MILAN, Italy, Oct 3, 2025 (BSS/AFP) - The Italian government said Thursday it was trimming its growth estimates for this year and the next, but said its deficit-to-GDP ratio was currently at the EU-mandated threshold of three percent.

For this year, gross domestic product (GDP) will rise by 0.5 percent and by 0.7 percent next year, the economy ministry announced in a press release following a cabinet meeting.

Rome had previously planned for 2025 growth of 0.6 percent and 2026 growth of 0.8 percent.

Previous forecasts already factored in a decline in exports linked to new US tariffs, with Italy being Europe's third-largest exporter to the United States.

"These figures are based on very conservative estimates, which are currently also affected by the international geopolitical context," the ministry wrote.

The public deficit was currently three percent for 2025 and was expected to reach 2.8 percent in 2026, according to the ministry.

That would put Italy in compliance with EU regulations that call for the deficit-to-GDP ratio to fall below three percent.

After a deficit of 3.4 percent of GDP in 2024, the Italian government had previously forecast a deficit of 3.3 percent in 2025 and 2.8 percent in both 2026 and 2027.

The right-wing government of Giorgia Meloni is pursuing a policy of fiscal austerity and has halved its public deficit in just one year.

But Italy remains much more indebted than other European countries such as France, with debt at 135 percent of gross domestic product (GDP) compared to 114 percent for its neighbour.

And its medium-term outlook is gloomy, with low productivity and an ageing population.

The government is due to present these forecasts to Italian parliamentarians on October 9, before they are forwarded to the European Commission.

Despite the sluggish growth in the euro zone's third-largest economy, Fitch upgraded Italy's rating last month, citing political stability and "increased confidence in Italy's fiscal trajectory".