Bank of Portugal Raises 2014 Growth Forecast on Consumption

Portugal’s economy will grow more than previously forecast this year as private consumption and investment increase, the country’s central bank said.

Gross domestic product will expand 1.2 percent in 2014, 1.4 percent in 2015 and 1.7 percent in 2016, after contracting 1.4 percent last year, the Lisbon-based Bank of Portugal said today in a statement. In December, the central bank forecast growth of 0.8 percent for this year and 1.3 percent for 2015.

“The recovery of economic activity expected over the projection horizon reflects the acceleration in domestic demand and the maintenance of a strong growth in exports,” the central bank said. “Economic activity in the public sector is assumed to decline further, albeit at a slower pace, reflecting the ongoing fiscal consolidation.”

Portugal emerged from its longest recession in at least 25 years in the second quarter of 2013 and Prime Minister Pedro Passos Coelho is trying to regain full access to debt markets with the end of the country’s 78 billion-euro ($108 billion) bailout approaching in May. Coelho still has to trim spending by 3.2 billion euros in 2014 to meet targets in the European Union-led aid plan after relying mostly on tax increases in 2013.

The government on Feb. 28 also forecast the economy will grow 1.2 percent in 2014, faster than a previous estimate for an expansion of 0.8 percent.

The Bank of Portugal today said it forecasts private consumption will increase 1.3 percent in 2014 after shrinking 1.7 percent last year, while public consumption will decline 0.9 percent. Investment will rise 1.8 percent in 2014 after dropping 6.6 percent last year. The bank projects inflation of 0.5 percent for this year and 1 percent for 2015.

Export growth will slow to 5.3 percent this year from 6.1 percent growth in 2013, while imports will increase 5.4 percent in 2014, the central bank said today. It predicts the current-account and capital-account surplus will widen to 3.3 percent of GDP this year and 3.7 percent in 2015.

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