ROME: Italy on Tuesday cut its economic output forecasts for this year and next, and raised its projections for the budget deficit, acknowledging that an unexpected slowdown in growth would hit government finances.

The update to the Treasury's Economic and Financial Document (DEF) approved by the cabinet lowered the 2016 growth outlook to 0.8 percent from 1.2 percent forecast in April, and cut next year's target to 1.0 percent from 1.4 percent.

The goal for the 2016 budget deficit was raised to 2.4 percent from 2.3 percent and hiked to 2.0 percent for next year from 1.8 percent. However, taking into account extra spending on immigration and earthquake reconstruction, that the government expects to exclude from EU calculations, Prime Minister Matteo Renzi said next year's deficit could climb to 2.4 percent.

In addition, the government said Italy's debt-to-GDP ratio would be 132.8 percent this year against a previous target of 132.4 percent, going back on a previous pledge to cut the ratio.

Copyright Reuters, 2016