The Bank of Portugal on Wednesday improved its economic outlook for the next two years, predicting GDP to grow 1.7 percent this year and 1.9 percent in 2016.

The Bank of Portugal's forecast was upgraded from December, when it estimated the economy would grow 1.5 percent this year and 1.6 percent in 2016.

Looking forward to 2017, the economy is expected to expand 2.0 percent, the bank also said.

The bank's forecast is more optimistic than the government's, which in April last year forecast a 1.5-percent growth in the state budget for 2015 and a 1.7-percent growth in 2016.

"The acceleration of economic activity throughout this period reflects largely sustained export growth, which contributes to the maintenance of the current account surplus and capital," the bank said.

The bank forecast exports to grow 4.3 percent this year and 5.8 percent in 2016, while investment will grow 4.0 percent this year and 4.0 percent in 2016, the bank said.

Portugal's economy is improving, with GDP expanding in the fourth quarter at the fastest rate in a year. However, the country is still struggling to reduce its public debt, which still stands at around 125 percent of GDP. The country exited its 78-billion-euro bailout program with its international lenders last year.

The Bank of Portugal's economic forecast comes a day after the European Central Bank revealed that business activity in the euro zone accelerated much faster than expected this month.