The Portuguese Banking Association is urging regulatory and state intervention to help prevent a rise in nonperforming loans due to the coronavirus pandemic, Reuters reported.
Faria de Oliveira, the association's head, told Reuters that it was premature to estimate the level of NPLs resulting from the pandemic but added that a severe recession is widely accepted to be imminent and said it was "crucial" to adopt countermeasures aimed at ensuring companies and families can continue repaying their debt.
Portuguese banks' NPL ratio was 6.1% in December 2019, which is significantly lower than the 17.9% they were struggling with in mid-2016 but still almost double the European average, the report said.
Oliveira also said the European Union's response to the pandemic is "absolutely critical" in mitigating its impact in the short term and to help economies get back on their feet post-crisis. He added that the banking sector will support the economy as long as it does not put financial stability at risk.
The country's central bank is predicting a 3.7% to 5.7% contraction in the economy in 2020 based on the fallout of the COVID-19 crisis, versus 2.2% growth in 2019.
Portugal has already introduced a number of measures to help deal with the pandemic, namely a €4.2 billion credit line for impacted companies and a six-month moratorium on debt repayments by companies and households.