The Portuguese government raised its growth forecast for 2015 and said it sees the economy accelerating in the following two years.
Gross domestic product will expand 1.6 percent this year, more than a previous estimate for 1.5 percent growth, 2 percent in 2016 and 2.4 percent in the next three years, Finance Minister Maria Luis Albuquerque said in Lisbon today after the government approved its stability program.
Portugal, which received a bailout from the European Union and the International Monetary Fund in 2011, followed Ireland last year when it exited the aid plan without the safety net of a precautionary credit line. The government this year made an early repayment of part of its IMF loan after borrowing costs fell and the European Central Bank announced a bond-buying plan.
“We will adopt a more ambitious strategy for the early repayment of the IMF loans,” Albuquerque said. The government plans to ask its EU partners to carry out the early repayment of the remainder of its IMF loans, the minister said. The early repayments may result in estimated savings of 730 million euros in interest, according to Albuquerque.
The government reiterated it targets a budget deficit equivalent to 2.7 percent of GDP in 2015, below the EU’s 3 percent limit. The shortfall will narrow to 1.8 percent in 2016 and Albuquerque said Portugal will have a budget surplus of 0.2 percent in 2019. The Finance Ministry plans to gradually reduce an income tax surcharge, Albuquerque said.
The government, which faces elections in September or October, forecasts a debt-to-GDP ratio of 124.2 percent in 2015 and 121.5 percent in 2016.