"For example, multi-year spending commitments alongside tax cuts will add rigidity to future budgets," says Moody’s in its note on the budget, released on Friday. "Over the medium to long term, this may increase pressure on the government’s balance sheet, especially if growth underperforms."

In its draft budget, the government includes measures that reduce the tax burden on those with lower incomes – with an increase in the number of brackets and an increase in the personal tax allowance. These will have an effect on state revenues in 2018 and 2019, when effective tax rates for individuals for 2018 will be calculated.

Moody's expects real growth in gross domestic product to slow by more than the budget projection, so that its deficit forecasts will continue to exceed those by the authorities. It sees the deficit narrowing to 2% in 2018 from 1.8% this year, as opposed to the government's 1% target for next year, following a projected 1.4% this.

Still, the agency stresses that it expects strong growth this year to start reducing Portugal's mountain of state debt.

"We expect the general government debt burden to gradually decline, starting from 2017, and reach just above 124% of GDP by 2018,supported by the favourable growth outlook and savings on interest costs, albeit at a slower pace than outlined in the draft budget," it said.

The government is forecasting state indebtedness to be equivalent to 123.5% of gross domestic product in 2018, around one point lower than this year.