The European Union believes that Italy's will fulfill its pledge to bring its budget deficit back below3% of GDP next year.
The autumn report from the office of Economic and Monetary Affairs Commissioner Joaquin Almuniaforecast that Italy's deficit in 2007 will be 2.9% of GDP, thus back below the 3% threshold set by theeuro's stability and growth pact.
For this year, however, the EC report said Italy's deficit will hit 4.7%.
The report also said Italy's public debt will decline from 107.2% of GDP this year to 105.9% in
2007.
According to the EC autumn forecast, Italy's GDP this year will rise by 1.7% and in 2007 by 1.4%,
while inflation will be 2.3% in 2006 and 2% next year.
The EC also predicted that the unemployment rate will be 7.1% this year and 7% in 2007.
The forecasts from the EC were in some cases more optimistic than those the government made in the 2007 budget currently before Parliament.
The Italian government has forecast GDP growth at 1.6% this year and 1.3% in 2007.
The forecast for the 2007 deficit, however, was more optimistic in the budget, 2.8%.
Last month, the definitive report from the EU's statistics bureau Eurostat said that Italy's budget
deficit in 2005 stood at 4.1% of GDP.
The deficit calculation was the same as forecast by the Italian government in April.
According to Eurostat, Italy's public debt in 2005 climbed to 106.6% of GDP, compared to the Rome's calculation of 106.4%.
Italy's had a deficit of 3.4% of GDP in 2004, 3.5% in 2003 and 2.9% in 2002.
The public debt in Italy stood at 103.9% in 2004, 104.3 in 2003 and 105.6% of GDP in 2002.
The International Monetary Fund in September predicted that Italy's GDP this year will rise by 1.5% and in 2007 by 1.3%, while the budget deficit will be 4% of GDP this year and 4.1% next year.
IMF inspectors are back in Italy to draw up a new outlook.
Both the Organization for Economic Cooperation and Development (OECD) and Italy's independent research institute ISAE have recently both forecast 1.8% growth for Italy.
If their predictions are correct, it will be the Italian economy's best performance since 2001.
