ROME (Reuters) - Italian employers group Confindustria raised its economic growth forecasts on Wednesday, but warned that a fragile recovery in the country could be threatened by political instability.

Confindustria said its 2016 economic growth forecast - raised to 0.9 percent from 0.7 percent in September - did not take into account a government crisis caused by the resignation of former Prime Minister Matteo Renzi.

"Political uncertainty represents a significant risk to the downside," Confindustria said in the report, adding that instability "would weaken ... incentives to invest."

Even though changes of government are familiar in Italy, the group said, "this time it is happening in a context of reduced economic wellbeing, and social and political disintegration that has no precedent in the post-war era."


The last government forecast for this year, made before Renzi lost a referendum on constitutional reform on Dec. 4, was for 0.8 percent growth in 2016.

Confindustria said in July that if the 'No' vote won the referendum, GDP would shrink by four percentage points in 2017-2019, and investments would fall by more than 20 percent.

The lobby group, which had supported Renzi's government, said in Wednesday's report it expected GDP to grow by 1 percent in 2018, when the deficit-to-GDP ratio would hit 2.6 percent.

It pared down its previous forecasts for Italy's vertiginous public debt to 132.7 percent of output in 2016 and 133.4 percent in 2017.

(Reporting by Antonella Cinelli, writing by Isla Binnie; Editing by Hugh Lawson)

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