Portuguese Economy Minister Pedro Siza Vieira said the government will extend its loan repayment moratorium by a further six months to September 2021 to prevent an increase in nonperforming loans due to the coronavirus pandemic, Reuters reported.

Vieira said households and most companies will benefit from this but they will have to start paying interest from March 2021, the report noted.

Portugal had already introduced a six-month moratorium on debt repayments by companies and households until March 2021.

In April, the Portuguese Banking Association was urging regulatory and state intervention to help prevent a rise in nonperforming loans due to the pandemic.

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Portuguese banks' NPL ratio was reportedly 6.1% in December 2019, which is significantly lower than the 17.9% they were struggling with in mid-2016 but still almost double the European average. The country's central bank reportedly predicted a 3.7% to 5.7% contraction in the economy in 2020 based on the fallout of the COVID-19 crisis, versus 2.2% growth in 2019.