Download 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 (%)
-0,1%
0,5%
0,2%
Germany
Italy
-0,3%
0,2%
Japan
France -0,4%
UK
US
Spain
-0,3%
0,0%
-0,5%
0,3%
0,3%
0,5%
0,5%
0,9%
Government net spendings
0,0%
0,5%
0,4%
0,4%
0,5%
1,0%
0,0%
1,0%
0,9%
1,5%
Household consumption
1,2%
1,3%
Net exports
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
The recovery we have…
Eurozone: Q/Q GDP GROWTH
Q/Q GDP GROWTH (%)
1,0%
1,0%
Germany
0,8%
0,8%
France
0,6%
0,4%
Italy
0,6%
Spain
0,4%
0,2%
0,2%
0,0%
0,0%
-0,2%
-0,2%
-0,4%
-0,4%
-0,6%
-0,6%
-0,8%
-0,8%
-1,0%
-1,0%
06-12
09-12
12-12
03-13
06-13
US
UK
Japan
06-12
09-12
12-12
03-13
06-13
The recovery we have…
2,0
Advanced Economies: Gross Fixed
Capital Formation (% yoy)
Business Confidence
(normalized, national sources)
1,5
10%
1,0
0,5
5%
0,0
0%
-0,5
-1,0
-5%
-1,5
France
Germany
Italy
US
UK
Japan
-10%
-15%
Q3 2013
Q3 2011
Q1 2011
Q3 2010
Q1 2010
Q3 2009
Q1 2009
Q3 2008
Q1 2008
Q3 2007
Q1 2007
Q3 2006
Q1 2006
-3,0
Q1 2013
-2,5
Q3 2012
-2,0
Q1 2012
Germany
France
Italy
Spain
US
-20%
Q1 2007
Q1 2009
Q1 2011
Q1 2013
Advanced economies: better in 2014
GDP Growth 2014
(%,)
6
4,5
5
4
3
4,8
2013
2014
3,1
2,5
2,2
1,5
2
1,8
1,0
1
0,1
0,6
0,6
1,2 1,5
0,4
1,9
1,4
0,3
0
-0,4
-1
-2
-1,7
-1,6
Source: Coface
Japan
UK
Spain
Italy
Germany
France
Euro
zone
USA
Emerging
World
-3
US : Yes, they will ?
US' Contri. to GDP Growth (Yearly)
5%
4%
1,8%
3,4%
3%
2,7%
2%
2,5%
Household Consumption (%, yoy)
Business Investment (%; yoy)
Forecas
11%
1,5%
2,8%
6%
1,8%
1%
1%
0%
-0,3%
2,2%
-2%
-2,8%
Investm ent
Net Exports
Inventories
Governm ent Spending
Private Consum ption
GDP
-3%
-4%
-5%
-6%
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
-7%
-4%
-9%
-14%
-19%
Q3 2001
Q1 2002
Q3 2002
Q1 2003
Q3 2003
Q1 2004
Q3 2004
Q1 2005
Q3 2005
Q1 2006
Q3 2006
Q1 2007
Q3 2007
Q1 2008
Q3 2008
Q1 2009
Q3 2009
Q1 2010
Q3 2010
Q1 2011
Q3 2011
Q1 2012
Q3 2012
Q1 2013
-1%
Germany : « the well-sealed window »
Consumption and unemployment
(%)
Consumption (%, QOQ, 3M ma)
Unemployment (RH)
0,5%
12%
0,4%
10%
0,3%
8%
0,2%
0,1%
6%
0,0%
4%
-0,1%
2%
Q212
Q211
Q210
Q209
Q208
Q207
Q206
Q205
Q204
Q203
-0,3%
Q202
-0,2%
0%
Insolvency rate (France and
Germany)
France: lucky…for now
France Contributions to Real GDP Growth (Yearly)
3%
2%
2,7%
2,2%
2,0%
1,9%
1,6%
Forecasts
1%
0,6%
0%
0,0%
-0,2%
0,1%
-1%
Investment
Net Exports
Inventories
Government Spending
Private Consumption
GDP
-2%
-3%
-3,1%
-4%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
France : back to normal ?
