Portugal's Political Stability Maintained After Presidential Vote

Political Stability and Economic Outlook

DAVOS, Switzerland, Jan 23 (Reuters) - Portugal is unlikely to face political upheaval following the upcoming presidential run-off, allowing the centre-right minority government to maintain budget surpluses and cut public debt, Finance Minister Joaquim Miranda Sarmento told Reuters.

Presidential Run-off Candidates

The run-off is set for February 8 and will pit moderate centre-left Socialist Antonio Jose Seguro against the leader of far-right, populist Chega, Andre Ventura for the largely ceremonial post.

Government's Fiscal Strategy

Political analysts say that even though Ventura is widely expected to lose, his strong showing in the first round could stiffen resistance to Prime Minister Luis Montenegro's rule in a fragmented parliament, where Chega is the main opposition.

Impact of Opposition Dynamics

"Investors look at Portugal as a stable country. I speak to a lot of investors and I've never heard any concerns," Miranda Sarmento said in an interview late on Thursday in Davos.

He said that, despite the administration's minority status, it has been able to govern, "passing bills in parliament, sometimes with one party and other times with another," referring to Chega and the Socialist Party.

GREATER RESPONSIBILITY

Miranda Sarmento said that since the government was re‑elected in May, after the Socialists joined Chega in rejecting a confidence motion, the opposition had not imposed spending hikes or tax cuts that would squeeze fiscal space, unlike in 2024.

"I think the opposition learnt the lesson in the May election... and I believe parliament will continue to have fiscal responsibility, no one in Portugal wants a return to deficits," he said.

The 2026 budget was passed in November when the Socialists abstained, citing the need for stability, though Chega voted against.

Portugal was subject to harsh austerity measures in 2011-2014 under the terms of an international bailout, after the public deficit exceeded 11% in 2010.

Miranda Sarmento was confident Portugal would post a 0.1% of GDP budget surplus this year, even as tax breaks were expanded and wages and pensions increased, although it would fall short of the slightly over 0.3% expected surplus for 2025.

The government has vowed to cut the public debt ratio, which peaked at more than 134% during the COVID-19 pandemic in 2020, to 87.8% of GDP this year, from 90% expected in 2025.

He said the government, in talks with unions and employers, will make "every effort" to conclude a labour reform it sees as vital to boosting productivity, and growth. The ultimate goal was to lift economic growth to around 3% in 2029, well above the 2.3% forecast for this year and 2.0% in 2025.

(Reporting by Mark John; writing by Sergio Goncalves; Editing by Alex Richardson)