LISBON: The Bank of Portugal expects economic growth to remain unchanged at 1.5 percent this year, which is lower than the new left-leaning government’s budgeted target of 1.8 percent, and below the central bank’s previous estimate. For next year, the central bank expects growth to pick up steam and reach 1.7 percent, but in 2018 it expects a slowdown to 1.6 percent.
It said there were various downside risks to the forecasts, mainly lower growth from foreign trade flows. In December, the bank put this year’s growth at 1.7 percent. It said the revision was due to a deteriorating international economic situation and a slowdown of investment in Portugal.
After pressure from Brussels, the government last month revised its growth outlook lower to 1.8 percent from over 2 percent and vowed to cut the budget deficit to 2.2 percent of gross domestic product from last year’s 4.4 percent.
However, the European Commission, ratings agencies and many economists doubt that the targets will be met. The Socialist government, which rules with the support of the far left Communists and Left Bloc in parliament, has been reversing the harsh austerity of recent years, but has promised to stick to European budget rules.