The Italian government on Friday officially slashed its economic growth targets and upped its estimates of the country's deficit levels, but markets took the changes in stride, still buoyed by promises that the European Union (EU) would step in to keep borrowing costs low when necessary for the most troubled European economies.

In the latest estimates, the government predicted the economy would shrink 2.4 percent this year, double the previous estimated rate of contraction of 1.2 percent. The government also backed away from its prediction that growth would restart next year, lowering its forecast from a positive 0.5 percent growth figure in 2013 to a further contraction of 0.2 percent.

Deficit estimates are worsened, with new predictions that the government's deficit would be the equivalent of 2.6 percent of the country's gross domestic product (GDP), compared to the previous estimate of 1.7 percent. The government now expects the deficit to total 1.8 percent of GDP next year, and not 0.5 percent as previously predicted.

"There is no doubt about it: the health of the Italian economy based on macroeconomic figures is not good," said Javier Noriega, chief economist with Hildebrandt and Ferrar in Milan.

But despite the bad news, markets barely reacted. In mid-day trading on secondary markets, the yield on Italy's benchmark 10-year bonds was 5.03 percent, up very slightly compared to Thursday's close, but still far below its euro-era high of 7.55 percent from last November and from its more recent peak of 6.61 percent on July 24.

Similarly, shares on the Italian Stock Exchange in Milan traded higher all day Friday, dipping briefly when the macro-economic news was made official around mid-morning, but staying in the black for the entire session, with blue chips trading around one percent higher than on Thursday.

Part of the reason for the collective shrug from financial markets, according to Noriega, is that the news was more or less expected and may have already been priced into securities before Friday's official announcement. But the biggest reason, he said, was still probably the decision from European Central Bank (ECB) head Mario Draghi from earlier this month to intervene directly on bond markets in order to keep yields low.

Italy and Spain -- seen as the two EU economies most likely to need such help -- have said they would not request aid unless there was a sudden and unexpected surge in bond yields. But analysts said the ECB's promise was still very important because it helped to significantly reduce worst-case scenario risks for bond investors.

"The statements from the ECB did not push Italian and Spanish bond yields into the neighborhood of Germany or even France, but it stabilized them, and that is key because it helped Italy whether some generally negative macroeconomic news that was just released," Noriega said.

Italy, which has one of the highest GDP-to-debt levels in the world, risked falling victim to the European debt crisis specifically because its debt levels were so high.

At an estimated 123.3 percent of GDP now, debt levels remain high. But the figures released Friday at least contained the silver lining of a likely steady drop in debt levels as a percentage of GDP, predicting that despite slow economic growth that the country's debt would drop to 122.3 percent of GDP at the end of 2013.