By Giuseppe Fonte

ROME (Reuters) – The Italian government’s 1% economic growth target for this year will be more difficult to achieve following downward revisions by the national statistics bureau ISTAT, the central bank, and budget watchdog UPB, as stated on Monday.

The revisions indicate a mechanical downward correction of 0.2 percentage points to the government estimate for the current year, according to Sergio Nicoletti Altimari, head of economics at the Bank of Italy, during his testimony to parliament.

As a result, the 2024 gross domestic product (GDP) growth in Italy, the euro zone’s third-largest economy, is now expected to be 0.8% instead of the previously set 1% target.

UPB chairman Lilia Cavallari, in her testimony, anticipated that growth would likely fall short of the official goal by at least two-tenths of a percentage point.

ISTAT recently revised down the year-on-year GDP growth rates for the first and second quarters, stating that the ‘acquired growth’ at the end of the second quarter is now 0.4%, lowered from 0.6% prior to the revisions.

If there is zero growth in the third and fourth quarters, the full-year growth would fall to 0.4%, compared to the previous year.

The Treasury’s multi-year budget plan published in September projected growth of 1.2% in 2025 and 1.1% in 2026, but both the Bank of Italy and UPB caution that these estimates face potential downside risks.

The central bank has emphasized the need for a prudent approach to public finances, urging a focus on reducing the debt-to-GDP ratio.

Italy aims to reduce this year’s budget deficit to 3.8% of GDP, a significant decrease from last year’s 7.2%, which was the highest in the 20-nation euro zone.

The deficit is projected to decline to 3.3% of GDP next year and aims to reach 2.8% in 2026, below the EU’s 3% ceiling.

According to current trends, the government anticipates a further decrease in the deficit to 2.9% in 2025 and 2.1% in 2026, which would provide some flexibility for additional spending or tax cuts.

However, the Bank of Italy cautioned that even minor deviations from the government’s plan could hinder efforts to stay below the EU’s 3% GDP ceiling by 2026 as promised.