Moody's warns of possible recession in Europe if it ditches Russian oil and gas

I KNOWMadrid Updated: 04/17/2022 17:14h

Cutting all energy ties with Russia could trigger an economic recession - at least two consecutive quarters with falling GDP - in Europe. This follows from a recent Moody's report in which it warns of the risks for the Old Continent of doing without Russian natural gas and oil, according to Servimedia.

“While a complete cut-off in Russian energy exports to the EU is not our baseline assumption, its negative effects would ripple across all asset classes, in particular European utilities, non-core but energy-intensive sectors. energy and those with short-term refinancing needs”, says Laura Pérez, Moody's associate general manager and responsible for the report.

Thus, the rating agency predicts that this scenario would lead to energy rationing in certain countries of the European Union. However, the institution believes that reaching this situation of cutting energy ties with the country led by Vladimir Putin would be unlikely to happen.

For Moody's, this recessive scenario with rising raw material prices, supply disturbances, economic and financial disturbances in addition to security challenges would be the main channels that would also end up affecting credit, the aforementioned agency collects. Also, the report explains that European utilities and energy-intensive companies would be among the most affected by the band shutdown against Russian energy.

Beyond this, Moody's also warns that a situation of turning its back on gas and oil from that country would cause tensions in some countries at the credit profile level. In short, it would increase the risks for the economic and fiscal soundness of certain States.

The report also goes into detail that ending Russian energy exports would cause further damage to supply chains, with increases in commodity prices and inflation.

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