ROME (Reuters) - Italian employers lobby Confindustria said on Wednesday the country's economy would shrink slightly more than it previously forecast in 2014, and would return slowly to growth the following year.
Gross domestic product will fall this year by 0.5 percent after declines of 1.9 percent in 2013 and 2.4 percent in 2012, Confindustria said, compared with its previous forecast for a 0.4 percent contraction.
"It is still unclear how 2014 will finish and what inheritance it will leave behind for 2015," Confindustria economists said, warning that growth over the next two years would "not reach a particularly strong rate".
The economy should grow by 0.5 percent in 2015 and 1.1 percent in 2016, Confindustria said. Italy's government currently forecasts a 0.3 percent contraction this year, and 0.6 percent growth in 2015.
Italy's public debt, proportionately the second highest in the euro zone after Greece's, will total 132.2 percent of output this year, Confindustria said.
The debt forecast is lower than the lobby's previous 137 percent estimate due to a series of methodological changes in calculating government accounts. The debt should total 133.8 percent of output next year before a tiny fall to 133.7 percent in 2016, the lobby group said.
Confindustria said Italy would keep a promise it has repeatedly made to the European Union and squarely hit the EU's budget deficit limit of 3 percent of output this year.
The deficit should fall to 2.7 percent in 2015 and 2.5 percent in 2016, Confindustria said.
A recent sharp fall in the price of crude oil could lead to Italy saving 14 billion euros ($17.4 billion) a year, Confindustria said, which would translate into a 0.3 percent boost to GDP in 2015 and a further 0.5 percent in 2016.
Reporting by Francesca Piscioneri, writing by Isla Binnie; editing by Agnieszka Flak