European issuers’ solvency to keep falling in 2009: Moody's

Business Materials 2 February 2009 16:43 (UTC +04:00)

Azerbaijan, Baku, Feb. 2/ Trend , N. Ismayilova/

The solvency of the European issuers will keep falling in 2009 due to spill-over effect of consequences of credit crisis to the global economy, according to new comments by the Moody's Analytics European Credit Trends - results of 2008 and forecast for 2009.

In Q4 of 2008, European economic and financial landscape worsened and forecast for 2009 is pessimistic as majority of the large European economies including Germany, the united Kingdom, France, Spain, Italy and Switzerland are experiencing recession, the comments said.

"Moody's short-term forecast on credit quality in the Western Europe worsened to a great degree amid deepening recession and sharp shortage of credit resources," Moody's junior director Christine Lee said.

Given the number of ratings set for control with possible fall and statistics of rating review in Q1 of 2009, the company forecasts rise in reduced ratings of non-financial companies and financial issuers both in speculative and investment segment.

"The credit quality fell at high growth rates in Q4 in the sector of issuers with speculative rating which was distinguished for stability earlier," Lee said. "So, number of reduced ratings hit 52 compared to 13 from previous quarter."

Moody's forecast for the CIS and Russia is less pessimistic. Economic recession, devaluation of currency and sharp outflow in foreign funds have a strong falling impact on ratings in this region. In Q4 of 2008, Moody's announced 33 reduced ratings in the East Europe and Russia. While governments in the region expect financial support from IMF and European Central Bank, statistics of Moody's forecasts gives ground to suggest that solvency in the region will keep falling.

Moody's says countries who are involved in foreign trade and international and financial relations to a great extent will face a sharper downturn while those who rely on domestic market and possess great opportunities to maneuver in fiscal policy will achieve better results. However, improvement of fundamental credit indicators to a great degree will depend on how soon the radical measures taken recently by the central banks to cut interest rates and large-scale state support programs will help restore market activity and production and to what extent state support measures for banks will contribute to restoration and encourage rise in volume of lending.

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