By Patricia Kowsmann

 

LISBON--The International Monetary Fund has cut its growth forecast for Portugal this year, saying investment and exports have slowed and could be further hit amid market uncertainties, including the U.K.'s vote to leave the European Union.

In its concluding statements following a recent IMF mission to the small Iberian country, the IMF said it now expects the economy to grow 1% this year, down from a March projection of 1.4%.

"While private consumption continued to expand robustly, investment and exports weakened, reflecting increased uncertainty and a sharp downturn in some markets for Portuguese goods," the IMF said in a statement.

"Increased market uncertainty in the context of heightened risk aversion following the referendum in the United Kingdom could persist for an extended period," it added.

The IMF's warning comes after Finance Minister Mario Centeno said Wednesday that the government's 1.8% growth forecast could be at risk given exporting markets including Angola, China and Brazil have slowed down sharply. He also said the U.K.'s decision to leave the EU will have an impact on the economy. The U.K. is Portugal's fourth-largest exporting market, although analysts say the actual volume is relatively small to have any major impact.

Mr. Centeno said despite the setback, Portugal remains on track to lower its budget deficit to below 3% of gross domestic product this year. The government's target is 2.2%, but the IMF said Thursday that won't be reached unless more spending-cut measures are taken.

Portugal is considered eurozone's most fragile economy after Greece.

 

Write to Patricia Kowsmann at patricia.kowsmann@wsj.com

 

(END) Dow Jones Newswires

June 30, 2016 08:30 ET (12:30 GMT)

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