Italy's economy will contract 0.4 percent in 2014, the Organization for Economic Cooperation and Development (OECD) forecast in a report released Monday.
The OECD cut its growth forecast for other big developed countries in Europe. Germany and France were expected to growth 1.5 percent and 0.4 percent respectively this year, compared to 1.9 percent and 0.9 percent in the previous forecast.
However, it was Italy's forecast that was modified the most. The previous OECD estimate released in May predicted 0.5 percent growth for Italy.
"The recovery in the euro area has remained disappointing, notably in the largest countries: Germany, France, and Italy," OECD wrote in its report.
"Confidence is weakening again and the anemic state of demand reflects in the decline of inflation, which is close to zero in the whole region and negative in several countries," it added.
Gross domestic product (GDP) of the European Union (EU) was expected to grow 0.8 percent in 2014 compared to 1.2 percent forecast in the previous report. This was mainly due to increasing geopolitical risks and low European inflation, the OECD explained.
Italy's growth forecast in 2015 was also cut to just 0.1 percent against 1.1 percent predicted in May. Germany and France were expected to expand by 1.5 percent and 1 percent in 2015, respectively.
As such, Italy would be the only economy in recession among those of the Group of Seven (G7) countries this year, according to OECD.
"Given the low-growth outlook and the risk that demand could be further sapped if inflation remains near zero, or even turns negative, the OECD recommends more monetary support for the euro area," the report stated.
OECD welcomed the latest action taken by the European Central Bank, which recently cut the benchmark interest rate and negative deposit rate, and announced a stimulus program to buy asset-backed securities and euro-denominated covered bonds, in an attempt to boost lending.
However, OECD urged more aggressive action. "Further measures, including quantitative easing, are warranted. Given the weakness of demand, European countries should also use the full degree of flexibility available within the EU's fiscal rules," it said.
The OECD's Interim Economic Assessment was an update of a biannual forecast for economic growth worldwide.
On Monday, credit ratings agency Standard & Poor's also lowered its outlook for Italy's growth to zero percent for 2014 compared to 0.5 percent predicted in June./.