ROME Italy's biggest business lobby Confindustria said on Tuesday the country will not pull out of recession until the end of next year, and that uncertainty about the outcome of elections in two months time is blurring the economic outlook.
The euro zone's third-biggest economy will not grow until the fourth quarter of 2013, when it will expand by 0.2 percent, Confindustria's research office predicted. Italy fell into recession in the middle of last year.
"The Italian outlook remains heavily dependent on the difficulties in forecasting the outcome of the next elections," the lobby said in a report.
Italy is now heading for a parliamentary vote, most likely in February, after Prime Minister Mario Monti said he would resign as soon as next year's budget is passed. The centre-left Democratic Party (PD) is leading in the polls, but may struggle to gain a clear majority in the upper house.
Confindustria revised up slightly its growth forecast for this year to -2.1 percent from -2.4 percent previously, while it said 2013 growth would drop by 1.1 percent, almost double its previous forecast. The economy will grow 0.6 percent in 2014, the lobby said.
Confindustria's previous forecasts were made in September.
The deficit will also be higher than previously forecast, with this year's at 2.3 percent of gross domestic product, compared with 2.1 percent previously. That's still lower than the government's 2.6 percent of GDP forecast.
In 2013, the deficit will be 1.9 percent of GDP, compared with the government's 1.8 percent forecast.
Debt will total 125.9 percent of GDP this year, 126.7 percent in 2013, and 125.4 percent in 2014, the lobby estimated.
(Reporting by Alberto Sisto. Writing by Steve Scherer.)