ROME Italy's economy rose 0.6% in the first quarter, boosted by strong domestic demand, national statistics bureau ISTAT said on Wednesday, lifting a preliminary estimate of a 0.5% rise in gross domestic product.

On a year-on-year basis, GDP in the January-March period was revised up to 1.9% compared with the 1.8% printout in ISTAT's flash estimate on April 28.

ISTAT confirmed growth in the fourth quarter to show a quarter-on-quarter fall of 0.1%, but revised up the year-on-year rate to 1.5% from a previous 1.4%.

The breakdown of first quarter components showed consumer spending rising 0.3%, government spending 0.2% and investments 0.2%, while inventories and exports each dipped 0.1%, ISTAT said.

It said so-called "acquired growth" after the first quarter stood at 0.9%, meaning that even if GDP is flat in each of the next three quarters of this year, full-year growth will be up 0.9% from the year earlier.

Last month Rome raised its forecast for 2023 full-year GDP growth to 1% from 0.6% but cut next year’s forecast to 1.5% from a previous 1.9%. The outlook is clouded by the impact of higher interest rates set by the European Central Bank to try to tame inflation.

Prime Minister Giorgia Meloni's right-wing government is also facing difficulties in meeting policy conditions set by the European Commission for the transfer of billions of euros of COVID-19 pandemic recovery funds, intended to support growth.

At the same time, the government has made little progress in actually investing the sums it has already received.

ISTAT gave the following details on contributions to quarterly growth in the first quarter of 2023 and the fourth quarter of 2022.

PERCENTAGE POINT CONTRIBUTIONS TO Q/Q GROWTH

Q1 2023 Q4 2022

Final domestic demand 0.7 -0.6

-Final national consumpton 0.5 -0.9

-Consumer spending 0.3 -1.0

-Government spending 0.2 0.1

-Gross Fixed Investment 0.2 0.3

Inventory Changes -0.1 -1.0

Net Exports -0.1 1.5

GDP 0.6 -0.1

(Reporting by Crispian Balmer)