During the course of theis year, the global credit insurer Coface has issued 23 downgrades and 10 upgrades across the 12 sectors it follows in six regions of the world.

The trend is likely to continue into 2017. Global growth is still weak at an estimated 2.6 percent, and low commodity prices are dragging down profitability in many sectors. The increase in political risk, provoked by uncertainties linked to the Donald Trump victory in the U.S. presidential elections, to Brexit, and to a number of political events in Europe, could lead companies in developed countries to postpone investment decisions.

North America Weakens

Sectors that depend on household consumption will suffer most from any slowdown in growth. The rate of increase in retail sales is already down one point as of July 2016, compared to the previous year. The expected increase in lending rates will increase the cost of loans and affect purchasing habits in poorer households.

After a net reduction in business bankruptcies in 2014 (-16 percent) and in 2015 (-12 percent,) the bankruptcy rate is expected to stabilize in 2016, and then increase slightly in 2017 (+1 percent.) This situation has led Coface to downgrade its assessments of the retail and textiles/clothing sectors to “high risk.”

Although the transportation sector in North America has benefitted from low oil prices and the effects of 2008-2011 auto bailout, prospects are gloomy because of the downturn in consumption, particularly with regard to air traffic. It is now “medium risk.”

The paper/wood sector is suffering from a slowdown in construction. From January to September 2016, growth in construction permits dropped from +12.5 percent to +2.3 percent. The risk in the sector is now “high.”

Credit Risk Increases in Europe

Credit risks are increasing in Europe, despite a slight drop in the number of bankruptcies. In Western Europe, the agro-food sector was downgraded to “high risk.” European grain producers, particularly in France and Germany, have been hit on two fronts, by unprecedented low production in an environment of low prices worldwide.

Central Europe saw two sectors downgraded (construction and information and computer technoology—ICT) and one upgraded (transportation).

The situation in the construction sector, downgraded to “high risk,” is worsening because of the freezing of infrastructure projects in Poland, which could become the first European country to be penalized for non-compliance with European regulations on public deficit.

The ICT sector, downgraded to “medium risk,” has suffered from moderate consumption, particularly due to the slowdown in global sales of smartphones. Credit risk is increasing because of downward pressure on prices and hence on company margins.

The transportation sector, the only one to be upgraded (to “medium risk”), benefits from the trend in consumption in the region and satisfactory growth prospects in the Eurozone. The exception here is in Poland, hurting from its exposure to the United Kingdom.

Middle East: ICT is Robust but Risky

In the Middle East, the risks in three-quarters of sectors are considered as “high” or “very high.” The most recent sector downgraded to “very high” risk is ICT, where margins have been affected by the market downturn resulting from the drop in oil revenues. Additionally, re-exports to Iran will decrease, given the lifting of sanctions. And the existence of a black market that is difficult to control has also contributed to the drop in profits on the legal market.