The outlook for credit conditions next year for non-financial companies in Europe, Middle East and Africa is negative, credit rating agency Moody's said on Monday, as financing conditions degrade and energy and wage costs loom.
After more than a decade of ultra-loose monetary policy, financing conditions are tightening, inflation is rising and the global economy looks poised to fall into its first recession since 2009.
"Higher interest rates will cause financing conditions to deteriorate and will weaken liquidity and credit quality," Moody's said. This could compel many companies to focus on cash conservation by curtailing shareholder returns and debt-funded M&A.
The agency also pointed to weak consumer sentiment and lower household purchasing power, which will hit demand in 2023 across most consumer-driven sectors and some industrial segments such as chemicals, construction and autos.