Portugal's economic growth beat expectations as it accelerated sharply to 1.6% in the first quarter from 0.3% in the prior three months, stoked by net exports, while the pace of expansion dropped from a year ago, official data showed on Friday.

The National Statistics Institute (INE) said in its flash estimate gross domestic product expanded 2.5% from a year earlier after registering 3.2% annual growth in the fourth quarter as high inflation and rising interest rates weighed on private consumption and investment.

The government expects growth to slow down to 1.8% this year from 6.7% in 2022, which was the strongest expansion in 35 years.

"Quarterly growth was higher than expected and exclusively due to net exports because of lower energy goods prices that Portugal imported and increasing exports," said Filipe Garcia, head of Informacao de Mercados Financeiros consultants.

"That makes the Portuguese economy more susceptible, for better or for worse, to the developments in the international economy," he said, adding that the government's full-year projection appeared within reach.

Researchers from the Catholic University of Lisbon expected the economy to have grown 0.5% quarter-on-quarter, while the ISEG school of economics and management had predicted an expansion of up to 1%.

(Reporting by Sergio Goncalves, editing by Andrei Khalip)