Italy to hike 2020 budget deficit to around 11.6% of GDP - source

ROME (Reuters) - Italy will raise its 2020 budget deficit to around 11.6% of gross domestic product from the current 10.4% goal, a senior government official told Reuters, as Rome readies new measures to soften the impact of the coronavirus crisis.

A new spending package of 20 billion euros (18 billion pounds) will be approved in July, the source said, asking not to be named because of the sensitivity of the matter.

The Treasury declined to comment.

The government began the year with a deficit target of 2.2%, after the 1.6% recorded in 2019 which was the lowest in 12 years.

Those plans have been upended by the virus outbreak which has pushed the euro zone's third largest economy into a deep recession, with most forecasters expending gross domestic product to contract by at least 9%.

The new spending package will supplement the income of workers temporarily laid off and support local authorities whose tax revenues were hit by the lockdown, the source said.

The extra borrowing will also make up a revenue shortfall stemming from a cut in the pension contributions that must be paid by companies on behalf of new hires.

Prime Minister Giuseppe Conte has said some of the financing for the overall stimulus will come from the EU's lending scheme, known as "SURE", to mitigate unemployment risks among member states hit by the coronavirus pandemic.

A second source said the government will also probably finance incentives for people to buy low-emission cars.

Ahead of the upcoming package, Rome has so far pledged up to 180 billion euros of economic help for families and firms, including state guarantees on banking loans, but much less is likely to be actually spent.

(editing by Gavin Jones)