France : social and economic cost of bankruptcies
Source: Coface
-30%
févr-13
France
févr-12
Greece
févr-11
Italy
févr-10
Spain
févr-09
févr-08
févr-07
0%
févr-06
160
févr-05
Corporates
févr-04
180
févr-03
Households
févr-02
Credit Growth (%, yoy)
févr-01
40%
févr-00
Jul 2013
Jan 2013
Jul 2012
Jan 2012
Jul 2011
Jan 2011
Jul 2010
Jan 2010
30%
Jul 2009
Jan 2009
Jul 2008
Jan 2008
Jul 2007
Jan 2007
Spain : something is happening…
Exports in volume (2000=100)
Portugal
20%
140
10%
120
-10%
100
-20%
80
The Italian puzzle…
Corporate Claims registered by Coface
Coface Claims ratio vs GDP Growth
(m oving average 3 m onth, 100 = jan. 2007)
Claims ratio = 1,1 - 0,3 * GDP growth
R2 = 0,29, tstudent = -3,00
350
France
Italy
250
200
150
100
50
Source : COFACE
2,5
Claims ratio (per thousand of exposure)
300
2,0
1,5
1,0
0,5
Source : COFACE
-4
12
11
10
09
08
07
-
Sources: Ine, Cerved
-3
-2
-1
0
Real GDP grow th (%)
1
2
Is Europe competitive?
Unit Labor Costs 2000=100)
Number of Patents to EPO / Thous. Inh.
Italy
Spain
Portugal
France
Germany
135
130
125
300
273
250
200
138
150
100
110
64
35
50
105
7
7
Portugal
115
132
Greece
120
Source: Eurostat
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
95
Spain
Italy
France
100
Av. Euro Zone
Germany
0
Source: Eurostat
Corporates face difficult access to credit
+…
Cash flow on investment (%) in 2011
and variation since 2009 (%)
+14
Nether.
+3
+0
Sweden
Spain
31
Germany
-4
Italy
United Kingdom
-3,8%
Ireland
-4,1%
-6,6%
Greece
-21
-8,2%
Spain-18,4%
200
Source: Eurostat
250
5%
0%
-5%
Source: Eurostat
10%
150
-10%
100
-15%
+7
-20%
50
-3,7%
-25%
0
Italy
Portugal
-9
Portugal
-0,1%
-17
Norway
France
0,2%
France
+8
UK
Germany
+106
Ireland
Greece
Credit Bank to corporates, %: Average
Growth 2013/2012
…+ public delays +
Average payment delays between 2008 and 2012, number of days
Business to business
120
Spain Greece
Italy
Portugal
80
Ireland
UK
France
Germany
Belgium
Netherlands
Sweden
Austria
Denmark
Finland
40
R² = 0,8479
0
0
50
100
Public authorities to business
Sources : European commission, Intrum Justitia
150
200
+ « structure » effects
Number of very small corporates (0-9 empl) / Total (%)
50
Employees/total
Italy
Spain
40
Portugal
30
Germany
20
UE 27 Belgium
Austria
France
Neth.
Sweden
Ireland
Finland
Lux
Denmark
UK
10
80
Source : Eurostat
85
90
Companies /total
95
100
+ “short cycles” effects
Business Insolvency Index
Business Insolvency Index
(basis 100 in 2007)
(basis 100 in 2007)
.
France
Italy
Germany
Spain (RH scale)
250
250
United Kingdom
1000
200
800
250
150
Japan
United States
200
1000
600
200
800
150
150
100
400
100
600
400
50
100
200
200
Source: Eurostat
2012
2011
2010
2009
2008
2007
2006
2005
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
0
2004
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
0
2003
50
0
2002
0
2002
50
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
Advanced Economies: Country Risk
Assessments
Advanced Economies
Emerging countries : confirmed slowdown
GDP growth, quarters, YOY
GDP Growth forecats
.
