OREANDA-NEWS. Most attendees at Fitch Ratings' annual Credit Outlook conferences last week were gloomy about the eurozone's economic prospects in 2015, although few predicted a renewed crisis in the bloc this year.
Audience polling in Paris and London found that nearly three-quarters (74%) of attendees expected economic stagnation. In Frankfurt, the proportion was lower, at 67%.

Opinion among the rest was split between more optimistic and pessimistic responses. Economic recovery was predicted by 17% of attendees in Frankfurt, 16% in Paris, and 10% in London. But 16% in Frankfurt and London and 10% in Paris thought crisis of the type like that of 2012 will reoccur this year.

Low nominal GDP growth is the key risk to eurozone sovereign ratings. Fitch cut its 2015 eurozone GDP growth forecast to 1.1% in December - down 0.2pp from our September forecast but still consistent with our prediction of a slow, gradually accelerating recovery in 2014-2016.

The revision was partly prompted by subdued growth in the third quarter. The start of rebalancing and recovery in some of the eurozone's crisis-hit economies is being offset by weakness in the bloc's three largest economies. German GDP grew 1.6% yoy in 3Q14, and French GDP by just 0.4%, according to Eurostat. Italian GDP contracted by 0.5%. Deflation is a meaningful risk (eurozone annual inflation was -0.2% in December), although prolonged deflation is not our baseline assumption.

More positively, eurozone exports should benefit from recoveries in the US and the UK, and lower energy prices could boost consumption. High public debt constrains policymakers' ability to boost growth, but the fiscal stance in the bloc turned broadly neutral and the ECB has maintained an accommodative monetary policy.