August 9, 2022
Portugal is one of the countries with the highest risk of inflation exposure, according to a US agency Moody’s warning that the war in Ukraine is raising the risk of stagflation in the European Union (EU). Heiko Peters, a senior analyst at Moody’s, was quoted in a document that was made public as saying, “The conflict has exacerbated underlying demand and supply issues and pushed inflation to levels not seen in the EU since the mid-1980s”.
The expert also notes that “a suspension of Russian natural gas imports would probably increase these pressures. According to studies conducted by the European Commission, an increase in inflation is probably imminent. According to Moody’s, the EU GDP would expand by 2.5 percent in 2022 and 1.3 percent in 2023, while the consumer price index (CPI) will slow from 6.8 percent in 2022 to 4.4 percent in 2023.
Nonetheless, structural shifts, particularly the move of EU members away from Russian energy imports, changes in regional and global supply and demand, and “have elevated risks of stagflation.”
However, Moody’s notes that for stagflation to occur, price dynamics would need to be restrained by elements like “higher-for-longer energy prices.” Additionally, “a fiscal-monetary policy mix that supports growth could enhance the danger of a stagflation situation.”
The exposure of southern Europe to this phenomenon was also warned against by Moody’s. “We consider southern Europe as being most exposed to a stagflation scenario based on a variety of factors that show variations in the exposures to ingrained inflation, significantly lower growth, and in the policy reaction functions,” the agency stated.
Malta, Cyprus, Portugal, Slovenia, and Croatia have the lowest capacity for policymaking and the biggest likelihood that temporary price hikes will become permanent, according to Moody’s. Portugal is ranked eighth on the rating agency’s list of nations most vulnerable to inflation.
Source: EcoNews.pt
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