ROME, April 19: Italy finally confirmed on Friday the less-than-rosy outlook most economists see for the euro zone’s third largest economy in 2003, by more than halving its forecast for economic growth.

In its quarterly review of macroeconomic forecasts approved by the Cabinet, the government slashed its 2003 target to 1.1 per cent from a previous 2.3 per cent as a weak global economy worsened by war in Iraq has taken its toll.

The move comes as little surprise. Italian ministers had long flagged the prospect of a cut in their forecasts and the new figure is in line with the International Monetary Fund’s latest forecast.

The government also said it sees the budget deficit coming in at 2.3 per cent of GDP in 2003 versus a previous forecast of 1.5 per cent.

However, the document said that in a worst-case scenario, if the international economic situation worsened, growth in 2003 could come in at as low as 0.6 per cent.

The review gave no new government forecasts for 2004.

It said Italy’s debt mountain, which has been a problem with the EU, was expected to reach 105.9 per cent of GDP from a previously forecast 105 per cent. This is below last year’s level of 106.7 per cent but still one of the highest in the euro zone.

The government sees Italy’s state sector borrowing requirement (SSBR) in 2003 coming in at 42 billion euros, from an earlier forecast of 36 billion.

Italy’s primary surplus target was set at 3.2 per cent of GDP, which would mean it was unchanged from 2002.—Reuters