The Bank of Portugal raised its forecast for this year's budget surplus to 1% of GDP from just 0.1% predicted in December, still slightly below the 1.2% surplus in 2023, while leaving the economic growth forecast unchanged at 2%.

It also expects the EU-harmonised inflation to slow sharply to 2.5% this year from 5.3% last year.

In its quarterly update of the economic forecasts the central bank said that the economy should grow between 2% and 2.3% each year until 2026, exceeding the projected expansion in the euro zone as a whole. (Reporting by Sergio Goncalves and Andrei Khalip)