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COUNTRY RISK OVERVIEW

COUNTRY RISK OVERVIEW. Yves Zlotowski Chief Economist, Coface. 0. The Big Growth Transition : it’s painful…and unfair ?. Contribution to GDP Growth, average 2002-2010 (%). The recovery we dream of. Step 1 : cost decrease + restoration of corporate profitability

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COUNTRY RISK OVERVIEW

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  1. COUNTRY RISK OVERVIEW Yves Zlotowski Chief Economist, Coface • 0

  2. The Big Growth Transition : it’s painful…and unfair ? Contribution to GDP Growth, average 2002-2010 (%)

  3. The recovery we dream of • Step 1: cost decrease + restoration of corporate profitability • key issue: unit labor costs  • Step 2: financing investment for final external demand (exports) • corporate leverage + credit availability + export specialization  • Step 3: exports momentum creates space for increasing employment • capacity utilization + emerging market outlook  • Step 4: domestic final demand increase • consumer confidence + consumer leverage

  4. The recovery we have…

  5. The recovery we have…

  6. Advanced economies: better in 2014 Source: Coface

  7. US : Yes, they will ?

  8. Germany : « the well-sealed window » Consumption and unemployment (%) Insolvency rate (France and Germany)

  9. France: lucky…for now

  10. France : back to normal ? France : social and economic cost of bankruptcies Source: Coface

  11. Spain : something is happening… Credit Growth (%, yoy) Exports in volume (2000=100)

  12. The Italian puzzle… Corporate Claims registered by Coface Coface Claims ratio vs GDP Growth Sources: Ine, Cerved

  13. Is Europe competitive? Unit Labor Costs 2000=100) Number of Patents to EPO / Thous. Inh. Source: Eurostat Source: Eurostat

  14. Corporates face difficult access to credit +… Cash flow on investment (%) in 2011 and variation since 2009 (%) Credit Bank to corporates, %: Average Growth 2013/2012 Source: Eurostat Source: Eurostat

  15. …+ public delays + Average payment delays between 2008 and 2012, number of days

  16. + « structure » effects Number of very small corporates (0-9 empl) / Total (%)

  17. + “short cycles” effects Business Insolvency Index (basis 100 in 2007) Business Insolvency Index (basis 100 in 2007) . Source: Eurostat

  18. Country risk according to Coface Country assessment Assesses the average risk of payment defaults by companies in a given country This evaluation combines economic and political prospects of the country, Coface payment experience and business climate assessment This evaluation has 7 grades: A1, A2, A3, A4, B, C, D and can be watch listed Business climate assessment Assesses overall business environment and more precisely whether corporate information is available and reliable and whether the legal system provides fair and efficient creditor protection This evaluation has 7 grades: A1, A2, A3, A4, B, C, D and can be watch listed

  19. Advanced Economies: Country Risk Assessments Advanced Economies

  20. Emerging countries : confirmed slowdown GDP growth, quarters, YOY GDP Growth forecats .

  21. Emerging Countries : supply constraints

  22. Emerging countries : financial weaknesses Exchange rate (% growth) Current Account and Portfolio flows .

  23. India: Large twin deficits drag on growth and financial stability Growth and twin deficits Share of raw material in total imports (%)

  24. Brazil : an infrastructure problem Brazil : GDP Growth and inflation (%) Brazil : quality of infrastructures (ranking, /144 countries, WEO)

  25. China’s corporate leverage: The time bomb? China: Public and Private Debt, Fitch estimates

  26. Emerging Markets: Country Risk Assessments Main Emerging Economies

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