Italy can expect to have a budget deficit of 2.3% of GDP both this year and next, before it climbs to 2.9% in 2009, the European Commission said in its latest economic outlook.
The forecasts are higher than those the EC made in the spring, when the deficit was put at 2.1% for 2007 and 2.2% for 2008.
The Italian government's latest predictions are for a 2.4% deficit this year and a 2.2% deficit in 2008.
In its autumn forecast, the EC said the drop in Italy's deficit from 4.4% in 2006 was due to an increase in tax revenue and a number of one-off measures.
Doubts over Italy's future deficit, the EC added, were based on "significant uncertainties" in regards changes to corporate taxes.
In its forecast for Italy's economy, the EC said GDP growth will remain below the euro zone average with a 1.9% rise this year, a 1.4% gain in 2008 and an increase of 1.6% in 2009.
The euro zone, on the other hand, should see GDP rise by an average of 2.6% in 2007 and 2.2% next year.
On a more positive note, the EC said that Italy's massive public debt had fallen more than previous forecast and this year would equal 104.3% of GDP, down from its current 105.1%, and decline to 102.9% in 2008 and 101.2% in 2009.
This was an improvement over the EC's spring prediction of Italy's debt at 105% this year and 103.1% in 2008.
The Italian government's target is to bring the debt below 100% of GDP by 2010.
There was also good news on the inflation front where prices in Italy should rise at a slower rate than the euro zone average.
The EC predicted that Italy's inflation rate would be 1.9% this year and 2% in 2008, compared to a euro zone average of 2% in 2007 and 2.1% in 2008.
