Bank of Portugal Cuts 2016 Growth Forecast on Drop in Investment

Portugal’s economy will expand less than previously forecast as investment drops, the country’s central bank said.

Gross domestic product will increase 1.1 percent this year, slowing from 1.6 percent in 2015, the Lisbon-based Bank of Portugal said in a statement on Friday. In June, the central bank forecast growth of 1.3 percent for 2016.

Prime Minister Antonio Costa’s government has been more optimistic about economic prospects, forecasting growth of 1.8 percent for this year. Sworn in at the end of November, his minority Socialist government is reversing state salary cuts faster than the previous administration proposed, while increasing indirect taxes.

Government spending will rise 1 percent in 2016, the central bank said. Investment will drop 1.8 percent this year, compared with a June forecast for a 0.1 percent rise. Inflation will be 0.7 percent this year and unemployment will fall to 11.2 percent from 12.4 percent in 2015.

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