(Reporting by Sergio Goncalves; editing by Andrei Khalip)
By Sergio Goncalves
LISBON, May 9 (Reuters) - The International Monetary
Fund on Tuesday raised its forecast for Portugal's 2023 economic
growth to 2.6% from 1% estimated a month ago, following the
release of official data showing a strong expansion in the first
quarter.
That exceeds the 1.8% growth projected by the government and
the Bank of Portugal, but still means a sharp slowdown compared
to last year's 6.7% as high inflation and rising interest rates
are expected to hamper domestic demand.
The new forecast comes after an IMF mission assessed the
country's financial and economic conditions between April 26 and
May 5.
While expecting inflation to slow to 5.6% in 2023 from 7.8%
last year, the Fund also warned that "core inflation is
projected to be stickier given a tight labour market and
elevated profit margins".
On April 28, Portugal's statistics body said the economy
expanded 2.5% in the first quarter from a year earlier, beating
expectations.
In 2022, Portugal registered its strongest growth in 35
years but the IMF said high inflation and tighter financial
conditions were weighing on growth. It expected GDP expansion to
stabilise at around 2% over the medium term.
It said that, despite sizeable measures to support families
and businesses, Portugal's "fiscal position has improved
significantly in 2022, reinforcing public debt reduction".
"In 2023, fiscal policy needs to remain non-expansionary to
preserve fiscal space and support monetary policy, while being
nimble if shocks materialise," the IMF said.
The government is targeting a budget deficit of 0.4% of GDP
this year the same as in 2022. The debt-to-GDP ratio, which
finished last year at 113.9% after dropping from over 125% in
2021, is expected to decline further this year to 110.8%.
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