Italian GDP, zero growth for Moody’s in 2023 (compared to 2.7% in 2022) – Corriere.it

Moody’s lowers its outlook on the Italian banking sector, which goes from stable to negative. «We expect the growth of the Italian GDP it will drop to 0% in 2023 – explains the agency – compared to 2.7% forecast for 2022, hit by the impact of the military conflict in Ukraine, the energy crisis and high inflation ”. Operating conditions have the greatest impact and will further deteriorate in the next 12-18 months, weakening the quality of loans, profitability and accessibility to bank loans.

The benefits of the increase in loan yields have been canceled

Rising prices “will affect the creditworthiness of small businesses and households, creating new lending problems,” Moody’s added. Furthermore, the benefits of higher loan yields as interest rates rise will be completely offset by weakening lending due to the slowdown in the economy, increased loan loss provisions and ” increase in operating costs, as well as the reimbursement of the ultra-economic Tltro2 program of the European Central Bank (ECB). «We expect that the capital ratios of Italian banks will absorb the growing risks and will remain substantially solid – continues Moody’s -. Government measures to alleviate the pressure on businesses and households caused by rising energy costs will also help the banking sector ”.

The influences of the energy crisis and inflation

Not only for Italy, the agency has changed the outlook for the banking sectors from stable to negative also in the Czech Republic, Germany, Hungary, Poland and Slovakia: the energy crisis and so high inflation, in addition to the increase interest rates, in fact, visibly weaken economic development. The changes are due to the agency’s forecasts which hypothesized «a further deterioration of operating conditions, which will go to undermine the quality of loans, profitability and access to finance for banks, although the impact will vary from country to country – explains Louise Welin, Moody’s vice president and senior credit officer -. Economies are hit by the energy crisis and high inflation following the Russian invasion of Ukraine. The increase in prices will affect the creditworthiness of many businesses and households, triggering the formation of new problematic loans ».