2027 budget reaches parliament with PS backing assured
On Thursday the government submitted to parliament the draft 2027 state budget, forecasting 2% growth and a surplus between 0.1% and 0.2% of GDP. Its approval is assured by the Socialist Party, which has said it will abstain in the overall vote.
The government on Thursday early afternoon submitted to parliament the draft State Budget law for 2027, two days before the deadline, after approving it this morning in the Council of Ministers.
The document was handed over by the finance minister, Joaquim Miranda Sarmento, to the Speaker of the Assembly of the Republic, José Pedro-Aguiar Branco.
The third State Budget of Luís Montenegro's government has its approval once again assured by the Socialist Party (PS).
The Socialist secretary-general, José Luís Carneiro, announced last week that the party intends to abstain in the vote on the bill in general terms, scheduled for 28 October, after the prime minister, Luís Montenegro, gave guarantees on four conditions set by the Socialists: a constitutional revision with PS and PSD playing a central role, protection of current and future pensions, funding for investment projects that remain to be carried out after the Recovery and Resilience Plan (PRR), and support for the recovery of municipalities and regions affected by storms.
The detailed debate and vote will take place between 29 October and 24 November, with the final overall vote set for 24 November.
The Communist Party (PCP) and the Left Bloc have already announced that they will vote against the government's proposal. Chega has also threatened to vote against (source in Portuguese)if the prime minister refuses to lower the retirement age, and has made an additional demand: a cut in VAT on fuel and the introduction of zero VAT on a basket of essential foodstuffs. These are red lines the government has already rejected.
The remaining parties have not yet announced how they will vote.
The President of the Republic, António José Seguro, said on Thursday that he expected a "fruitful debate" to improve people's lives "at a very difficult time".
Speaking to reporters in parliament after meetings with the parties on the draft budget, the finance minister, Joaquim Miranda Sarmento, refused to estimate how much room there is for negotiations, confirming that the projected surplus for next year will be between 0.1% and 0.2% of gross domestic product (GDP).
The government estimates that the economic measures already adopted, which will continue to have an impact on the public accounts in 2027, will have a 4.8 billion-euro impact next year, not yet counting any new policies to be included in the next budget.
As for the macroeconomic scenario for next year, the government is forecasting economic growth of 2%, in line with the trend of recent years, along with a budget surplus of up to 0.2%.
Pensions, public-sector wages and debt-interest payments are among the main sources of pressure, alongside tax measures such as updating income tax brackets, cutting the corporation tax rate and housing measures.
The finance minister said that the 2027 State Budget provides for a further cut in income tax, through updating the brackets, the specific tax deduction and the minimum subsistence threshold, mechanisms which by law have to be adjusted.
The PSD/CDS-PP government has decided to lower income tax rates in the first to sixth brackets by between 0.3 and 0.5 percentage points, a measure with an estimated impact of 400 million euros that will already be reflected in withholding at source in 2026.
The reduction will be 0.3 percentage points in the first bracket, 0.5 points in the second to fifth brackets and again 0.3 points in the sixth bracket.
The government has also announced a 50-euro increase in the solidarity supplement for the elderly (CSI) in 2027, with the reference amount rising to 720 euros.
The government's programme provides for this amount to reach 870 euros in 2029, compared to the current 670 euros.
A rise in the minimum wage from 920 to 970 euros is also planned. The tripartite agreement on wage increases and economic growth for 2025-2028, signed in October 2024 between the government, the four employers' confederations and the UGT trade union, revised upwards the path of the national minimum wage. The agreement provides for annual increases of 50 euros, with the aim of reaching 1,020 euros in 2028.
In the civil service, the multiannual agreement in force provides for pay rises of 2.30% in 2027, with a minimum increase of 60.52 euros.
If the planned increase in the agreement goes ahead, the minimum basic wage in the public administration should rise to 995.51 euros in 2027.
The same agreement also provides for an increase in the meal allowance, currently set at 6.15 euros, of 15 cents per year up to 2029.
