ROME—The Italian economy is struggling to emerge from a prolonged recession and Prime Minister Matteo Renzi needs now to firmly push through his bold reform agenda to address Italy's structural weaknesses and unleash the country's growth potential while continuing to reduce its huge debt load, the International Monetary Fund said Thursday.

In its annual staff report completed at the end of August after bilateral consultations with Rome, the IMF forecast a 0.1% drop in Italy's gross domestic product in 2014, highlighting the...