By Stephen Nakrosis

Moody's Investors Service on Friday said it was giving negative outlooks to the Czech Republic and to Slovakia, citing their reliance on Russian energy supplies.

Both nations had a stable outlook prior to the change.

In the case of Slovakia, Moody's cited the country's significant energy dependence on Russia. "Given Slovakia's large industrial sector and high interconnectedness with the rest of the European Union, a permanent reduction in gas supply from Russia has the potential to significantly weaken the country's economy which would, in turn, negatively affect Slovakia's public finances and compound pre-existing structural challenges such as population ageing," Moody's said.

Regarding the Czech Republic, Moody's said its decision to lower the outlook "reflects the increased risk of the materialization of prolonged, severe gas supply disruptions from Russia which could lead to rationing and push the country's economy in a deep recession with negative implications for trend growth and a material weakening of fiscal metrics."

In the wake of sanctions imposed following Russia's military invasion of Ukraine, the flow of oil and gas from Russia has slowed. As The Wall Street Journal reported last month, Russian state-owned energy company Gazprom PJSC cut in half the amount of gas flowing through the Nord Stream pipeline.

Moody's also cited energy reliance on Russian supply as a factor when it changed its outlook on Italy to negative from stable on Friday. "Significant reliance on gas for its energy exposes Italy to further cuts in supply from Russia as well as higher energy prices," Moody's said.

Write to Stephen Nakrosis at stephen.nakrosis@wsj.com

(END) Dow Jones Newswires

August 05, 2022 18:41 ET (22:41 GMT)