(Bloomberg) -- Italy’s economy was weak in the third quarter and isn’t expected to significantly improve in the last three months of the year, according to the country’s main business association.

“In addition to the drop in industrial and business activities, there is a setback in the service business,” Confindustria said in a report published on Saturday. “ECB interest rates keep rising, credit and liquidity are falling, energy costs continue to grow. All this affects consumption and investments, with foreign demand fading away.”

Italy’s economy unexpectedly contracted by 0.3% in the second quarter from the previous three months. In its latest budget projections approved earlier this week, Italy’s government put economic growth at 0.8% in 2023 and at 1.2% for 2024. 

Last Wednesday, Italian Finance Minister Giancarlo Giorgetti blamed European Central Bank interest rate hikes and Russia’s invasion of Ukraine for the country’s slower growth. The right-wing government of Prime Minister Giorgia Meloni risks confrontation with Brussels after postponing the attainment of a European Union budget deficit target until 2026 as it struggles to avoid a recession.

Read More: Meloni, Macron Challenge EU as Budgets Defying Deficit Limit

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