The European Union and IMF agreed on Tuesday to loosen strict budget goals imposed on Portugal under a 78-billion-euro bailout, giving Lisbon more time to meet the targets, the finance minister said.

Under the revised targets, the country can now post a budget deficit of 5 percent of GDP this year, 4.5 percent in 2013 and 2.5 percent in 2014, finance minister Vitor Gaspar told journalists. The changes were announced after European Union and IMF officials carried out their fifth review of the economy under the bailout.

The government had a goal of reducing the budget deficit to 4.5 percent of gross domestic product this year and 3 percent next year.

The move marks a climb down for the centre-right coalition government which has single-mindedly focussed on meeting the goals as justification for harsh austerity measures which have sent the economy into its worst recession since the 1970s.

(Reporting By Sergio Goncalves and Daniel Alvarenga, writing by Axel Bugge)