ROME, July 8 (Reuters) – Italy’s economic growth was likely strong in the second quarter but could slow or even stall in coming months as inflationary pressures mount, Economy Minister Daniele Franco said on Friday. .

“We believe there was robust growth in the quarter just ended,” Franco told a meeting of bankers in Rome.

He added, however, that with rising recession risks around the eurozone, “there is certainly a risk that growth will stall or slow sharply in the second half of the year.”

Italy has an official growth forecast of 3.1% this year, and Franco said it should have a “carried over” growth platform of around 3% at the end of the second quarter.

This means that even in the event of stagnation in the second half of the year, annual growth would be 3% compared to 2021.

Italy’s inflation, which stood at 8.5% in June, ‘is not expected to drop quickly’, Franco said, pledging the government would continue to work to limit the impact of soaring energy costs on businesses and households, especially for low-income families.

Rome plans to pass a new aid package worth up to 8 billion euros ($8.12 billion) later this month, government sources told Reuters, in addition to more than 33 billion euros already budgeted since January.

Despite the recent sharp rise in Italian government bond yields, Franco said Italy’s average debt servicing costs this year would be broadly in line with those of 2021, adding that he expected markets stabilize soon.

Italy’s public debt-to-GDP ratio will decline significantly this year from last year’s level of 151%, he said, while confirming the current deficit-to-GDP target of 5, 6%.

“I am convinced that the sustainability of Italian public finances will help restore more stable market conditions and bond yields in line with our economic fundamentals,” Franco said.

Looking ahead, Franco said the government will cut taxes to reduce the so-called tax wedge, the difference between what an employer pays and what a worker takes home, in the 2023 budget to be approved. in October.

($1 = 0.9856 euros)

written by Gavin Jones; edited by Barbara Lewis

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