ROME—The Italian government confirmed on Tuesday its expectation that the eurozone’s third-largest economy will exit its longest postwar recession this year, with growth seen accelerating in the next two years.

In its updated economic forecasts, the government of Prime Minister Matteo Renzi now expects gross domestic product to grow by 0.7% in 2015, above a previous projection of 0.6%. The government sees GDP growing by 1.4 % in 2016 and 1.5% in 2017.

“We preferred to remain cautious,” Mr. Renzi said at a news conference. “If possible, we will further reduce taxes in 2016, with the next budget law.”

The Italian economy, which had contracted for three years in a row since 2012, is showing the first signs of recovery, with business and consumer morale lifted by the European Central Bank’s recent measures, a weak euro and relatively cheap energy prices.

Economists, however, worry that the beneficial impact of the ECB’s quantitative easing will be eroded by Italy’s competitiveness gap, as the long drawn-out recession, uncertain outlook and difficult credit conditions continue to hamper the ability of Italian firms to invest.