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Italian central bank revises down outlook

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MILAN, Jan 18 AFP

January 19 2013, 00:35AM

The Italian economy is likely to contract by one per cent this year, half the expected shrinkage in 2012, but far worse than a previously expected downturn of 0.2 per cent in the coming 12 months, the central bank says.

The bank said it had revised down its outlook for growth this year "owing to a worsening of the international context" and underlying weakness of activity in recent months.

And it said it expected the contraction last year to turn out at slightly more than two per cent.

Italy is enacting rapid and radical budget cuts, tax rises and economic reforms to deal with a huge debt mountain and raise efficiency in the economy.

The central bank said it expected the economy to return to a path of growth in the second half of this year "but at a modest rate and with a wide margin of uncertainty."

Italy would have to wait until 2014 to show a full year of growth, the bank warned. It suggested that the economy would grow by 0.7 per cent next year.

The government said in its last forecasts in September that it expected the economy to have shrunk by 2.4 per cent last year and to grow by 0.2 per cent this year.