MILAN: Italy must undertake structural reforms to boost its slow growth rate and further reduce its deficit, said the OECD, which also reduced on Monday its forecast for Italy's 2011 growth to 1.2 percent.
In its latest economic survey of Italy, the Organisation for Economic Cooperation and Development also warned, with bond markets jittery and a high debt level, that it was "crucial" that Rome brings its budget back into balance.
Calling the strength of Italy's recovery from the global economic crisis uncertain, the OECD said "it would be wise to plan for no more than the rather sluggish growth seen in the decade prior to the crisis."
The OECD trimmed its 2011 growth forecast for Italy to 1.2 percent from the 1.3 percent. The Italian goverment last month revised down its growth forecast to 1.1 percent from 1.3 percent.
Italy managed 1.3 percent growth last year.
The OECD kept its 2012 growth forecast for Italy at 1.6 percent.
The slow growth rate has hindered the recovery from the crisis, which according to the OECD Italy will manage in 2014, seven years after it began.
Given Italy's sluggish growth "the priority remains structural reforms to increase growth potential," said the OECD, which provides economic analysis and advice to its 34 members.
But "with bond markets having become more sensitive to sovereign risk, action to bring the budget toward balance remains crucial," it added.
Italy has one of the highest debt levels in the OECD, which the organisation expects to peak this year at 119.2 percent of gross domestic product (GDP) according to the EU's calculation methods.
The OECD called the Italian government's fiscal plans "prudent" and noted that the Italian government recently announced additional measures to bring the budget nearly back to balance by 2014.
Italy's public deficit came in at 4.6 percent of GDP last year.
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