The Italian economy this year will be practically stalled with GDP rising by 0.1%, compared to 1.5% in 2007, the industrial employer's association Confindustria said on Thursday.
Looking at 2009, the Confindustria report predicted that GDP would inch up by 0.6%.
Confindustria also forecast that earnings will be virtually unchanged in 2008 because the expected 3.5% hike in salaries will be erased by inflation running this year at 3.4%.
The report added that the situation will be the same in 2009.
Looking back at the past ten years, Confindustria said that while the rise in real salary buying power had been ''modest'', it remained higher than the increase in productivity.
The employers association defended the government's decision to set planned inflation at 1.7% this year and 1.5% in 2009 on the grounds that this was ''credible and coherent with the need not to lose further competitiveness''.
In any case, Confindustria predicted that inflation will begin to cool in the second half of this year.
According to Confindustria, ''the erosion of consumer buying power can only be recovered through greater competition and efficiency, deregulating the economy and improving infrastructures''.
The Confindustria report said that consumer spending this year will climb by 0.2%, over the 1.4% jump in 2007.
Italy's budget deficit in 2008 will rise to 2.5% of GDP, compared to Confindusria's previous forecast in December of 2.2%, and then inch up to 2.6% in 2009.
The public debt will continue to decline, Confindustria said, dipping to 103.2% of GDP this year and 102.7% next year.
In its report, Confindustria confirmed that, for the first time in ten years, unemployment was back on the rise due to a ''modest'' increase of 0.1% in the number of new jobs this year and 0.4% rise in 2009.
Confindustria put this year's unemployment rate at 6.4%, up from 6.1% in 2007, while in 2009 it should climb to 6.5%.
