Portugal's 2025 Budget Bill: Balancing Growth and Stability

Portugal's parliament has approved the 2025 budget bill in its first reading, forecasting growth and a small surplus despite tax cuts and public sector wage hikes. The bill passed narrowly and faces a final vote on Nov. 29. It aims for a balanced economy and reduced public debt.

In a crucial political move, Portugal's parliament approved the centre-right minority government's 2025 budget bill on its first reading, signalling cautious optimism for future economic growth. Despite tax cuts for young people and businesses, as well as wage increases for certain public sector workers, the bill forecasts a slight uptick in growth and a modest surplus.

The bill narrowly passed with 80 votes in favor from the ruling alliance, as the opposition Socialist Party abstained from voting, holding 78 seats. This abstention was crucial, allowing the government to pass its first stability test after coming to power in April. Analysts had feared its failure could trigger a third snap election in as many years.

The budget predicts a robust 2.1% economic growth in 2025, compared to the euro area's anticipated 0.8% growth. It also aims for a 0.3% budget surplus and a 93.3% debt-to-GDP ratio. Finance Minister Joaquim Miranda Sarmento emphasized the importance of maintaining a balanced budget to enhance Portugal's economic resilience and sustainable growth. Meanwhile, Socialist bench leader Alexandra Leitão criticized the budget's transparency.

(With inputs from agencies.)