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Get comprehensive country risk ratings, rankings, and analysis for 152 countries. Evaluate the economic, financial, and political outlook to assess the risk of payment default by corporates. Identify sectors with high-risk potential and stay informed about payment incidents in various countries.
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Country Risk Overview Yves Zlotowski Country Risk Department,Coface Paris
Country risk @rating • Country risk @rating assesses the average risk of payment default by corporates in a given country • It indicates to what extent the companies’ financial commitments are affected by the overall economic, financial and political outlook for the country in which they operate
Country risk @rating • The model calculates a score for each country which combines 7 types of risk : • Growth vulnerability • Sovereign financial vulnerability • External over indebtedness • Foreign currency liquidity crisis • Banking sector’s fragilities • Geopolitical and Governance vulnerabilities • Companies’ payment behaviour
Country risk @rating • There are seven different rating grades: A1 to A4 : The country's political and economic environment makes the probability of payment defaults quite low. The situation of the companies depends more on their sector of activity B, C, D : The economic and political environment faces ongoing uncertainties and is likely to affect payments. The ratings are regularly updated 152 countries Ratings, indicators of payment incidents and country risk assessment are available on: www.cofacerating.com
United States : So far, strong payment records …. Economic growth and payment incident index Payment incident index 100 : World 1995-2000 basis
United States : … but some sectors should be watched closely Highest Risk Automotive Air Transport Textiles, Clothing Energy transport and distribution Household electrical appliances Paper Chemicals Steel Mass distribution Information technology, telecommunications Construction, mechanical engineering Pharmaceuticals Defence, aeronautics Ore, hydrocarbons + - Lowest risk • Scale of sector risk
Western Europe : ….convergence in growth rates but still heterogeneous situations
Germany : An upgrade in A1 in 2006 Economic growth and payment incident index Payment incident index 100 : World 1995-2000 basis
Germany : Companies solvency is consolidated by reorganisations and productivity gains Highest Risk Construction Mass distribution Plastic and metal processing Paper Information technology, telecommunications Automotive Chemicals Steel Air transport Agro food Mechanicals Electrical and textile machinery Pharmaceuticals Optics, measurements and precision + - Lowest risk • Scale of sector risk
Italy : back to normal Economic growth and payment incident index Payment incident index 100 : World 1995-2000 basis
United Kingdom : strong payment record, traditional industries still weak Economic growth and payment incident index Payment incident index 100 : World 1995-2000 basis
France: growth peeking up, payment experience remains favourable Economic growth and payment incident index Payment incident index 100 : World 1995-2000 basis
Spain : High growth…but is it sustainable ? Economic growth and payment incident index Payment incident index 100 : World 1995-2000 basis
Central Europe : a faster growth than in the Euro zone… Economic growth and payment incident index Western Europe (EU 15) Central Europe Payment incident index 100 : World 1995-2000 basis
Central Europe :… but payments are more volatile Payment incident index Payment incident index 100 : World 1995-2000 basis
Central Europe, Turkey : Exchange rates still shaky Low risk Manageable Significant High risk Companies’ payment behaviour Growth vulnerability Sovereign financial vulnerability External over-indebtedness Foreign currency liquidity crisis Banking sector’s fragilities Geopolitical and Governance vulnerabilities Central Europe Turkey
Turkey : despite external shocks, good payment experience Payment incident index Payment incident index 100 : World 1995-2000 basis
Russia : despite solid financial situation, governance still problematic
Russia : improvement in payment behaviour but companies lack transparency
Japan : confirmation of a stronger activity Economic growth and payment incident index Payment incident index 100 : World 1995-2000 basis
Japan : Restructuring begins to bear fruit Highest risk + Building, Public works Food and Lodging Electronics Household electrical appliances Pharmaceuticals Steel, glass, paper Chemicals Textiles Mechanical engineering Air transport Automotive Telecommunications Information technology - Lowest risk • Scale of sector risk
Chinese corporate margins are under pressure Survey first results Coface China 2005 Reasons for non-payment 100% 90% 80% 68% 62% 70% 60% 50% 39% Private companies are the riskiest 37% 40% 27% 22% 20% 30% 17% 20% 5% 5% 10% 0% 100% Financialdifficulties Managementchaos Commercialdisputes Fraud & lackof morality Others 90% 77% 80% 68% 2004 2005 70% 60% 50% 40% 26% Strong pressure on margins result in financial difficulties 30% 19% 20% 6% 4% 10% 0% SOE's Private Companies Others 100% 90% 80% 2004 2005 70% 60% 49% 50% 36% 40% 30% 20% 9% 9% 10% 0% Fiercecompetition Lack of financingresources Impact of risingraw material prices Others
India : the payment experience has improved Payment incident index Payment incident index 100 : World 1995-2000 basis
China – India : the two countries are rated A3, are they similar risks ?
Asia : payments are stable and robust Economic growth and payment incident index Payment incident index 100 : World 1995-2000 basis
HIGHEST RISK 350 CIS 300 Subsaharian Africa Emerging Countries 250 Latin America Near and Middle East 200 World Europe centrale 150 Industrialized Emerging Asia Countries 100 European Countries 50 The regional risk index is the average of the country risk @rating weightedaccording to the share of each country in the regional GDPThe base ofthe index is the world risk in 2000 Japan North America LOWEST RISK Regional risk index