The Brazil international missed his side's final pre-season fixture against Athletic Bilbao in Dublin due to a back problem. He was dropped from the squad as a precautionary measure by the Merseyside club manager Jurgen Klopp.
Coutinho is undergoing treatment for his back problem at Melwood since Liverpool returned from Germany. According to the Daily Mail, the midfielder is yet to return to training, which has raised concerns over his availability to face the Hornets.
The 25-year-old is wanted by La Liga giants Barcelona, who are also closely watching his developments at the club. The Catalan outfit has seen their initial bid of £72m ($94.5m) and also saw their second bid of around £90m, ($117.3m) turned down by the Merseyside club, reports the BBC.
Coutinho is reportedly keen on leaving Anfield for Camp Nou. However, Liverpool have rejected Barcelona's second bid after making it aware to Ernesto Valverde's side that the former Inter Milan man is not for sale.
Liverpool are currently dealing with Barcelona's interest in Coutinho as the player is recovering from the back injury. Should the South American playmaker miss the clash against Watford, it will be a massive blow to the Reds.
Klopp is already without Adam Lallana as the England international midfielder is out of action for two months due to a thigh injury. In addition to this, Nathaniel Clyne is recovering from hamstring and back problems as he missed Liverpool's pre-season trip to Asia and Germany.
According to an earlier Telegraph report, the right-back is unlikely to face Watford. Danny Ings and goalkeeper Adam Bogdan are recovering from long-term injuries as Lallana and Clyne join the former duo on Liverpool's treatment table.
Should Coutinho fail to be ready to take on Marco Silva's side, Klopp will be without five players for the first competitive match of the season. Liverpool then travel to Germany as they face Bundesliga outfit Hoffenheim in the Champions League play-off on 15 August.