* Q1 GDP 0.5% q/q vs forecast of 0.2%
* Domestic demand, exports both pushed Q1 growth
ROME, April 28 (Reuters) - Italy's economy grew by 0.5% in the first quarter from the previous three months, preliminary data showed on Friday, a stronger recovery than expected after a slight contraction at the end of last year.
On a year-on-year basis, first quarter gross domestic product in the euro zone's third largest economy was up 1.8%, ISTAT said.
A Reuters survey of 29 analysts had forecast a 0.2% quarterly increase and a 1.4% rise compared with the year earlier.
ISTAT said the first quarter growth was supported by both domestic demand and exports.
It gave no numerical breakdown of components with its preliminary GDP estimate, but said industry and services had expanded, while agriculture stagnated.
Data for the fourth quarter of last year was unrevised, showing a 0.1% quarter-on-quarter fall and a 1.4% rise year-on-year.
Looking ahead, the outlook has been clouded by European Central Bank interest rate hikes aimed at curbing inflation.
Giorgia Meloni's right-wing government is also facing growing 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.
Throughout last year the economy held up consistently better than analysts had forecast despite headwinds from the war in Ukraine and sky-high energy costs, and grew by 3.7% over the year as a whole.
The Treasury this month raised its forecast for 2023 growth to 1.0% from 0.6% but cut next year’s forecast to 1.5% from a previous 1.9%.
ISTAT gave the following details on Italian GDP in the last three quarters:
Q1 Q4 2022 Q3 2022
Q/Q (pct change) 0.5 -0.1 0.4
Y/Y (pct change) 1.8 1.4 2.5
r=revised
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