LISBON (Reuters) – Portugal’s parliament on Thursday approved the centre-right minority government’s 2025 budget bill on its first reading, forecasting a slight pick-up in growth and a small surplus despite tax cuts for young people and businesses, and wage hikes for some public sector workers.
The budget must now pass a second and final vote on Nov. 29.
The bill passed with only 80 votes in favour from the alliance that supports the government because the Socialist Party, which has 78 seats in parliament, abstained. The remaining 72 voted against it.
The vote means the government that came to power in April has now passed the first key test of its stability. Analysts feared that if the budget were not approved, the government could collapse and potentially lead to a third snap election in as many years.
The budget bill sees the country’s economy growing by 2.1% in 2025, more than double the euro area’s projected 0.8% growth.
It forecasts a budget surplus of 0.3% of gross domestic product and a debt-to-GDP ratio of 93.3%.
Finance Minister Joaquim Miranda Sarmento told the opposition that the margin for more budgetary stimulus is “constrained by the imperative need to keep accounts balanced and public debt on a consistent downward trajectory.”
He said that this budget strategy is crucial not only to strengthen the resilience of the Portuguese economy to adverse shocks, but also to sustain growth.
Socialist bench leader Alexandra Leitão argued that, despite her party’s “responsible stance” in abstaining, the budget is “opaque and cannot be trusted”.
Under the budget the corporate tax rate will be reduced to 20% from the current 21%, and people under 35 and earning up to 28,000 euros ($30,500) a year will get a 100% tax exemption in their first year of work that gradually comes down to 25% between their eighth and 10th year of work.
($1 = 0.9187 euros)
(Reporting by Patrícia Vicente Rua and Sergio Goncalves; Editing by Hugh Lawson)
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