Italy's GDP this year and next will rise by only 0.3%, with the budget deficit at 2.5% of GDP for both years, the International Monetary Fund (IMF) said in its latest World Economic Outlook.
In January, the IMF had predicted that Italy's GDP would rise by 0.5% in 2008 and 0.7% in 2009.
Despite Italy's weak growth, the IMF said it did not see the nation's economy slipping into a recession.
''Italy has one of the slowest economies in the euro zone. We expect growth to be low but no recession,'' said the IMF's deputy chief economist, Charles Collyns.
The IMF said Italy's public debt will rise to 103.6% of GDP in 2008 and 104% in 2009.
The revisions for Italy were the result of a general downturn in the global economy, which the IMF said may result in a minor recession in the United States, brought on by a slowdown in the American housing market and the related financial crunch sparked by the subprime loan crisis.
Looking at the euro zone, the IMF said average growth this year will be 1.4%, compared to its previous forecast of 1.6%.
Inflation in the euro zone will hit 2.8% this year, well above the European Central Bank's target of 2%. However, inflation should dip to 1.9% in 2009, the IMF said.
Even though inflation will be higher than targeted, the IMF said there was room for the ECB to cut interest rates as a means to stimulate the economy.
Last month the Italian Treasury said that because of a global economic slowdown Italy's GDP growth in 2008 would be 0.6%, compared to its previous forecast of 1.5%.
The Italian ISAE economic think-tank in March cut its economic growth forecast from 1.4% to 0.5%.
The Treasury put Italy's budget deficit at 2.4% this year while the ISAE said it would be 2.3% of GDP.
Looking at the global picture, the IMF said the economic slowdown in the US will reduce world GDP growth this year by 0.5 percentage points to 3.7%.
The IMF said there was also a 25% possibility that GDP growth would drop to 3% or lower this year and in 2009 ''which would be the equivalent of a global recession''.
The US economy, the IMF said, will see a ''slight recession'' in 2008, with two or three quarters showing declines in growth which will result in GDP rising by only 0.5% this year.
In its last outlook the IMF had predicted the US economy would expand by 1.5% this year
However, in 2009 the US can expect a ''slight recovery,'' the IMF added.
