The Bank of Portugal said on Wednesday the political uncertainty following the resignation of Prime Minister Antonio Costa is a new risk amid for the country's economy amid an already slowing economy that will add pressure on the government's finances.

"The recent political uncertainty that the country is experiencing is a new source of risk, despite being mitigated by the expected approval of the 2024 budget proposed by the government," it said.

There may be "increased pressure on public finances due to a slowdown in economic activity, combined with the reversal of the cycle of reducing spending on interest, in a context of still high debt".

In its quarterly financial stability report, the central bank added the political risk to other risks it had already highlighted such as the increase of defaults on loans by the most vulnerable families and companies as a result of a still high inflation and soaring interest rates.

The report, which examines threats to the country's financial stability, also identified the slowdown in the residential real estate market in Portugal as a risk, with an impact on prices. (Reporting by Sergio Goncalves;editing by Inti Landauro)