By Sergio Goncalves
LISBON (Reuters) - The Portuguese parliament on Wednesday approved the Socialist government's 2024 budget, three months before a snap election triggered by the resignation of Prime Minister Antonio Costa.
The bill in its final reading was backed with 120 votes in favour and 108 against in the 230-seat house, with two abstentions.
Costa resigned on Nov.7 over an investigation into alleged illegalities in his government's handling of "green" energy projects and a large-scale data centre, which led President Marcelo Rebelo de Sousa to call an election for March 10.
To ensure economic stability, Rebelo de Sousa retained the ministers, including the premier, with full powers until the budget is passed, after which they will operate as caretaker government until the election.
The Bank of Portugal warned last week that the political uncertainty could put pressure on government finances as the economy begins to slow.
The bill sees economic growth slowing to 1.5% in 2024 from an expected expansion of 2.2% this year, as inflation and high interest rates limit private consumption.
A broader economic decline in Europe is expected to penalise exports.
Investment is projected to rise by 4.1% next year after an increase of 1.3% in 2023, but experts have said that multi-billion-euro green energy projects that require European Union funds now risk being derailed.
The budget aims for a surplus of 0.2% of GDP next year, after a surplus of 0.8% in 2023, and to cut the public debt ratio to 98.9% of GDP from 103%.
Finance Minister Fernando Medina, reviewing the last eight years of socialist governance, said Portugal "has achieved financial credibility with balanced budgets".
"Debt reduction is not a whim, it is not a trophy, it is not a fetish. It is a path that guarantees our sovereignty," he said.
The bill foresees lower intermediate income tax rates for the middle class and higher wages, pensions and social benefits.
The opposition has criticised the Socialists for increasing the total tax burden through indirect taxes, such as on tobacco and alcoholic beverages.