Morningstar DBRS fears government instability could lead to early elections again

The Canadian ratings agency DBRS has weighed in on Sunday’s election results by saying that the Democratic Alliance (AD) win gives more force to continued sound economic and budgetary policies but has warned that challenges could again lead to snap elections.

“While the results have given more strength to the AD for the new legislative cycle, the next government will still need to have the support or abstention of other parties to govern and legislate.”

“Therefore, the stability of the Government may face challenges and lead to early elections at some point,” it adds, noting, however, that new elections can only take place from May 2026.

Morningstar DBRS says that the new government will face the same challenges as in recent years, “namely implementing reforms and investments related to the recovery and resilience plan, shortage of affordable housing, and the management and integration of migratory flows”.

“On top of this, Portugal faces a more complex overseas situation, both in terms of the tariffs and greater geopolitical tensions”, states the ratings agency.

With growing budgetary pressures, due to the need to increase defence spending, DBRS expects the government to “maintain its commitment” to reducing the public debt ratio and to “implement its political agenda and increase defense spending gradually, without compromising Portugal’s commitment to budgetary responsibility.”