Moody’s warns oil investors
2022.11.21 12:52
Moody’s warns oil investors
Budrigannews.com – According to Moody’s (NYSE:), the credit rating agency, the outlook for non-financial companies in Europe, the Middle East, and Africa for credit conditions in the coming year is negative.said on Monday, as energy and wage costs rise and financing conditions worsen.
Financing conditions are getting tighter, inflation is rising, and the global economy appears to be headed for its first recession since 2009 after more than a decade of extremely loose monetary policy.
“Higher loan costs will make supporting circumstances decay and will debilitate liquidity and credit quality,” Moody’s said.The agency also pointed to weak consumer sentiment and lower household purchasing power, which will hit demand in 2023 across most consumer-driven sectors and some industrial segments such as chemicals, construction, and automobiles.
This could compel many businesses to focus on cash conservation by reducing shareholder returns and debt-funded M&A.
Moody’s noted, “Sectors reliant on discretionary demand will be hit hardest.”However, it anticipates that telecoms, gaming, and airlines will continue to recover from the pandemic.
It went on to say that “the conflict between Russia and Ukraine remains a key geopolitical risk,” as Moscow’s reduction of gas exports as a response to Western sanctions has left Europe and other regions scrambling to fill the energy gap.
According to the agency, although supply constraints will lessen, energy scarcity will continue to squeeze margins. However, high power prices will support oil and gas companies’ credit ratios.
It brought to light the possibility of rising wage inflation, which will disproportionately affect certain industries, such as retail, hospitality, and leisure, escalating tensions in labor relations.
Investors have expressed concern about European companies’ plans to pay one-time bonuses and raise wages because, according to Eurostat, costs for businesses in the euro zone increased by 43.3 percent in the year to August.
Moody’s projects real GDP growth for the G20 economies to be 1.3 percent next year, down from an estimated 2.5 percent in 2022.
