CMVM warns of increase in bankruptcies
The President of the Portuguese markets regulator CMVM, Gabriela Figueiredo Dias, has warned this week that the shock to the economy from Covid-19 will get worse in Portugal causing more private and public debt and an increase in the number of company bankruptcies and loan defaults which will put more pressure on the financial system.
“As the fallout from the economic shock spreads in an intense manner, one should expect alarming signs. Private and public debt will increase, as well as the number of bankruptcies and loan defaults, putting new pressures on the financial system, in particular more fragile entities which have less financial autonomy,” she said in her opening statements to the annual CMVM conference which took place during World Investors Week.
The opinion of the CMVM president is based on the economic effects of the Covid-19 pandemic which is already being felt in Portugal and which could get even worse. Despite this period of “apparent recovery and relative calm” Figueiredo Dias warns that the forecasts from the Bank of Portugal anticipate a GDP contraction of 8.1% and an unemployment rate of 7.5% which are “worrying signs”.
“From the same forecasts, it will take us two years to recover to the levels we had in 2019 while in 2022 we will have more unemployment than last year,” she added.
Which is why the head of the capital markets regulator in Portugal has a “clear expectation that the moment will come when the dissociation identified between the behaviour of the markets and the real economy will see a correction and the risk of bankruptcies for companies will rise across the board,” she warned.
Gabriela Figueiredo Dias stressed therefore the “even more essential role” that the capital markets will have in the economic recovery as a source of alternative financing to channel family savings into the economy, providing them with investment opportunities with greater returns.
The capital markets will contribute to the “recapitalisation of companies, enabling them to achieve a balanced, more resilient and diversified capital structure,” the CMVM president concluded.