Coface: Growth in World Trade Stronger Than Anticipated
Global trade credit insurer Coface released its quarterly economic outlook and map for country and sector risk. World economic growth remains healthy, forecast at 2.9 percent in 2017 and 2018. This quarter, once again, nearly all of the adjustments in Coface country and sector risk assessments are improvements rather than downgrades.
The growth in world trade is stronger than anticipated at the start of the year. Europe’s performance is strong and political risks are fading. Brazil and Russia are both showing positive signs, while capital is once again flowing in some emerging countries. These positive trends have led Coface to improve several country ratings:
Hungary (now A3) is demonstrating lively economic activity, supported by household consumption and renewed investments due to flexible credit conditions and EU aid. Finland (now A2) has seen a drop in corporate insolvencies, down 6 percent in 2016 and a further 19 percent in the first half of 2017. Growth is forecast at 1.3 percent in 2017, with 1.7 percent expected for 2018.
Cyprus (now A4) is experiencing dynamic growth and has improved controls in its banking and public finance segments. Belarus (now C) is benefiting from the upturn in Russia and Europe, affecting both exports and household consumption.
Even so, the outlook is not improving for the major English-speaking countries, as illustrated by lackluster savings rates and wage dynamics in the USA and the UK. This is compounded by the lack of visibility around Donald Trump’s policies and the outcome of Brexit negotiations.
Within this more positive global economic environment, several sectors are rebounding. The pharmaceuticals industry is proving to be the lowest-risk sector in the world. In Western Europe, particularly in Italy, France and Germany, risk is now rated “low” due to well-established production and demand. Corporate insolvencies are low.
North America’s transport sector is now “low risk” category as a result of public investment.
The information and computer technology (ICT) sector is back on track in emerging Asian countries, China, and in Latin America, largely due to healthier household consumption. The risk is now rated “medium” in these regions and countries.
Retail in Latin America is now ranked “medium risk,” also due to household consumption that has been aided by falls in the unemployment rate and inflation.
Agrofood in Russia and South America is now “low risk.” Companies in Russia have benefited from the food embargo on Western products while South Africa’s excellent harvests have provided relief there.
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