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Portuguese GDP expected to grow by 1.5 percent in 2016

Xinhua, March 31, 2016 Adjust font size:

Portugal's Gross Domestic Product will grow by 1.5 percent in 2016, the Bank of Portugal said on Wednesday.

The central bank said in a report regarding the country's economy forecasts for 2016-2018 that the economy will grow by a rate less than its previous estimate of 1.7 percent.

But it will grow by 1.7 percent in 2017 and 1.6 percent in 2018, the Bank of Portugal added.

The bank had said in its Economic Bulletin in December that Portugal would grow by 1.7 percent this year and 1.8 percent in 2017, while pointing out that there was a "high level of uncertainty" regarding the estimates, due to the lack of a state budget for 2016 at that time.

The report comes two days after Portugal's center-right president Marcelo Rebelo de Sousa, who took office earlier this month, enacted Prime Minister Antonio Costa's state budget for 2016.

Measures in the state budget include restoring public workers' pay while raising indirect taxes on products like alcohol and cigarettes, and restoring four public holidays.

According to the budget, the growth rate will be 1.8 percent this year.

The Central Bank headed by Carlos Costa, is more pessimistic than the government and the country's international lenders.

The European Commission expects the country's economy to grow by 1.6 percent and the International Monetary Fund expects a growth of 1.5 percent.

The Bank of Portugal's more pessimistic estimate is due to the worsening international economic situation, a slowdown in investment and resiliency of private consumption, according to the report released on Wednesday.

The growth of the economy will accelerate in 2017 due to dynamic investments and exports and will slow down again in 2018 due to structural constraints of potential growth of the Portuguese economy, the report points out.

The Bank of Portugal maintains its estimate for the contribution of domestic demand to GDP growth in 2016 at 0.9 percentage points. However the central bank reduced the contribution of exports to 0.6 percentage points from 0.8 percentage points forecast in December. Endit