These factors are decisive for promoting investment and an efficient allocation of capital, and moreover, promote sustained growth in the economy. Sustained growth is also indispensable for preserving financial stability, by ensuring the wealth creation needed for paying down debt to the financial system.
A protracted recessive environment leads to an increase in bankruptcies and unemployment, creating significant growth in non-performing loans which weakens the banks’ balance sheets and jeopardises financial stability. In this context, given its responsibilities in supervising the Portuguese financial system, Banco de Portugal has a key role in the Portuguese economy’s adjustment strategy.