EU economies resilient against Russia slowdown – Moody’s
EU countries face only minor credit impairment risk from a slowdown in the Russian economy, and any disruptions to trade and financial links between Russian and the EU will be manageable, according to a report issued by rating agency Moody’s.
“Our base case forecast that Russia’s GDP will contract by 1 percent this year has no impact on the EU’s economy or the credit profiles of EU issuers”, said Marie Diron, Moody’s senior vice president, in a press release.
“Even an escalation of the geopolitical crisis that led to further economic deceleration in Russia or disruptions in trade and financial relationships would not have significant economic or credit impact on the EU in most cases,” added Ms Diron.
Some threats remain, these include increases in gas prices and reduced overall confidence could negatively impact EU credit profiles. Some EU exporters to Russia may face a fall in consumer demand in the country. However, even in “extreme” scenarios Moody’s expects the effects to be “manageable.”
The sovereign issuers most at risk of a deterioration in credit profiles are states such as Cyprus or the Baltics, which have relatively high exposure to Russia through trade links and investment.
European banks’ exposure to Russian financial risk is relatively low, and does not pose a systemic threat in Moody’s assessment. Although, as a separate report by Fitch ratings agency recently highlighted, Austrian banks, and in particular Raiffeisen, are open to shocks emerging from Russia and a continuation of the crisis in Ukraine.