DBRS, a financial rating agency, has raised concerns about the possibility of a setback in Portugal's Recovery and Resilience Plan (PRR) if the outcome of the legislative election leads to extended negotiations or political turmoil.

"The most tangible short-term risk is a potential delay in the implementation of Portugal's Recovery and Resilience Plan, especially if government formation drags on over time or if the next government is short-lived and triggers snap elections relatively early," DBRS stated.

However, within the concerns (which doesn't constitute a 'rating' action), DBRS is confident that the forthcoming government will maintain stability in budgetary policy and not disrupt its conduct.

"We see limited risks to Portugal's public debt reduction efforts in the coming years, regardless of which party leads the next government," according to the agency's analysis.

As a result, DBRS does not believe that "the next government, whether led by the AD [Democratic Alliance] or the Socialists, to deviate from a decade-long commitment to prudent fiscal policy and debt reduction".

In addition, the rating agency also highlighted that the start of the privatisation process for TAP was halted due to the downfall of António Costa's Socialist government. However, it anticipates that "it will probably be restarted after the formation of a new government."

"The reactivation of the TAP privatisation process could provide another favourable boost to the reduction of Portugal's public debt. However, we do not expect this to materially alter the trajectory," DBRS said.

Furthermore, the rating agency forecasts that none of the parties will achieve an absolute majority in parliament, The Portugal News reports, but "Chega's rise in opinion polls could give it the opportunity to join a right-wing coalition."

Last month, DBRS confirmed Portugal's 'A' rating, whilst still maintaining a 'stable' outlook.

The 'rating' represents an evaluation provided by financial rating agencies, significantly influencing the financing of countries and companies by assessing credit risk.