Europe risk score slightly drops in Q4 2022 as targeted stimulus measures offer relief, says GlobalData

Europe faced a cost-of-living crisis in 2022 due to high prices of energy and food. Uncertainty over war, protests in several countries, and tight monetary conditions added to the woes. Despite this, targeted stimulus measures from governments eased the burden on households and firms. As a result, the region’s risk score slightly dropped from 33.4 in Q3 2022 to 33 out of 100 in Q4 2022, but remained higher than Q2 2022’s score of 32.6, reveals GlobalData, a leading data and analytics company.

In the 19th update version of GlobalData’s “Global Risk Report Quarterly Update – Q4 2022,” which evaluated 41 countries in the European region, 16 countries were identified in the very low risk zone, 14 countries in the low-risk zone, 10 countries under manageable risk, one country under high risk.

Out of the 41 countries in the Europe region, Slovakia and Montenegro slipped by two places to 24th and 36th ranks, respectively, in Q4 2022 when compared with the previous update. Norway exhibited the swiftest improvement in ranking in Q4 2022, indicating a steady economic recovery aided by higher revenue from hydrocarbon exports.

Maheshwari Bandari, Economic Research Analyst at GlobalData, comments: “Although inflation is expected to decline because of tight monetary conditions, the risks are significant and lean mostly to the upside. By the end of 2023 and beyond, inflation is expected to stay over ECB’s target. In addition, tight labor market and uncertainty over war create less room for growth in most economies of the region.”

Meanwhile, Eastern Europe is expected to remain vulnerable to Germany’s expected real GDP contraction in 2023 as they have close industrial ties which can impact the employment prospects and industrial production. On the other hand, thousands of people demonstrated throughout Europe against the growing cost of living, and proposed changes to pension systems.

Following a turbulent year in 2022 marked by dwindling gas supplies and skyrocketing energy costs, Europe is now looking beyond emergency measures to explore long-term solutions to the energy crisis and lay the foundation for the green transition. Since the beginning of energy crisis in September 2021, countries in Europe allocated $798.2 billion to protect consumers from increasing prices of energy, as of March 2023. Of the total, Germany alone allocated $279.1 billion.

Bandari concludes: “As Russia’s assault on Ukraine continues, the threat of war looms large over Europe, posing a serious concern for the region. Despite this, the start of 2023 brought some relief for both businesses and consumers as inflationary pressure eased. However, prices are still expected to remain well above the central bank’s target of 2%, which will likely result in the central bank maintaining a higher policy rate for an extended period.”