Socialist Prime Minister Antonio Costa won Portugal’s general election and will now have an absolute majority in parliament, meaning far-left parties are no longer needed to back his budgets.
Costa’s center-left Socialists took about 42% of the vote and increased the number of seats held in the 230-seat chamber to at least 117 from 108, based on 99% of voting districts reporting, according to the government’s election results website. The last time the Socialists won an absolute majority in parliament was in 2005. The opposition center-right PSD party garnered about 28% of the vote.
Costa, 60, will oversee an economy that’s trying to bounce back after the pandemic with the help of European Union recovery funds that began to flow last year. The government said in April that the EU pandemic recovery plan will have an economic impact of 22 billion euros ($25 billion) in Portugal through 2025, and estimated that gross domestic product in 2025 will be 3.5% higher than it would be without that plan.
Portugal’s 200 billion-euro economy is recovering after shrinking 8.4% in 2020 — the most since at least 1960 — as the pandemic hurt tourism and other key businesses. For Portugal, which has the third-highest debt ratio in the euro area behind Greece and Italy, tourism represents about 15% of the economy and 9% of employment.
In January 2021, Portugal had one of the world’s worst outbreaks, forcing the government to impose strict confinement measures. The country now has one of the highest Covid-19 vaccination rates in the world, and despite record cases in recent weeks, there hasn’t been a surge in occupancy at intensive-care units. The government eased restrictions earlier this month.
The Bank of Portugal forecasts growth will accelerate to 5.8% in 2022, before slowing to 3.1% in 2023. Inflation is predicted at 1.8% in 2022, subdued when compared with other European economies. Meanwhile, the government forecasts the debt ratio will drop to about 122% of GDP at the end of 2022 from about 127% in 2021, and aimed to narrow the budget deficit to 3.2% of GDP in 2022.
With Costa’s previous minority governments, the Communists or the Left Bloc had helped budgets pass in parliament by voting for the plans or abstaining. In October, they both joined parties on the right to vote against the 2022 budget, saying the government hadn’t met their demands on topics including a higher minimum wage. That cut Costa’s second term short and led to the snap election. Both the Communists and the Left Bloc lost seats on Sunday.
Meanwhile, the far-right Chega party grew to at least 12 seats in parliament from one, becoming the third-biggest force. Still, the Socialists and the center-right PSD party remain dominant with a combined share of about 70% of the vote.
“It was a victory of humility, trust and for stability,” Costa told Socialist supporters gathered at a hotel in Lisbon on Sunday night.
The Socialists pledge budget discipline and say they offer stability and further improvements in household incomes. Costa, who’s been prime minister since 2015, plans to raise the minimum wage again and increase investment in health care.
Rui Rio, 64, leader of center-right opposition party PSD, has said the economy should grow faster and points out that Portugal has been overtaken in terms of GDP per capita by eastern European nations that joined the EU later, including the Czech Republic and Slovenia.
Given the country’s debt pile, governments have to keep borrowing costs in check. Portugal’s 10-year bond yield was at 0.62% on Friday, up from 0.19% six months ago but still lower than the rate for Italy or Spain. It peaked at 18% in 2012 at the height of the euro region’s debt crisis. There wasn’t a big bond market reaction in October to the political developments that led to the snap election being called.
In 2019, the government was sworn in about three weeks after the election.
