FICO and Efma today announced the results of the fourth European Credit Risk Survey, which shows a grim outlook for 2012. In the survey, which queried credit risk management professionals in January and February, 79% of respondents forecast a new European recession for 2012.
Opinions on the likelihood of a new European recession varied by market. For example, in Germany, Austria and Switzerland (the DACH region), just 45 percent of respondents forecast recession, and in the UK and Ireland, the count went down to 40 percent. However, 76 percent of respondents in Central and Eastern Europe said a new European recession is likely this year.
When asked if they believed their own country would enter a new recession in 2012, 100 percent of Spanish and Portuguese respondents said yes, and 44 percent saying they strongly agreed with this statement. More than half (53 percent) of respondents from the UK and Ireland forecast a local recession, compared with just 25 percent from the DACH region.
Risk managers also see a tough year ahead for the housing market. Asked if it would end the year stronger than it is now, just 2 percent said yes, and 60 percent said no. The DACH region had the most positive outlook, with 56 percent of respondents saying the housing market would get stronger in 2012. By contrast, just 18 percent of respondents from the UK and Ireland agreed, and no one in Spain and Portugal forecast an improvement.
“We don’t see housing markets improving until job markets improve, and right now the forecast looks rocky at best,” said Mike Gordon, FICO vice president and managing director for Europe, the Middle East and Africa. “These forecasts echo those in our recent survey of US credit risk professionals, who said housing prices would not return to pre-recession levels until at least 2020. In countries like the US and the UK, the housing market also won’t rebound until the backlog of distressed properties is cleared out.”
Patrick Desmarès, secretary general of Efma, added: “With the Eurozone sovereign debt crisis still playing out, bankers have every reason to be pessimistic. Until the political situation at the core of Europe is resolved, or the global economy improves to the point where it lifts European markets, confidence among bankers and consumers will be at a low ebb.”
A detailed report, including specific results for the UK, Germany/Austria/Switzerland and Spain/Portugal, is available online. Participants included credit-granting institutions ranging from local banks to global institutions. More than 100 representatives from 31 European countries and 79 companies responded to this survey.
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