Confindustria said in a report that gross domestic product would shrink 1.9 percent in 2013, compared to a previous forecast of a 1.1 percent decline.
It said Italy would begin recovering in the last quarter of 2013 and see a return to growth in 2014, but warned progress would be "very slow" and cut the growth estimate for next year from 0.6 percent to 0.5 percent.
While it said indicators such as figures for car sales and family confidence suggest "we have hit bottom," Confindustria ratched up its 2013 debt to GDP ratio forecast from 126.4 percent to 131.7 percent and suggested it would rise to 132.4 percent in 2014.
There was glum news on the public deficit front as well, with the business lobby saying Italy's deficit would rise from 1.9 percent to 3.0 percent in 2013, hitting the European Union recommended ceiling.
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