Nov 21 (Reuters) – The outlook for credit score situations subsequent yr for non-financial corporations in Europe, Center East and Africa is adverse, credit standing company Moody’s mentioned on Monday, as financing situations degrade and vitality and wage prices loom.
After greater than a decade of ultra-loose financial coverage, financing situations are tightening, inflation is rising and the worldwide economic system seems poised to fall into its first recession since 2009.
“Larger rates of interest will trigger financing situations to deteriorate and can weaken liquidity and credit score high quality,” Moody’s mentioned. This might compel many corporations to concentrate on money conservation by curbing shareholder returns and debt-funded M&A.
The company additionally pointed to weak client sentiment and decrease family buying energy, which can hit demand in 2023 throughout most consumer-driven sectors and a few industrial segments equivalent to chemical compounds, building and autos.
“Sectors reliant on discretionary demand will likely be hit hardest,” Moody’s famous. It nevertheless expects telecoms and gaming to be resilient and airways to proceed to get better from the pandemic.
“The battle between Russia and Ukraine stays a key geopolitical danger,” it added, as Moscow’s lower in fuel exports in retaliation for Western sanctions has left Europe and different areas scrambling to plug the vitality hole.
Though provide constraints will ease, vitality shortage will hold squeezing margins, the company mentioned, however excessive energy costs will help credit score ratios of oil and fuel corporations.
It highlighted the potential of rising wage inflation, which some companies, together with retail, hospitality and leisure, will undergo disproportionately, fuelling tensions in labour relations.
Plans by European corporations to extend wages and pay one-off bonuses have prompted considerations amongst traders after prices for corporations within the euro zone surged 43.3% within the yr to August, based mostly on the EU’s statistics workplace Eurostat.
Moody’s forecast actual gross home product progress for G20 economies of 1.3% subsequent yr, down from an estimated 2.5% in 2022.
Reporting by Juliette Portala, modifying by Jane Merriman
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