Bank of Portugal: Over-indebtedness could lead to reduced investment

Portugal risks facing over-indebtedness that could lead to reduced investment in the medium-term, the head of the Bank of Portugal, Mário Centeno warned on Friday.

“To face this difficulty, measures are needed to strengthen the capital of companies, to reduce leverage and increase their debt service capacity,” Centeno, the country’s former finance minister, said at the opening of a conference organised by local media outlets Dinheiro Vivo and TSF.

He added that an efficient use of public funds required “procedures that allow an effective identification of viable companies, which must be the privileged recipients of these supports.”

Centeno, known as the “Ronaldo of finances,” has been praised for helping bring Portugal’s public debt down and reducing the deficit significantly.

The country’s economy grew 2.2% in 2019, reaching its first budget surplus in 45 years, but as COVID-19 ravages economies around the world, figures now paint a bleak picture for the country, with the government expecting the economy to contract 8.5% this year. Debt is expected to reach 135% of GDP next year.