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Portugal Snap Election: Don't Expect Much Change

Polling around Portugal’s early parliamentary election to be held on January 30, 2022 suggests the vote is unlikely to change the makeup of the legislative assembly in any meaningful way. While the election will postpone fiscal support to the economy, the call for early election is of no major concern from a credit perspective. The economy is in the midst of a recovery, and public debt is already on a downward trajectory. DBRS Morningstar does not expect the budget delay nor any likely policy changes to dent public funding conditions or significantly alter fiscal deficit projections. We continue to expect broad continuity around pragmatic macroeconomic policymaking.

Key highlights include:
• With party preferences entrenched, it is unlikely the election changes the legislative makeup.
• However, fragmented politics should not upend Portugal's pragmatic macroeconomic policymaking.
• The delays are unlikely to alter the economic recovery or the favourable trends in public finance.

“There is a high likelihood that this election will deliver a government much like the current one that relies on multiparty support to pass legislation,” says Jason Graffam Vice President in the Global Sovereign Ratings Group. “But status quo is not necessarily a negative outcome. Two-thirds of the electorate according to current polling supports one of the two centrist parties. This is a source of stability and continuity in an otherwise fractured political landscape.“