Credit rating agency Moody’s said yesterday that the recovery in the entire Eurozone economy will be “slow, uneven and fragile.” For this reason, the agency has kept the sovereign solvency of the region on a “negative” perspective. Spain will be the euro area member country which will register the greatest rebound in GDP in 2021, with growth of 6%, compared to the average of 4.7% for the Eurozone. That said, it will close the year as the economy farthest from the pre-pandemic level, after suffering the greatest impact of the Covid crisis in 2020. GDP will contract 11.4% versus the Eurozone average of 7.7%.
In addition, Moody’s points out that Spanish public debt is at maximum levels for a century. The agency has therefore warned it will take into account in its next rating reviews whether the Spanish government presents a credible plan to reverse the fiscal deterioration aggravated by Covid-19. (Brussels expects Spain’s deficit to continue above 8% at the close of 2022). A downgrade of the current rating (Baa1 with a stable outlook) could lead to the downgrade of more than 50% of Spain’s companies’ in 18 months. Even so, this warning is not exclusive to Spain (public debt/GDP 120%), as there are other countries with high debt problems (Italy 158%, Greece 200%, Portugal 137%).Meanwhile, the continued support of the ECB means the rise in the cost of financing is minimal, with Spain’s 10-year yield having risen only 7 basis points from the minimums of 2020: 0.06% vs the minimum -0.02%.
According to Moodys’ forecasts, only Lithuania will manage to recover pre-crisis GDP levels, with an estimated growth of 3.3% in 2021, after the fall of 1.7% in 2020. Meanwhile, the recovery in the largest euro economies will extend to 2022, with Spain being the furthest away from pre-crisis GDP levels in 2020. It is followed by France, with a recovery in 2021 of 5.3% after the 10.2% contraction estimated for 2020.