Global credit insurer Coface announced its country risk outlook for 2016. Among the risk assessment downgrades are Canada, Brazil and South Africa.

Economic trends to watch this year include financial market volatility, cheap oil, and the Chinese slowdown in advanced economies; sluggish growth and increasing company indebtedness in emerging countries: and increased political risks in all regions.

A cautious approach to country risk will be necessary in 2016, according to Coface, since the risks that emerged in 2015 are expected to continue this year. Coface forecasts global growth to remain soft at 2.7 percent, compared to 2.5 percent in 2015. At the forefront are the political tensions gaining ground in both advanced and emerging countries.

Advanced countries will see moderate two-percent growth in 2016. The main concerns are their dependency on commodity prices, the Chinese slowdown, and financial market volatility.

The trend of low barrel prices should continue in 2016, due to the continued surplus of oil supply, in part attributable to Iran’s return to the market. Canada is heavily affected by the drop in oil sector investment and is now assessed A2. The continued decline in oil prices has, however, had a beneficial effect on households and businesses in some advanced countries. With the exception of Japan and Italy, the fall in energy costs has helped to revive corporate investment, especially in Spain and the United Kingdom.

Japan is also among the potential victims of the stronger than expected Chinese slowdown, given that 18 percent of its exports are destined for China. Weak growth, estimated at 0.9 percent for 2016, and the persistent risk of deflation have prompted Coface to place Japan’s A1 assessment under negative watch. Not surprisingly, the decrease in demand and in tourism from mainland China will continue to adversely affect activity in Hong Kong and Taiwan, also under negative watch.

In the eurozone, where growth of 1.7 percent is expected in 2016, the situation is gradually improving, as evidenced by insolvency statistics for France, Germany, Italy and especially Spain, where thy feel by 26 percent. Growth in Italy will be supported by domestic demand, spurred by the return of confidence and the progress in structural reforms. This has led Coface to place Italy’s B assessment under positive watch.

In emerging countries, growth has halved in five years with 3.9 percent expected in 2016. Company indebtedness is growing, affected by both the drop in commodity prices and the highly expansionary monetary policies that followed the Lehman Brothers crisis. Only Central Europe remains unaffected. Hungary, upgraded to A4, and Latvia, B, placed on positive watch, stand out for solid growth driven by household consumption and for increased exports to European countries other rather than Russia.

Chinese companies are among the most indebted. Their debt represents more than 160 percent of GDP and 60 points more than in 2008.

Turkish companies, which have one-third of their debt denominated in U.S. dollars, are proving to be among the most exposed to currency risk. The main glimmer of hope in the medium-term are the gains in competitiveness resulting from recent depreciations of emerging currencies.