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Bank of Portugal cuts growth forecast to 1.1 pct for 2016

Xinhua, October 8, 2016 Adjust font size:

The Bank of Portugal cut its growth forecast to 1.1 percent of gross domestic product (GDP) for this year, down from 1.6 percent last year, according to its quarterly economic bulletin released on Friday.

The Bank of Portugal's forecast fell by 0.2 percentage points compared to its forecast of 1.3 percent, presented in its last bulletin last June.

The central bank said its lower forecast reflected less domestic demand and less investment in particular.

However, exports will improve to 3 percent this year from 1.6 percent in 2015, the bank said.

Private consumption is projected to decelerate from 2.6 percent in 2015 to 1.8 percent this year, while inflation will stand at 0.7 percent this year, an increase of 0.2 percentage points compared to last year.

Portuguese Prime Minister Antonio Costa was expecting growth to be 1.8 percent growth of GDP this year, however has recently admitted it may not be much higher than 1 percent.

While raising wages and pensions and cutting taxes, Costa has said that the country will manage to comfortably bring the budget deficit to lower than 2.5 percent of GDP this year, and is compensating his "turning a page of austerity" by raising indirect taxes.

He might also introduce a new tax for the rich, which was revealed last month.

The Bank of Portugal also said bringing the budget deficit down to 2.5 percent as requested by Brussels was possible.

However, the country's budget implementation in the second quarter is still "very demanding" and subject to risks, the bank warned, adding that the country's public debt was still very high. Endit