The rating agency issued a statement today, declaring, “Portugal’s fiscal trajectory remains on track despite the likelihood of continuing with a minority government following the parliamentary elections on May 18.”
However, they cautioned, “persistent political fragmentation may delay the implementation of reforms.”
The agency highlighted that the Democratic Alliance (AD), led by Luís Montenegro, “achieved a relative majority, although not an absolute one, in the parliamentary elections,” emphasizing that the leadership was still strengthened.
“While a minority government may facilitate cabinet formation, it also underscores political fragmentation, given that these are the third general elections in Portugal in just three years,” they noted.
Nonetheless, S&P predicts that Portugal “will maintain a budget surplus in 2025 for the third consecutive year,” which should be close to the budgetary target of 0.3% of the Gross Domestic Product (GDP).
Moreover, they reminded that “previous political transitions since 2015 have not triggered significant economic disruptions or budgetary slippage.”
However, they highlighted that fiscal risks might arise next year, reminding that budgets continue to “require majority approval.”
The agency clarified that if the State Budget for 2026 is not approved, the country can continue operating with the 2025 budget, “ensuring a reduction in public debt relative to GDP.”
“At the same time, Portugal faces pressure to increase defense spending from 1.5% of GDP to NATO’s target of 2.0%, although EU funds help cushion the fiscal impact,” they stated.
According to S&P, this situation might slow the reduction of public debt as a percentage of GDP in 2025-2028 but “is unlikely to reverse the trend,” they concluded.
The AD won Sunday’s parliamentary elections with 89 MPs, while both the PS and Chega tied with 58 elected parliamentarians each.
The Liberal Initiative remains the fourth political force, gaining one more deputy (total of nine) compared to 2024, and Livre ranks fifth, increasing from four to six elected representatives.
The CDU lost one representative, leaving them with three, while the Left Bloc is reduced to one representative, the same as PAN, which maintained one deputy.
The JPP from Madeira managed to elect one deputy.
These results do not yet include voters residing abroad, whose participation and choices will be revealed on May 28.
