LISBON (Reuters) – Portugal’s parliament easily approved the majority Socialist government’s 2023 budget bill on its first reading on Thursday, paving the way for planned further deficit and debt reductions despite a sharp economic slowdown.
Only the 120 Socialist lawmakers backed the bill in the 230-seat house, with other parties voting against and two abstentions, but that was enough to secure its approval, in contrast to a year ago, when the Socialists ruled in minority and the rejection of the 2022 budget triggered a snap election.
Prime Minister Antonio Costa won the ballot with an outright majority in January.
The bill projects economic growth will slow down to just 1.3% in 2023 from 6.5% this year, with private consumption practically stagnating, hampered by high energy and food prices and the erosion of savings accumulated during the pandemic.
Export growth is estimated to slow to 3.7% from this year’s 18.1% given the foreseeable strong slowdown or even recession in some of its major European trading partners.
Public investment will increase by 37% to 8.6 billion euros with funds from the European Union pandemic relief programme.
The government hopes to cut the budget deficit to 0.9% of GDP next year from 1.9% in 2022, while public debt should drop to 110.8% after a projected 115% this year.
Criticised by the opposition for focusing too much on the deficit, premier Costa told parliament during the debate that Portugal needed slash the budget gap and public debt especially at a time when the European Central Bank is hiking interest rates to fight inflation.
“The best protection we can give to families and companies is not to let the sovereign debt yield rise to levels that affect the other interest rates in the economy,” he said.
Joaquim Miranda Sarmento, a lawmaker from the main opposition Social Democratic Party said the budget demonstrated “continuity of policies that have led Portugal to impoverishment,” accusing the government of “voracity in charging taxes.”
(Reporting by Sergio Goncalves and Andrei Khalip; Editing by Aurora Ellis)