ROME: Italy expects its gross domestic product to drop by 4.2 percent this year before a slight rebound of 0.3 percent in 2010, the finance ministry said on Saturday.

The ministry, in an official report posted on its website, also forecast a budget deficit of 4.6 percent of GDP this year and in 2010, before dropping to 4.3 percent in 2011.

The government had previously forecast a two percent contraction of its GDP in 2009 and a budget deficit of 3.7 percent.