Portugal's 2027 budget bill passes first parliamentary hurdle

Portugal Parliament Passes 2027 Budget Bill Amid Political Divisions

Key Highlights and Political Context of the 2027 Budget Bill

By Sergio Goncalves

Parliamentary Approval and Political Dynamics

LISBON, Oct 28 (Reuters) - Portugal's parliament on Wednesday approved the centre-right minority government's 2027 budget bill at first reading despite opposition from far-right party Chega after the opposition Socialist Party abstained to avert a political crisis.

Economic Projections and Fiscal Targets

The bill forecasts economic growth of 2.1% in 2027, a slight slowdown from the 2.3% projected for this year.

It targets a budget surplus of 0.1% of gross domestic product next year, after a balanced budget in 2026, despite a cut in the corporate tax rate to 18% from 19%, tax reductions for lower-income households and higher pension spending.

Parliamentary Support and Opposition Breakdown

The budget was backed only by 89 lawmakers from the Social Democrats and two members of the centrist People's Party, which together form the ruling coalition. A total of 79 lawmakers voted against and 60 abstained, including 58 Socialists.

This is the second time Prime Minister Luis Montenegro's government has depended on Socialist support to pass a budget, with 60 lawmakers from far-right Chega and a smattering of others from parties including the Liberal Initiative, the far-left Livre, the Communists, and the Left Bloc voting against.

Reactions from Political Leaders

Socialist leader Jose Luis Carneiro said the 2027 budget bill was bad, but that his party's abstention was necessary because "the country cannot enter a political crisis". Voters were called to the polls in 2022, 2024 and 2025.

Fiscal Policy Measures and Economic Outlook

Finance Minister Joaquim Miranda Sarmento told parliament Portugal's "very robust fiscal position" allows the government to "responsibly" cut taxes, raise pensions, increase public investment and reduce public debt.

The government forecasts the tax burden on households and businesses will fall to 23.8% of GDP in 2027 from an estimated 24.1% this year.

Public debt, which has been declining steadily since peaking at over 130% in 2020, is expected to shrink to 84.5% in 2027 from this year's 87.5%.

Next Steps for the Budget Bill

The bill must now pass a second and final vote on Nov 24 after committee discussions and amendments.

(Reporting by Sergio Goncalves; Editing by Victoria Waldersee and Nick Zieminski)