By Giuseppe Fonte and Gavin Jones

ROME (Reuters) – The Italian government's 1% economic growth target for this year will be more difficult to reach following downward revisions by national statistics bureau ISTAT, Economy Minister Giancarlo Giorgetti stated on Tuesday.

ISTAT recently lowered the year-on-year GDP growth rates for the first and second quarters, indicating that the so-called "acquired growth" at the end of the second quarter now stands at 0.4%, down from the previously estimated 0.6%.

Consequently, should there be zero quarterly growth in the third and fourth quarters, full-year growth would be just 0.4% year-on-year.

Giorgetti remarked that these revisions make achieving the 1% growth target more challenging this year during an address to lawmakers on Italy's multi-year budget plan.

He noted that while the new data could impact the final reading for 2024, it does not raise concerns for subsequent years. Giorgetti anticipates possible upward revisions to the GDP data for 2023 and the beginning of 2024 in the future, without specifying details.

The government’s budget plan is founded on extremely conservative macroeconomic estimates, and Giorgetti assured a careful approach to public finances.

Additionally, he mentioned that Italy's adjustment path aligns with the reform of European Union fiscal rules. This year, Italy entered an Excessive Deficit Procedure by the EU, with its 2023 budget deficit reaching 7.2% of GDP, the highest in the euro zone.

Rome projects this year’s deficit to decrease significantly to 3.8% of GDP, tapering down to an estimated 3.3% in 2025, and aiming for 2.8% in 2026, below the EU's 3% limit.

Giorgetti expressed confidence in achieving a debt-to-GDP reduction that could remove Italy from the Excessive Deficit Procedure starting in 2027.

Italy’s budget plan is also expected to outline reforms across various policy sectors, including initiatives for a more efficient tax system. These reforms aim to ensure EU approval for a seven-year budget adjustment rather than a four-year timeframe.

Among the proposed measures, Giorgetti expressed the intent to increase state estimates of house values for tax purposes, as current evaluations are often outdated, limiting tax revenues and enabling undue access to tax breaks. The review will particularly focus on properties that have received state-funded renovations, such as through the Superbonus scheme.