Italy to cut GDP growth estimate to 0.6% this year, 0.8% in 2026, say sources

By Giuseppe Fonte

ROME, April 8 (Reuters) - Italy's government is preparing to cut its economic growth estimates for both this year and next, two sources familiar with the matter told Reuters on Tuesday, amid mounting uncertainty caused by U.S. President Donald Trump's sweeping new tariffs.

Italy's multi-year budget framework, due to be unveiled on Wednesday, forecasts gross domestic product in the euro zone's third largest economy to grow by 0.6% this year, down from a 1.2% target made last September, the sources said.

Next year, Prime Minister Giorgia Meloni's government sees GDP growth of 0.8%, down from the previous 1.1% target.

GDP growth is likely to be set at 0.8% also in 2027 and 2028, one of the sources said, although the numbers remain subject to possible further changes.

Under Trump's plans announced last week, Italy, which has a large trade surplus with the United States, will be subject to a general tariff of 20% along with other European Union countries.

Other major European countries have also started to revise their growth estimates downwards. German economic institutes have cut their forecast for this year to 0.1% growth from the 0.8% growth expected in September, Reuters reported.

In a meeting with Italian business lobbies, Meloni said her government would discuss with EU authorities alternative ways to use already allocated EU funds to offset the expected negative impact of the tariffs.

"We are committed to using all available resources, starting with those that do not have an impact on the public finances," Meloni said in a speech released by her staff.

With no extra borrowing currently foreseen, she said some 14 billion euros could come from an overhaul of Italy's EU-funded post-COVID recovery plan, while an additional 11 billion would stem from EU regional development funds.

A further 7 billion euros were expected to be deployed using EU funds aimed at addressing climate change.

Economy Minister Giancarlo Giorgetti said last week the European Union should allow member states to raise spending without breaching the bloc's fiscal rules.

Under EU governance rules, commitments agreed with the European Commission to cut public spending can be put on hold in the event of a "severe economic downturn" in the euro zone.

Italy has committed to bringing its deficit below the EU's 3% of GDP ceiling in 2026 from 3.4% in 2024.

($1 = 0.9168 euros)