Brussels, February 22 - The European Commission sounded the alarm for Italy's recession-hit economy on Friday, when it revised down its growth forecast for this year and said unemployment is likely to keep rising in 2014. The Commission said in its winter forecast that Italian gross domestic product (GDP) will drop 1% this year, compared to its previous prediction of 0.5% in November. "Domestic demand, and in particular investment in equipment, is set to resume growth in the second half of 2013," the Commission said. "However, the negative carry-over from 2012 implies that real GDP in 2013 as a whole is still projected to decline by 1%". It said real GDP is forecast to increase by 0.8% in 2014, when "the projected normalisation in financing conditions and reduced uncertainty are set to sustain activity". The EU report added that unemployment in Italy will rise from 10.6% to 11.6% this year and keep increasing next, even though the recession should be over by then, reaching 12.0%. But there was some good news too. The Commission said Italy was on target to hit its target of balancing the budget in structural terms this year and Italy's massive national debt should start coming down next. "In structural terms, a broadly balanced budgetary position is expected for 2013," the report said. "The gross debt is projected to peak at 128.1% of GDP in 2013, before falling in 2014 thanks to the sizeable primary surplus and the return of economic growth".
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di Giovanni Pastore