By Giuseppe Fonte and Gavin Jones

ROME (Reuters) – Italy has cut its estimates of the impact on economic growth of European Union funds and reforms linked to its stimulus package, a Treasury document released on Friday, saying the money will be spent more slowly.

Italy is eligible for more than 200 billion euros ($216.82 billion) in grants and cheap loans from the EU Fund, making it the biggest beneficiary of the 750 billion prize pool. set up to help the 27 countries of the bloc recover from the economic fallout from the COVID-19 pandemic.

The Treasury’s annual Economic and Financial Document (DEF) says the government now expects to be able to spend the money less quickly than it envisioned when it sent its investment and reform recovery plan to Brussels in April last year.

The positive impact on growth is reduced by 0.3 percentage point in 2022, 0.4 point in 2023, 0.4 in 2024, 0.3 in 2025 and 0.4 in 2026.

According to the latest forecasts, gross domestic product (GDP) will be 3.2% higher in 2026 than it would have been without the Recovery Fund. This compares to a previous estimate of a 3.6% increase.

The downward revision reflects “different and slower momentum in the overall spending program than previously expected,” the Treasury said without providing further details.

The DEF also says that of an additional Italian growth support fund worth €30.6 billion, almost a third (€9.5 billion) will now only be spent after 2026. .

The revisions come as the war in Ukraine worsens economic prospects across the euro zone.

The DEF cut Italy’s GDP growth estimate for this year to 3.1% from a 4.7% projection made in September.

This projection remains more optimistic than those of several independent forecasters. Employers’ lobby Confindustria has estimated 2022 growth at just 1.9%.

Italy, whose two main banks have significant exposure to Russia and which relies heavily on Moscow for its energy needs, could see its growth prospects deteriorate further if the West increases its sanctions against Russia following its invasion. from Ukraine.

In a worst-case scenario, assuming an embargo on Russian gas and oil until 2023 and severe supply shortages, the DEF estimates growth of just 0.6% in 2022 and 0.4% the next year.

($1 = 0.9224 euros)

(Editing by Bill Berkrot)