Portugal’s socialist PM Antonio Costa wins surprise absolute majority in snap polls

Costa declared the results a ‘victory of humility, trust and for stability’. The last time the Socialists won an absolute majority in Portugal was in 2005
The snap election was called after Costa’s Socialists lost the budget support of Portugal’s Communists and the Left Bloc, which both lost seats on Sunday

European Union

Bloomberg

Published: 11:27am, 31 Jan 2022

Why you can trust SCMP

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 centre-left Socialists took about 42 per cent of the vote and increased the number of seats held in the 230-seat chamber to at least 117 from 108, based on 99 per cent 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 centre-right PSD party garnered about 28 per cent of the vote.

Costa, 60, will oversee an economy that has trying to bounce back from 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 (US$25 billion) in Portugal through 2025, and estimated that gross domestic product in 2025 will be 3.5 per cent higher than it would be without that plan.

Customers on the terrace of a near-deserted waterside bar in Lisbon earlier this month. Tourism represents about 15 per cent of Portugal’s economy. Photo: Bloomberg

Portugal’s €200 billion economy is recovering after shrinking 8.4 per cent 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 per cent of the economy and 9 per cent 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 has not been a surge in occupancy at intensive-care units. The government eased restrictions earlier this month.

Holiday chaos as Britain removes Portugal from travel green list

The Bank of Portugal forecasts growth will accelerate to 5.8 per cent in 2022, before slowing to 3.1 per cent in 2023. Inflation is predicted at 1.8 per cent in 2022, subdued when compared with other European economies. Meanwhile, the government forecasts the debt ratio will drop to about 122 per cent of GDP at the end of 2022 from about 127 per cent in 2021, and aimed to narrow the budget deficit to 3.2 per cent 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 had not 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 centre-right PSD party remain dominant with a combined share of about 70 per cent of the vote.

‘A victory of humility’

“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 have pledged budget discipline and said they offer stability and further improvements in household incomes. Costa, who has been prime minister since 2015, plans to raise the minimum wage again and increase investment in health care.

Rui Rio, 64, leader of centre-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 per cent on Friday, up from 0.19 per cent six months ago but still lower than the rate for Italy or Spain. It peaked at 18 per cent in 2012 at the height of the euro-zone’s debt crisis. There was not 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.