Portugal recorded its strongest economic growth in more than three decades last year, official data showed today, boosting Socialist Prime Minister Antonio Costa's credentials after his weekend election triumph.

The economy expanded by 4.9% as it bounced back from the Covid-19 crisis, lifted by high domestic demand as consumer spending and investments recovered, according to the INE national statistics institute.

It was the euro zone nation's strongest growth since 1990 and it beat the government's forecast of 4.6%.

The news comes a day after Costa won a surprise absolute majority in parliament in an early election and prepares to start a third term.

Portugal's economy contracted by 8.4% in 2020 as lockdowns and travel restrictions crippled its key tourism sector.

The return to growth in 2021 helped bring down the unemployment rate to 5.9% in December, INE said in a separate statement, down from 6.3% in November and its lowest level since 2002.

The Bank of Portugal predicts growth will accelerate to 5.8% in 2022, before slowing to 3.1% in 2023.

Portugal is set to receive a €16.6 billion package of European Union recovery funds by 2026.

Costa, who has governed in a minority since 2015, has said he would like to use the bulk of the EU funds to modernise Portugal's infrastructure to make it more competitive.