Italy, among the countries worst hit by the coronavirus pandemic, expects to run a large budget deficit this year but it will help fund strong growth in 2021, the government’s outlook showed on Tuesday.

This year’s budget deficit, the shortfall between government revenues and spending, will come in at 10.8 per cent of GDP, falling to seven per cent next year.

Prime Minister Giuseppe Conte’s cabinet signed off on the budget outlook in the early hours of Tuesday.

Having suffered nearly 36,000 coronavirus deaths, Italy should see the economy grow a sharp 6.0 per cent in 2121, helped by a more than €200 billion EU-backed aid package, it said.

Some 37 per cent of the funds will go into green projects

Growth in 2022 will ease back to 3.8 per cent, followed by 2.5 per cent in 2023, it added. Bank Intesa Sapaolo said in a note there had to be doubts about such “optimistic” figures.

The government has unveiled plans for a massive modernisation programme to put the economy on a firm foundation after years of languishing in the doldrums, made worse by the near-complete shutdown during the worst of the coronavirus outbreak earlier this year.

Prime Minister says some 37 per cent of the funds will go into green projects, as sought by Brussels, to pave the way for a more sustainable economy less dependent on traditional fossil energy sources.