Standard & Poor's warned Portugal that it would lower the credit rating of the nation in coming few months if the government fails to meet its budget targets.

S&P on Wednesday placed the 'BB' ratings of Portugal on credit watch with negative implications as there is rising risks to fiscal consolidation objectives and an increased likelihood of noncompliance with the current EU/IMF program.

There is a one-in-two chance that the agency could lower the ratings in the next few months if fiscal performance falls short.

Risks include further challenges to fiscal and reform measures by constitutional court, weaker-than-expected economic performance, and a resurgence of political tension leading to delays in 2014 budget or program reviews, it said.

The court rejected a key government measure related to the termination of permanent contracts for public sector workers. In April, it rejected fiscal measures amounting to 0.8 percent of GDP.

S&P said these developments raised doubts as to whether Portugal will be able to comply with the ambitious debt stabilization target fixed by the IMF/EU program.

The rating agency also see an increasing risk that Portugal will not regain full capital market access early next year and that the government will require a second official support program after the current program expires in June 2014.

RTTNews