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First quarter continued 2002's downward credit trend in Europe, Moody's says
New York, April 10 - Credit quality continued to deteriorate in western Europe during the first quarter of 2003 and the outlook is for more of the same, according to Moody's Investors Service.
The downward move continued the trend of 2002, the rating agency said.
During the first three months of 2003 there were 52 downgrades, similar to the average of 53 per quarter during 2002. And the number of upgrades fell to four from a quarterly average of 14 last year.
"Downgrades are likely to continue outnumbering upgrades by a wide margin in 2003, with only a very modest economic recovery expected during the second half of the year," said Kerryn Fowlie, assistant vice president and economist at Moody's Investors Service in London, in a news release.
"The outlook for the European economy remains blighted by the possible implications of still volatile financial markets, weak labor markets and the potential loss of export competitiveness as a result of a stronger euro.
"Until a palpable economic recovery helps to boost earnings and to sustain a rally in the financial markets, the rate at which downgrades outnumber upgrades is unlikely to fall substantially."
Of the 52 downgrades during the first quarter, 36 were to non-financial issuers as were two of the four upgrades.
Utilities, in particular, remained under pressure, accounting for a third of all non-financial sector downgrades during the quarter as the aggressive growth strategies adopted by some companies continued to weaken debt protection levels in the sector, Moody's said.
Telecoms made up 11% of downgrades compared to 26% in 2002.
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