario, the 2022 deficit would be 4.4% of GDP, the DEF showed, allowing the government to finance additional spending of 1.2% of GDP, or some 22 billion euros ($19 billion). Is. ($1 = 1.1714 euros) (Reporting by Giuseppe Fonte and Gavin Jones; Editing by Catherine Evans and Hugh Lawson)

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