The rating agency does not see the scenarios of a new minority government or a rejection of the State Budget for 2026 as risks, as the country can operate with the “responsible Budget of 2025”.

According to the agency, which on February 28 raised Portugal's rating from A- to A, with a positive outlook, the main risk could come “beyond 2025, if fiscal performance deteriorates”.

“We expect that, in 2025, Portugal will register a budget surplus for the Public Administration for the third consecutive year”, he pointed out, in a statement. “The 2025 Budget has already been approved and previous episodes of political transition have not led to significant economic disruptions or budget overruns.

“Beyond 2025, risks may arise if budgetary performance deteriorates,” the rating agency warned, however.

In an analysis of the political landscape, they explained that “while the main left and right parties generally support sound fiscal policies, the far-right Chega party is less aligned with this consensus.”

Portuguese governments can be formed without majority support, but Budgets can only be approved with majority support. “However, even in the scenario of another minority Government, if the 2026 Budget is not approved, Portugal will be able to continue to operate with the fiscally responsible 2025 Budget ensuring that public debt continues to decrease as a percentage of GDP”.

“In our view, early elections will not have an impact on the rest of Portugal’s macroeconomic profile,” S&P highlighted.

“This includes its track record of moderate current and capital account surpluses, in a context of expected average GDP growth of around 2%, or 1.6% on a per capita basis”.

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