ROME, Sept. 20 (Xinhua) -- Italy's cabinet on Friday updated its budget plan, raising its forecast for deficit and debt for 2014 and cutting the growth previsions for this year.
The new forecasts see an economy contraction of 1.7 percent in 2013, compared to a 1.3-percent shrinkage projected in April. The budget deficit is likely to be 3.1 percent of GDP this year on current trends.
The government also said it expected its budget deficit to increase to 2.5 percent of the country's Gross Domestic Product (GDP) in 2014, up from the previous forecast of 1.8 percent, and public debt to reach 132.9 percent by the end of 2013 and 132.8 percent, up from 130.4 and 129 percent respectively.
But the government pledged to meet the targets required by EU. Prime Minister Enrico Letta said, despite the growing pressure on public finances, Italy would keep within the EU limit of 3 percent by the end of the year.
Letta blamed the economic slippage on the current political instability.
Attempts by former prime minister Silvio Berlusconi to avoid being expelled from parliament following a tax fraud conviction have destabilized the government and sent the country's borrowing costs climbing.
"To win the markets' trust we have to show that we can do it. And all our targets are perfectly achievable if we will have political will and stability," Letta said.
The government's forecast on Friday also predicted Italy's GDP to expand by 1.0 percent in 2014.