DBRS highlights Portugal’s growth among European economies

Portugal was highlighted by the DBRS as one of the European economies that has maintained growth rates close to or equal to estimated potential economic growth rates, along with Spain and Belgium.

“For our September baseline forecast, revisions to the outlook for 2023 were mixed, reflecting both positive and negative surprises in the final months of the year. Some European economies (Spain, Portugal, and to a lesser extent Belgium, for example) continued to record growth rates close to or equal to their potential growth rates.” estimated, while most major European economies recorded faster growth (UK) or moderate recession (Germany),” the rating agency said in a note, highlighting that among major economies, the United States and Japan recorded outperformance over the past year.

For next year, “the outlook remains bleak,” notes the DBRS in a bulletin issued today on basic macroeconomic scenarios, recalling the deterioration of “the outlook in recent months.”

In terms of growth, the US stands out from other economies, given “the forecast was revised upward to a consensus of 1.2%”.

The rating agency expects central banks in North America and Europe to maintain higher interest rates through most of 2024. However, it points to a downward scenario in the second half of the year.

Regarding institutional banking, “Although most major banks have demonstrated resilience, we may see a deterioration in credit quality across loan portfolios, which could particularly impact smaller, less diversified banks that have significant exposure to commercial real estate or other high-risk sectors.” Risks: However, strong household balance sheets appear to help limit the duration and depth of the expected slowdown.

Analyzing the labor market, the agency believes that “tight labor markets are likely to contribute to persistent wage pressures, making it difficult for companies to reduce prices or prices or even maintain prices at current levels.”

In the world of business, DRBS highlights that despite “an increase in the number of large companies announcing layoffs or other headcount reductions, employment growth has continued unabated in many key sectors of the economy (such as healthcare and travel) in most economies.” “The big one.”

In the United States, among other markets, “the decline in unemployment also reflects some degree of labor force disengagement in the wake of the pandemic. Labor markets remain tight, even as employment opportunities continue to deteriorate. In Canada in particular, the accelerating pace of immigration has contributed to They supported faster growth and increased numbers of available workers, but also contributed to increased pressures towards higher prices for housing and related services.

DRBS expects unemployment to remain generally low until 2025 in most economies.

Finally, the DBRS warns of the risk of additional impacts of the current conflict in Ukraine and the war between Israel and Hamas on food or energy prices.

Although Western efforts to reduce dependence on Russian energy supplies have made significant progress, Russia remains an important oil and gas producer that could have an impact on global markets. Disturbances in grain production and exports could resurface. The rating agency explains that other geopolitical risks, namely the deterioration of US-EU relations with China, also remain a potential source of shocks.

“We have added our 2025 outlook to our scenarios, which at this point reflect expectations of a recovery in activity, which appears to be based on the assumption that major central banks will begin to slow activity in the middle or end of 2024.” “, highlights the same note.