The European Commission last week slashed its forecast for Italian GDP growth in 2019 to 0.2 percent, well below the government's 1 percent projection.
JPMorgan forecast Italian GDP would contract at an annualised rate of 0.75 percent in the first quarter, adding that a widening of the spread between benchmark 10-year Italian bonds and their German equivalent may add to downside risk.
"At this stage, we estimate that Italy's 2019 (budget) deficit will climb to 2.8 percent of GDP, which, together with our growth forecast, implies an increase in the debt ratio to 133.5 percent of GDP (up from an estimated 132 percent in 2018)," it said in a report.
The government of the anti-establishment 5-Star Movement and the right-wing League has targeted the deficit at 2.0 percent, after the European Commission rejected its original goal of 2.4 percent deficit, saying it broke EU spending rules.
The weakening economy is putting pressure on public finances, leading to selling pressure on Italian bonds and higher borrowing costs, in a vicious circle which some analysts say could lead to corrective budget measures later this year.
(Reporting by Silvia Aloisi; Editing by Gareth Jones and Gavin Jones)
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