BRICS
9
EMERGING (without BRICS)
3,6
South. Af
2000-2011 av.
1,8
2,5
2013 (p)
6
4,8
1,9
Russia
2014 (p)
2,8
3
7,8
India
0
5,5
10,6
7,5
China
-3
7
3,8
-6
2,3
2,9
Brazil
Q1 2008
Q2 2008
Q3 2008
Q4 2008
Q1 2009
Q2 2009
Q3 2009
Q4 2009
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
-9
5
0
2
4
6
8
10
12
Emerging Countries : supply constraints
BRICS (without China), Growth yoy, %
Investment
20%
Household Consumption
15%
10%
5%
0%
-5%
Q1 2013
Q3 2012
Q1 2012
Q3 2011
Q1 2011
Q3 2010
Q1 2010
Q3 2009
Q1 2009
Q3 2008
Q1 2008
Q3 2007
Q1 2007
Q3 2006
Q1 2006
-10%
Emerging countries : financial weaknesses
Exchange rate (% growth)
Current Account and Portfolio flows
.
Exchange Rate vs USD
(from May 1 to Septem ber 23)
Curent Account Balance (%GDP, LHS)
1,9%
Czech Rep.
Poland
Portfolio equity net (Mn USD, RHS)
5
150 000
0,9%
4
100 000
-1,4%
Russia
3
-5,0%
Philippines
50 000
Mexico
-6,2%
Thailand
South Af.
-8,4%
Brazil
-8,7%
0
-50 000
-1
-100 000
-12,8%
-2
-14,4%
2014f
2011
2008
5%
2005
0%
2002
-5%
1999
-10%
-150 000
1996
-15%
-3
1993
-20%
0
1990
India
1
-9,6%
Turkey
Indonesia
2
-4,5%
India: Large twin deficits drag on growth and financial
stability
Share of raw material in total
imports (%)
2013/14f
2012/13e
2011/12
2010/11
2009/10
2008/09
2007/08
2006/07
2005/06
2004/05
Growth and twin deficits
0
Share of hydrocarbons in total imports
Share of gold in total imports
12
- 0 ,3
-1
- 1,2
- 1,0
33,8%
10
- 1,3
2012
-2
- 2 ,3
-3
- 2 ,8
7,95%
8
- 2 ,7
- 3 ,1
6
- 4 ,8
- 5,0
- 5,3
-6
- 5,8
-7
1999
- 7,7
40%
35%
15%
Real GDP % change
0
10%
Current account % GDP
Central government budget balance % GDP
5%
-9
5,16%
2
0%
-8
- 7,0
17,64%
4
- 6 ,2
30%
- 4 ,5
- 4 ,2
- 4 ,3
25%
-5
- 3 ,9
- 4 ,0
20%
-4
Brazil : an infrastructure problem
Brazil : quality of infrastructures
(ranking, /144 countries, WEO)
Brazil : GDP Growth and inflation
(%)
15
GDP Growth
Argentina
13
Inflation
Peru
Colombia
11
108
107
Brazil
9
105
Pakistan
7
Russia
5
India
101
China
3
Mexico
1
Sth Africa
2014p
2012
2010
2008
2006
2004
2002
2000
-1
Turkey
0
10
20
30
40
50
60
70
80
90
100 110 120
China’s corporate leverage: The time bomb?
136%
200%
198%
China: Public and Private Debt, Fitch estimates
180%
160%
140%
60%
40%
25%
80%
24%
100%
49%
120%
Private w.
Shad. Bank.
Private
Govt
(reestimated)
Local uth.
0%
Government
20%
Emerging Markets: Country Risk Assessments
Main Emerging Economies