Moody’s predicts that 60% of the Eurozone countries will be in recession this year. The energy crisis, rising interest rates and slowing global growth will trigger the recession.
Moody’s considers that the credit outlook for the euro zone countries is negative this year, due to a recession projected for 60% of these countries and the energy crisis, it announced on Monday.
In an analysis report, which does not constitute a ‘rating’ action, the financial rating agency forecasts that 60% of the countries in the euro zone will enter recession this year, with the contraction of the economies of Germany, Italy and Slovakia to reduce the GDP of these countries below pre-pandemic levels.
“Support measures at the national and European Union level and the reduce disruption to global supply chains It will mitigate some of these effects, but we still predict that 60% of eurozone sovereigns will be in recession by 2023,” said Heiko Peters, an analyst at Moody’s.
Moody’s explains that the outlook for the sovereign credit quality of the eurozone in 2023 is negative, since the energy crisis, the increase in interest rates and the slowdown in global growth will trigger a mild recession.
For the agency, to add to this scenario, if it materializes, the Stagflation could have “serious consequences” for the valuation of some southern European sovereigns.
In the longer term, high energy prices “may also weaken the region’s price competitiveness and lead to a structural decline in industrial bases in the absence of effective government action.”
Noting that although it is not Moody’s baseline scenario, the agency notes that an escalation of the Russia-Ukraine conflict involving the North Atlantic Treaty Organization (NATO) countries or the European Union would have negative credit implications.
Source: Observadora
