Standard & Poor's Ratings Services is starting a three-month review of its ratings for Portugal's debt that could lead to a downgrade.
The ratings agency says placing Portugal's credit ratings on "CreditWatch" reflects concerns about increased risks to the government's creditworthiness.
Portugal is widely considered the next European nation likely to need a bailout. Concerns about the further spread of the debt crisis that has already led to Greece and Ireland getting European Union assistance have unsettled world markets recently.
S&P says while Portugal has outlined "an ambitious fiscal austerity program," the government has made little progress with reforms to generate growth and it expects the nation's economy to shrink next year.
The review will consider what Portugal does to address growth, and the terms of any potential EU deal.