LISBON—Portugal's central bank on Wednesday raised its outlook for the country's economy for the next two years thanks to a pickup in private consumption and a continued rise in exports, which should represent 45% of gross domestic product by 2016.

Bank of Portugal said the economy should grow 1.2% this year, in line with forecasts from the International Monetary Fund and the European Union, which together have lent €78 billion ($108 billion) to the country under a bailout program that runs out in May. In 2015, the economy will expand 1.4%, and in 2016, 1.7%. Bank of Portugal previously expected growth of 0.8% this year and 1.3% in 2015.

While it increased the forecast for private consumption, the central bank lowered its forecast for exports, which should still rise more than 5% yearly.

Exports represented a little more than 30% of Portugal's GDP in 2008, but have been growing steadily in what government officials say is a combination of a more aggressive private sector that can no longer rely on a weak internal market to survive and the opening up to markets outside Europe.

Portugal's growth outlook is key because the country has a public debt above 120% of GDP. The government has said it can pay that down under current projections for the economy.