Portugal’s 2026 Budget Passes: Pay Rise In, Citizenship Wait Doubles

Portugal’s newly-minted centre-right government just secured the first green light for its State Budget for 2026 and a tighter Nationality Act, but the outcome was anything but routine. The diplomatic abstention of the Socialists spared the executive an early defeat, even as smaller parties warned of tax pressure and tougher paths to citizenship. What follows is what matters for households, companies and the many foreigners who have chosen Portugal as home.

A surprise alliance shapes next year’s budget

A full afternoon of voting ended with the PSD-CDS coalition mustering 131 ayes—barely enough in the 230-seat Assembleia da República—thanks to the strategic abstentions from PS, PAN and JPP. The left fringe and the liberal right, namely Chega and IL, rejected the plan, contending it either spends too much or too little. For Prime Minister Luís Montenegro, the numbers tell a different story: a modest 0.1% surplus and a debt path descending to 88% of GDP. Critics fixate on the earmarked €1.2B military reserve, a sum the finance minister could deploy without fresh parliamentary consent.

What the new numbers mean for household wallets

Workers on the lowest rung will see the minimum wage rising to €920, the sharpest uptick since 2021. Mid-income families benefit from income-tax brackets adjusted for inflation, while retirees count on a permanent pension increase, though not the extraordinary bump some unions demanded. Social policy gained a boost through the Complemento da Prestação Social para a Inclusão, earmarked to lift disability benefits. To cushion living-cost shocks, the cabinet kept energy taxes frozen and floated a mortgage deduction pilot for young borrowers. Government economists peg 2026 inflation at 2.3%, a figure baked into automatic salary updates across the civil service.

Nationality law: longer road to a Portuguese passport

On the same day, deputies also waved through a sweeping rewrite of the 1981 statute. The headline is a 10-year residence requirement—up from five—alongside a compulsory Portuguese language and culture test. Courts may impose loss of citizenship for grave crimes committed within a decade of naturalisation. The bill scrubs the expedited track for Sephardic descendants and trims other exceptional regimes, though a special regime for EU citizens keeps the wait at seven years. Newborns gain automatic nationality only if a parent has completed the 5-year rule for parents. Any court-ordered revocation must still respect the principle of avoidance of statelessness.

Divided chamber: why PS chose the middle path

The Socialists call proposal a 'copy' of their own July motion, accusing the right of theatrics yet voting neither for nor against. They justify the stance as a shield for political stability, a scarce commodity since the snap election last May. Far-right Chega denounces 'tax stranglehold' and vows to re-table fuel-price cuts. Market-friendly Iniciativa Liberal questions defense spending that “sidesteps scrutiny”. Bloco, PCP and Livre maintain 'No', slamming what they see as social underfunding. For now, Montenegro is counting on moderates to shepherd the blueprint through the specialty debate ahead.

Experts weigh in on economic bets and migration overhaul

Banco de Portugal economists predict GDP growth of 1.8% if the global cycle behaves. Exporters cheer, but firms await corporate-tax cuts promised for committee stage. Migration lawyers applaud the €91M package for an Agency for Integration, Migration and Asylum (AIMA) digital accelerator that should unclog residence queues. Police unions, in turn, welcome the Unit for Foreigners and Borders to replace ad-hoc airport teams. On defence, analysts applaud NATO alignment, though fiscal hawks warn the cushion may vanish if growth falters. Social policy scholars caution fiscal room remains tight in a greying country, and demographers eye an ageing trend that will keep welfare costs climbing.

What happens next

The draft now enters the specialty phase, where each article faces line-by-line scrutiny. Parties have an amendment deadline in November, with the final vote slated for December. President Marcelo Rebelo de Sousa retains the power of a possible presidential veto, and a contentious clause could invite a Constitutional Court scenario. Until then, markets watching the spread on Portuguese bonds will gauge whether the fragile truce in Lisbon can hold through the winter.