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UPDATE 1-Italy sets 2021 GDP target at 6%, deficit/GDP at 9.5% - sources

(Adds details, background)

ROME, Sept 28 (Reuters) - Italy forecasts economic growth of 6% this year following the record contraction of 8.9% in 2020, two government sources said on Tuesday, while the budget deficit is targeted at 9.5% of gross domestic product (GDP).

The 6% GDP growth forecast is an upward revision from a projection of 4.5% set in April, while the new deficit goal of 9.5% is a sharp reduction from the previous 11.8% estimate.

The lower deficit will drive Italy’s debt-to-GDP ratio below the previous 159.8% goal, but it will still be above the 2020 level of 155.6% and mark a new post-war record, the sources said.

They were not immediately able to give the new target, but said the debt would be targeted to follow a downward trend over the next few years.

The new forecasts were agreed at a meeting of key coalition figures on Tuesday and will be formalised in the government’s twice-yearly Economic and Financial Document (DEF) to be approved by the cabinet on Wednesday.

The DEF will set new economic and public finance targets for 2021-2024.

Economy Minister Daniele Franco told Tuesday’s meeting the forecasts in the DEF would allow additional spending of up to 1 percent of GDP, or around 16 billion euros, between 2022 and 2024, sources present at the meeting said.

The document will form the framework for Rome’s 2022 budget to be presented in mid-October.

The DEF will target GDP growth of more than 4.5% in 2022, one of the sources said. Rome set a 4.8% goal in April. (Reporting by Giuseppe Fonte, editing by Gavin Jones)

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