The Bank of Portugal on Friday raised the country's 2024 economic growth forecast to 2.0% from 1.2% predicted in December on the back of stronger investment and exports, expecting only a gentle slowdown after last year's 2.3% expansion.

In its quarterly economic bulletin, the central bank expected the economy to grow by 2.3% next year and by 2.2% in 2026.

Portugal's euro area-harmonised inflation is projected to slow sharply to 2.4% this year from 5.3% in 2023, and to further dip to 1.9% by 2026.

The central bank said in a statement that growth through 2026 will benefit from "increased investment and exports, and exceeds that projected for the euro area".

It sees investment growing 3.6% this year and 4.8%, on average, in 2025 and 2026, due to "the recovery of global demand, the gradual easing of financing conditions and greater implementation of the post-pandemic recovery programme and other European funds".

The bank said that exports remained one of the main drivers of economic growth. They are expected to grow annually, on average, 3.6% in 2024-26.

Private consumption - which represents around two-thirds of GDP - is expected to grow 1.9% in 2024-26, "in a context of gains in real disposable income and increased savings". (Reporting by Sergio Goncalves; editing by Andrei Khalip)