Portugal's government on Monday raised its 2023 economic growth forecast to 1.8% from 1.3% predicted in November, still a sharp slowdown compared to last year amid stubbornly high inflation, Finance Minister Fernando Medina said.

The government revised the inflation rate expected this year higher to 5.1% from its previous forecast of 4%, but Medina said the pace of price increases will slow down "gradually and consistently" from last year's peak of 10.1% year-on-year in October.

He forecast that the EU harmonized inflation rate will fall to 2.9% in 2024 and hover around 2% over the next three years.

The budget deficit should end the year at 0.4%, the same as in 2022, he told a news conference, presenting the so-called Stability Programme for 2023-27, which must be submitted to the European Commission as part of EU members' economic plans.

The country should reach a budget balance in 2026 and have a slight surplus of 0.1% of GDP in the following year, Medina said, predicting that the public debt ratio will decline to 107.5% of GDP this year and then gradually to 92% of GDP in 2027.

In each of the next two years, the government expects the economy to expand by 2%.

"We are already growing above pre-pandemic levels and more than the euro zone average," Medina said. "Summing up, we'll have more exports (than expected earlier), more GDP, and the same budget deficit, with the debt coming down." (Reporting by Sergio Goncalves; editing by Andrei Khalip)