Portugal premier wins election, takes majority in parliament

Bloomberg

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.
The 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.
The result indicating political stability was welcomed by investors, with Portugal’s debt trading little changed on Monday.
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.

Recovering Economy
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 several seats on Sunday.
Meanwhile, the far-right Chega party grew to 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.