"Political stability is necessary for the trust of Portugal, for the creation of new jobs, raising salaries," Costa said in a televised address, emphasizing that his responsibility is to "fulfil the commitments made with the Portuguese over the next four years."
Costa's Socialist Party received 36.7 percent of the votes in the Sunday election, but it failed to secure a majority in the 230-seat parliament.
The Socialist Party’s main rival, centre-right Social Democrats (PSD), came second with 28 percent of the votes.
Portugal’s Socialist government has ruled four years with support from smaller leftist parties. It has been credited with boosting economic growth to 2.1 percent above the EU average, lowering the jobless rate and reducing budget deficit.