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Portugal's economic growth forecast revised up

Xinhua, May 6, 2015 Adjust font size:

Portugal's economic recovery is "gathering momentum," an official forecast by the European Commission revealed on Tuesday.

The European Commission said it revised upward its forecast for the Portuguese economy this year to 1.6 percent of GDP, in line with the government's forecast, following 0.9 percent growth in 2014.

"Economic growth is gathering momentum in Portugal thanks to improved domestic demand and strong exports," the commission's Spring Economic Forecast reads.

"Most consumer confidence indicators, as well as data on car sales and on debit and credit cards purchases in the first quarter of 2015 point to a continuation of the strong domestic demand performance," the report adds.

Private consumption will be supported thanks to "low oil prices, an improved labor market, a gradual pick-up of wages and, albeit to a lesser extent, the burden reducing reform of the personal income tax."

The Brussels-based commission also slightly improved its forecast for the country's budgetary deficit in 2015, which is expected to stand at 3.1 percent, a percentage point lower than its forecast in February.

But the figure falls short of the bloc's 3 percent deficit rule and surpasses the Portuguese government's target of 2.7 percent of GDP for this year.

The commission predicts the Portuguese economy will grow 1.8 percent of GDP in 2016, two percentage points below the government's latest projections.

Portugal's Minister of Finance Maria Luis Albuquerque on Tuesday said she was confident in the government's forecast and rejected the commission's claims that the country was lagging on reforms.

"They are increasingly getting closer to our forecast," Albuquerque said at a conference at the London School of Economics.

"They say we have lost our reforming spirit. We don't agree with that opinion," she added. "We are continuing to approve measures and sustaining a reform effort."

The commission also points out that there is a "risk" to the final headline deficit figure relating to the "statistical recording" of support for Banco Espirito Santo, which had to be rescued by the state in a 4.9-billion-euro (about 5.5 billion U.S. dollars) bailout plan.

Portugal was bailed out of a sovereign debt crisis by the European Commission, the International Monetary Fund and the European Central Bank in 2011, when the country signed a 78-billion-euro rescue package.

Left-wing parties have criticized the country for the harsh austerity imposed under that program which they say has impoverished the country.

The European Commission forecasts the country's public debt to fall to 124.4 percent this year from 130.2 percent last year, and to 123 percent in 2016.

Portugal's unemployment rate is forecast to decline to 13.4 percent in 2015 and to 12.6 percent in 2016. Endit