Bank of Portugal Raises 2014 GDP Forecast on Consumption

Portugal’s economy will grow more than previously forecast in 2014 fueled by private consumption, the country’s central bank said.

Gross domestic product will increase 0.8 percent next year and 1.3 percent in 2015, after contracting 1.5 percent in 2013, the Lisbon-based Bank of Portugal said today in its winter economic bulletin. The central bank previously forecast a 1.6 percent contraction for 2013 and growth of 0.3 percent for 2014.

“The projections for the Portuguese economy incorporate a profile of a gradual domestic demand recovery, limited by the continuing fiscal consolidation and private sector deleveraging processes,” the central bank said in a statement.

While Portugal emerged from its longest recession in at least 25 years in the second quarter, Prime Minister Pedro Passos Coelho still has to trim spending by 3.2 billion euros ($4.4 billion) next year to meet budget deficit targets. The government, which is trying to exit its European Union-led bailout program, relied mostly on tax increases this year.

The central bank now forecasts private consumption will increase 0.3 percent in 2014 compared with a previous projection for a 1.4 percent decline. Public consumption will decline 2.3 percent in 2014, while investment will rise 1 percent. Exports will climb 5.5 percent. The Bank of Portugal’s 2014 GDP forecast is in line with that of the government. The institution projects inflation of 0.5 percent for this year, 0.8 percent for 2014 and 1.2 percent for 2015.

The trade surplus is forecast to widen to 2.7 percent of GDP in 2014 from 1.7 percent in 2013, according to the central bank. It predicts a current and capital-account surplus of 2.5 percent of GDP in 2013 and 3.8 percent in 2014.

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