DBRS: The economic outlook has deteriorated in all countries – The bar for the development of Greece is lowering

Of Eleftheria Kourtali

The rating agency DBRS has downgraded its estimates for the growth of Greece this year, now predicting that the Greek GDP will increase by 3.9% this year and by 3.2% in 2023, from 4.3% and 3.4%. foreseen in March and in its previous report on the international economic outlook.

As the house points out, since March, short-term growth prospects have deteriorated in most countries, while high inflation will not subside quickly, even if interest rate hikes manage to slow demand growth. “The geopolitical tensions arising from Russia’s invasion of Ukraine are unlikely to ease any time soon, so in the face of a protracted conflict, energy and food supplies remain vulnerable and prices are likely to remain high,” he said.

Forecasts for growth in Europe in 2022, in particular, have been cut due to the effects of the Russian invasion of Ukraine, increased inflationary pressures and additional disruptions in supply chains. US growth forecasts have also deteriorated, in part due to the negative contribution of net exports in the first quarter, but also due to the expected impact of high inflation and higher interest rates. According to DBRS, high commodity prices are likely to persist as the conflict in Ukraine continues and could further limit growth prospects until 2023.

However, despite the lower expectations for growth, unemployment rates remain close to record low levels in many economies, with the house estimating that in Greece unemployment will reach 12.9% this year and in 2023 at 12.4%.

Although DBRS is monitoring the impact of asset prices, especially in countries with high real estate prices and high housing construction rates, it does not expect the forthcoming global economic slowdown to turn into a severe recession and affect the ratings of the countries it monitors. A mild economic downturn scenario and a mild recession scenario are unlikely to differ substantially in terms of credit impact, however, as a deeper recession indicates, especially if accelerated by additional geopolitical shocks, a pandemic resurgence or a major “pandemic”. in asset prices could have a greater impact on ratings.

With regard to inflation, the house points out that the geopolitical tensions arising from the Russian invasion of Ukraine do not seem likely to ease soon. With the prospect of a protracted conflict, energy and food supplies remain vulnerable and prices are likely to remain high, DBRS notes.

Key short-term growth risks in Europe in general include energy supply, interest rates and geopolitics, according to DBRS. Russia’s relationship with Europe and other NATO countries seems to be undergoing a dramatic and lasting change. Russia has refused to withdraw from Ukraine, and NATO countries have provided overt support to the Ukrainian government and military. EU governments have also followed other NATO countries by imposing extensive sanctions on Russian officials and companies. The extension of sanctions on oil and gas and additional efforts to reduce dependence on Russia, as well as Russia’s anti-sanctions, increase the likelihood of a wider cut in Europe’s energy supply, warns the DBRS. The European manufacturing sector could suffer this winter along with vulnerable households if the conflict continues.

DBRS also monitors the potential impact of interest rate shocks, including on the real estate sector, other asset prices and the operation of monetary policy. While stock markets have declined, property prices continue to rise in most of the major economies. This leaves household balance sheets in relatively good condition.

Rising interest rates have begun to affect home sales and prices have begun to stabilize or fall in some high-priced metropolitan areas. The affordability of mortgages has deteriorated rapidly, especially in the US and Canada, and DBRS expects that this will at least slow down the rise in house prices. “We see limited risks to financial stability right now,” he said. “However, a steady rise in interest rates could have wider and more adverse effects.