ROME (REUTERS) - The International Monetary Fund (IMF) on Thursday said Italy's economic outlook remained weak and called on Italian Prime Minister Enrico Letta's government to accelerate its reform efforts.

At the end of its annual Clause IV consultations with Italy, the IMF said the euro zone's third largest economy would contract by 1.8 per cent this year, down from its previous projection of a 1.5 per cent fall.

Next year will see growth of 0.7 per cent, the Fund said in its concluding statement.

Italy's reform efforts need to be complemented at the European level, the Fund said, urging direct assets purchases by the European Central Bank and more long term cheap loans "of considerable tenor" to euro zone banks.