ROME (Reuters) – Italy’s economy is expected to grow by 1.2% in 2023, national statistics institute Istat said on Tuesday, significantly raising its previous projection of 0.4% made in December on the back of a stronger start to the year than expected.

In its half-yearly report on the economic outlook, Istat forecasts a gross domestic product (GDP) increasing by 1.1% in 2024 for the third largest economy in the euro zone.

According to Istat, growth this year and next will be largely fueled by strong domestic demand, while trade flows will provide only marginal support.

Italy’s economic growth, traditionally a laggard in the eurozone, has consistently exceeded expectations since the rebound in activity following the sharp recession of 2020, during the COVID-19 pandemic.

During the first quarter of this year, GDP grew by 0.6% compared to the previous three months, and by 1.9% year-on-year, Istat said last week.

The institute said its forecast was based on “a favorable assumption” that inflation would decline over the next few months and that Italy would manage to invest the billions of euros from European Union recovery funds. .

So far, the right-wing government of Giorgia Meloni has struggled to meet the political conditions set by the EU for the transfer of funds, and has also fallen behind in using the funds it has already received. .

In April, the government said it forecast growth of 1.0% this year and 1.5% in 2024.

Economy Minister Giancarlo Giorgetti said last month, however, that based on the latest data, he expected growth of 1.4% in 2023.

Istat estimates the average unemployment rate at 7.9% this year, down from its December forecast (8.2%). It forecasts a drop to 7.7% in 2024.

The unemployment rate stood at 7.8% in April, according to the latest available data, Istat said on Thursday.

(Report Gavin Jones; Gaëlle Sheehan, edited by Blandine Hénault)

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