Portugal says economic growth easing need for 2015 budget cuts

LISBON (Reuters) - Portugal's government laid out plans for savings in 2015 worth 1.4 billion euros (1.1 billion pounds) on Tuesday and said an improving economy has reduced budget cuts it needed to make for next year by about a third.

Finance Minister Maria Luis Albuquerque said most of the savings would be in line ministries. Smaller gains were expected from a continuing reduction in the number of civil servants.

No new tax hikes or wage and pension cuts will be needed, she promised, after three years of painful austerity to meet the terms of an EU/IMF bailout that expires in mid-May. The lenders have demanded seeing the measures for 2015 before ending the rescue programme.

"The measures approved today make up 0.8 percent of GDP, or 1.4 billion euros," Albuquerque said after a cabinet meeting. "That is what was needed to meet the budget deficit goal of 2.5 percent next year.

"When we made the estimates in December, we thought the effort needed was equal to 1.2 percent of GDP. This is a difference worth 680 million euros. That's thanks to a better-than-expected budget execution and macroeconomic setting."

Portugal's economy began to recover from its worst recession since the 1970s last year, but it still shrank 1.4 percent for all of 2013. This year, the government and its lenders expect the economy to grow 1.2 percent.

Albuquerque also said recent data pointed to further improvements in the unemployment rate, which should drop to 14.8 percent next year from this year's estimated 15.7 percent. The jobless rate peaked at 16.3 percent in 2013.

Under the terms of its bailout, Lisbon has to cut the budget deficit to 4 percent of GDP this year from last year's 4.9 percent, and then to 2.5 percent in 2015.

(Reporting By Andrei Khalip and Daniel Alvarenga; Editing by Larry King)