The Bank of Portugal said private consumption will have a more important role in the country’s economic recovery than previously anticipated.
Consumer spending will rise 2.6 percent this year, more than the 2.2 percent projected in June, the Lisbon-based central bank said in a statement on Wednesday. It also lifted its forecasts for imports and exports, which it sees expanding 7.9 percent and 6.1 percent, respectively.
The institution kept its forecast for growth in gross domestic product unchanged at 1.7 percent, following an expansion of 0.9 percent in 2014. The 2015 inflation projection remains at 0.5 percent.
Portugal’s government is relying on exports and investment to drive growth this year as Prime Minister Pedro Passos Coelho continues to cut spending to meet budget targets. Coelho won elections on Sunday, though he no longer has the majority in parliament that helped him lead Portugal through a bailout program from the European Union and International Monetary Fund.
“It’s important that national authorities comply with European budget rules, which can ensure a sustained reduction of the current level of debt as a percentage of GDP and reduce that latent vulnerability of the Portuguese economy,” the Bank of Portugal said.
The European Commission forecasts Portugal’s debt-to-GDP ratio will start declining this year. The Portuguese government projects economic growth to accelerate through 2017 from 1.6 percent this year. It targets a budget deficit of 2.7 percent of GDP in 2015, below the European Union’s 3 percent limit.