Government has budget under control says Prime Minister

Portugal’s Prime Minister, Luís Montenegro, has brushed off warnings from its central bank governor that the government’s ambitious wage hikes and tax cuts could put the country back in the red.

On Friday, Luís Montenegro said that the government had the country’s budget “completely under control” after Mário Centeno warned that Portugal was running the risk of running deficits for the next few years.

“We’ve got the situation completely under control”, he said at a PSD party pre-European elections campaign rally in Lisbon.

The Prime Minister said he didn’t intend to comment on the warning from the Bank of Portugal and would “meet all the (new government spending) targets” set by the European Commission.

The Bank of Portugal said on Friday that the measures recently approved by the government would put the country a risk of returning to running budget deficits in the coming years according to the central bank’s June bulletin.

The bank considers that the magnitude of the measures and their nature, and their impact on reducing revenues and/or increasing expenditure would mean a reduction in the budget balance with the consequent risk of Portugal returning to the red.

In 2023, Portugal’s budget balance was +1.2% of GDP.