The Italian economy will grow by 1.2% this year, national statistics bureau ISTAT said on Tuesday, raising a previous projection of 0.4% made in December on the back of a stronger than expected start to the year.

In its twice-yearly economic outlook report, ISTAT forecast that gross domestic product in the euro zone's third largest economy will increase next year by 1.1%.

It said growth this year and next will be driven largely by firm domestic demand, while trade flows will offer only marginal support.

(Reporting By Gavin Jones)