Italy's government has lowered its growth forecasts after Prime Minister Giorgia Meloni held a cabinet meeting in Rome late on Wednesday. The Economic and Financial Document (DEF), which precedes a full budget due later this year, predicts Italy's GDP will grow by 0.8 percent in 2023. The last projection in the spring predicted 1.0 percent growth.

Meanwhile in 2024, the economy is now expected to grow by 1.2 percent, down from 1.5 percent. Speaking to reporters after the cabinet meeting in Rome, Economy Minister Giancarlo Giorgetti blamed the conflict in Ukraine and tightening of monetary policy by the European Central Bank for Italy's worsening outlook.

Deficit rises as growth weakens

As growth forecasts are being cut back, the government is also moving its fiscal deficit targets in the opposite direction. After predicting a drop of 4.5 percent of GDP for 2023 earlier this year, the target has now been raised to 5.3 percent.

The 2024 target is lower at 4.3 percent of GDP, but was also increased from earlier estimates. In a post on X, the social media network formerly known as Twitter, Meloni struck a bullish tone.

"Enough with the waste of the past, all available resources to support the lowest incomes, cut taxes and help families," she wrote.

Cutting taxes for low and middle-income families was a key part of Meloni's pitch to become Prime Minister in last year's general elections.

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Meloni hit by policy reversals

Italy's outlook is worsening as Meloni faces growing criticism of her stewardship of the economy. Earlier this year, the government was forced to water down a windfall tax on banks after stocks in the financial sector plunged.

The government also pulled back on plans to impose a cap on the cost of flights from mainland Italy to islands including Sicily and Sardinia. Low-cost carrier Ryanair described the proposals as "illegal and unenforceable" and threatened to cut flight numbers.

The governing coalition is under pressure from European authorities in Brussels to reintroduce controls on spending that were loosened in the immediate aftermath of the conflict in Ukraine beginning.

Italy is set to present its new budget to the European Commission by mid-October.

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