The PS will be unable to repeat its surprising success in 2022

The results of the Portuguese general elections are unlikely to have an immediate impact on the market, with a new government likely to maintain a focus on fiscal sustainability and government debt reduction, which will be supported by relatively elevated growth. B2G multinationals should note that a decision-maker turnover is likely, which may complicate existing and new procurement processes. However, potential PPD/PSD-led government that will need to rely on the far-right Chega could bring a shift in domestic politics akin to the wider wave of European populism, which may, in turn, result in the adoption of controversial policies that put the government at odds with the EC, though the risk of the latter is limited. A PS win, on the other hand, is likely to translate into an unstable minority government that will need to rely on far-left partners to pass through necessary reforms.


  • The upcoming March 10 general elections remain hotly contested, as neither the Socialist Party (PS) or the Democratic Alliance (PPD/PSD) have secured a significant advantage in the polls.
  • The elections come in the aftermath of November’s resignation of PM Antonio Costa, following a corruption probe into lithium exploration schemes and corruption allegations into a hydrogen mega-project in Sines.
  • The far-right “Enough” (Chega) party has made consistent gains in the polls and is set to secure a third place in the elections .
  • Smaller leftist groups have failed to capitalize on the PS’s fall in popularity, but their support might be critical for a potential new PS administration.
  • Both the PPD/PSD and the PS have ruled out a grant coalition, but the PPD/PSD’s coalition partner options are limited and may need to rely on Chega to govern.

Our View

Antonio Costa’s surprise majority win in the January 2022 elections relied heavily on an election strategy that sought to undermine a PSD government as potentially reliant on the far right. His successor, Pedro Nuno Santos, will find it difficult to repeat that success. Santos’s refusal to comment on the ongoing investigation against Costa may further weigh on support for the PS. His background in the far-left wing of the PS, however, might make him more palatable for smaller leftist parties, such as the Left Bloc and Free, given that the PS is unlikely to wrestle away more support from the Democratic Alliance.

Both the PPD/PSD and the PS remain neck and neck in the polls,  at 31% and 29%, respectively, but the Democratic Alliance’s limited coalition options make Chega the most likely partner. While a formal coalition remains unlikely, the PSD will likely seek to form a minority government, which is currently the most likely outcome of the elections. A Democratic Alliance government is, however, unlikely to implement significant policy changes, given its preference for fiscal discipline and the already relatively conservative budget. In fact, despite the political uncertainty, the economy is still projected to see a relatively resilient expansion of 1.1% YOY, a fiscal surplus of 0.3–0.5% of GDP, and persistent easing in the government debt-to-GDP ratio, which will likely fall below 100% this year.

A new government will maintain policy continuity after the elections, but structural challenges, such as a prevalence of low-skilled jobs in the economy and relatively elevated unemployment, will continue to weigh on the economy going forward. The next government will remain reliant on EU funding to maintain capital expenditures, while sustaining relatively high levels of social expenditures.

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