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IMF cuts growth forecasts for Italy

The IMF lowered its 2016 and 2017 growth forecasts for Italyas the country's economy gradually recovers "from a deep and protractedrecession."

Growth is now projected to remain under 1% in 2016 and at about1% in 2017. The IMF's previous growth projections at May-end were 1.1% and1.25%, respectively, Reuters reported July 12.

The IMF said Italy's economic recovery "is likely to beprolonged and subject to risks" against a backdrop of significant structuralchallenges including low productivity and investment growth as well as highlevels of nonperforming loans and lengthy judicial processes that continue tostrain banks' balance sheets.

The country's public debt has edged up to close to 133% ofGDP, a level which the IMF said restricts fiscal space to respond to shocks.

"[F]inancial sector reforms are critical to entrenchfinancial stability and support the recovery," the IMF said, adding thatconcerns regarding the bail-inof retail investors "should be dealt with appropriately."

The country is negotiating with the EU to devise a plan to shore up itsstruggling banks in a way that would abide by the bloc's bank bailout rulesafter the U.K.'s Brexit vote piled fresh pressure on Italianlenders' share prices.