Fitch Ratings on Thursday cut Portugal's sovereign credit rating to BB-plus from BBB-minus, putting the country's rating in junk status.
The rating carries a negative outlook, which means a further cut is possible.
"The country's large fiscal imbalances, high indebtedness across all sectors, and adverse macroeconomic outlook mean the sovereign's credit profile is no longer consistent with an investment-grade rating," Fitch said in a news release.
The ratings firm said recession will make the government's deficit-cutting plan more challenging and will hurt bank asset quality, but that the government's commitment to the plan was "strong."
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