Italy should hold back its competitive lost and recover financial health so that it will not miss the economic recovery, the Organization for Economic Cooperation and Development (OECD) said Tuesday in its biannual economic outlook.

"The sustainability of the recovery depends on reversing highly unfavorable trends in international competitiveness and public debt," the OECD said, adding that in Italy "growth is projected to slow in the next few quarters".

Italy registered a growth obviously weaker than its partners in the euro area for years. The Italian economy went out of the recession in Spring but will slightly grow by 0.2 percent this year and might expand by 1.1 percent in 2006, and 1.5 percent in 2007, the OECD said.

The Paris-based organization forecast that the eurozone economy would grow by 1.4 percent this year rising to 2.1 percent next year and 2.2 percent in 2007.

During the last 10 years, Italy has lost nearly 40 percent of its part in the export market. Since 2000, its unitary cost of manufacturing labor force has increased by 30 percent, faster than in Germany, said the OECD.

The organization that groups 30 developed countries suggested Italy to open its services sectors to competition in order to regain competitiveness.

Italy has promised to bring public deficit to under the ceiling of 3 percent of gross domestic product (GDP) set for the euro area by 2007 and has predicted its public deficit at 4.3 percent this year and at 3.8 percent next year.

The OECD said that even assuming the success of the corrective measures, it estimated the Italy's public deficit at 4.2 percent of GDP in 2006 and it could rise to 4.75 percent of GDP in 2007 without further measures.

It warned the country of an increase of public debt in 2005 to amount to 110 percent of GDP in 2006.

"The rapid rise in debt, and the risk of even greater than projected fiscal slippage, could provoke a market reaction and higher debt service burden," it said.

Source: Xinhua