Italy is planning to confirm this year’s budget deficit target at 5.6% of national output, according to sources, despite pressure to increase borrowing as the growth outlook worsens.

Prime Minister Mario Draghi’s government is preparing to cut its growth forecast for 2022 to 2.8% from a prior 4.7% target set in September, amid soaring energy costs and chaos fuelled by the war in Ukraine.

On confirming the 5.6% deficit target, looking at current trends, the deficit is on course for 5.3%, Reuters reports. This allows room for additional spending of between €4 billion - €5 billion without hiking the present target. The 2021 deficit stood at 7.2%.

The Treasury will unveil the figures next week in its annual Economic and Financial Document (DEF).

The Prime Minister has been faced with ongoing pressure to approve a new spending package to bolster economic growth.

There may still be minor changes to the figures as the Treasury awaits final public finances data for Q4 2021, due to be published by the Italian National Institute of Statistics on 5th April, the sources told Reuters news agency.

The government sees 2023 GDP up by around 2.5%, the sources said, a fall from the official 2.8% target made last September. The forecasts are founded on an unchanged policy scenario.

Italy grew 6.6% in 2021 following the record 9.0% contraction the year before, as a result of Covid lockdowns.

In addition, industrial output in Italy declined 3.4% in January compared to December, the sharpest fall in over a year. Consumer and business sentiment also both plunged this month.

The war in Ukraine has intensified the soaring energy costs and led to agricultural supply issues. Up to now, the government has allocated over €19 billion since July to attempt to reduce the increase in energy and fuel prices.