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Bank of Portugal cuts growth forecast to 1.1%

Staff Writer | October 10, 2016
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.
Bank of Portugal
Europe   Less domestic demand and less investment in Portugal
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.