LISBON Portugal Monday moved closer to exiting its bailout programme with its international lenders, the EU and the IMF, approving the country's performance under its bailout agreement six months before the programme is set to end, the government said Monday. "The lenders agreed that our targets were met and our objectives are within reach," Portugal Finance Minister Maria Luis Albuquerque told media. "It was a very smooth evaluation... that envisages the end of the bailout programme on the agreed date" in mid-2014. Staff teams from the European Commission (EC), European Central Bank (ECB), and International Monetary Fund (IMF) visited Lisbon during December 4-16 for the tenth quarterly review of Portugal's economic adjustment programme. The team in its report stated that "Further signs of recovery have emerged since the last review. Growth is broadly in line with projections, while unemployment has fallen by more than expected. External rebalancing has continued, although imports have picked up, reflecting stronger-than-expected domestic demand." Portugal is the second country after Ireland that is set to exit the bailout by the middle of next year. On Sunday Ireland became the first country to formally exit the bailout program funded by the International Monetary Fund and the European Union . The European Union and IMF have been monitoring the country's economic reforms, a condition of the 2011 bailout of 78billion-euro (66billion pounds). Portugal has so far received 71.4billion euros of the 78bn euros agreed as the bailout package in May 2011 . The country's economy is forecast to return to growth of 0.8% next year after falling 1.8% this year. Economists say the country is likely to be able to leave behind its bailout but may need some kind of precautionary loan from creditors before standing on its own two feet. An exit from the bailout would give Portugal back its financial independence, allowing the country to borrow on the financial markets. The country carried out a bond swap this month which met with strong investor demand. During Portugal's recession, borrowing on the capital markets was effectively closed as the interest rate being demanded was seen as unsustainable. The biggest threats seen to the end of the bailout are potential decisions by the country's constitutional court that could challenge austerity measures adopted under the bailout. But Albuquerque and Deputy Prime Minister Paulo Portas said there were no plans for alternative measures. "We see no reason to presume that there will be negative decisions from the constitutional court," Albuquerque said. Portas said the "evaluation was positive" and Lisbon was likely to meet this year's budget deficit target of 5.5 percent of gross domestic product. The troika report shares this optimism stating that the programme's fiscal targets have been confirmed. "With tax collections performing well, the 2013 deficit target of 5.5 percent of GDP is achievable. The 2014 budget was approved by Parliament with only a few changes. It includes important steps towards rationalising and modernising public administration,improving the sustainability and fairness of the pension system, and lowering costs across ministries. "If some of these measures are determined to be unconstitutional, the Government has re-affirmed its commitment that it will then identify and implement compensatory measures of high quality to meet the agreed deficit target of 4 percent of GDP." The troika report however warns that such austerity measures, "could heighten risks to growth and employment and reduce the prospects for a sustained return to financial markets." Capital buffers are broadly adequate and liquidity conditions are improving, the troika report notes, adding that profitability remains weak, and the corporate debt overhang is a source of vulnerabilities for the banking sector that must be addressed so as not to put a brake on medium-term growth prospects.
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