© Reuters. FILE PHOTO: A man walks with his dog outside Bank of Portugal in downtown Lisbon, Portugal, February 21, 2017. REUTERS/Rafael Marchante
LISBON (Reuters) – The Bank of Portugal on Friday lowered its 2023 economic growth forecast to 1.5% from 2.6% predicted in June, expecting a sharp slowdown after this year’s 6.8% expansion as inflation and rising interest rates are likely to hit private consumption.
In its December economic bulletin, the central bank expected Portugal’s euro area-harmonized inflation to decelerate in 2023, but still remain at a high level of 5.8% after 8.1% this year.
Portuguese harmonized inflation clocked 10.2% year-on-year in November, just off a three-decade high of 10.6% recorded in October, stoked by soaring energy and food prices.
The bank said in a statement that “growth will be contained in the first half of 2023, against a background of global uncertainty, erosion of purchasing power, tightening financial conditions and weakening external demand”.
From the second half of next year it expects activity to gather steam amid a potential “ease of tensions in energy markets” and gradual recovery of real income.
The central bank sees private consumption – which represents two-thirds of gross domestic product – almost stagnating next year after growing 5.9% in 2022 as families struggle with high inflation as well as rising interest rate hikes.