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Coface Country Risk Conference 2012 Yves ZLOTOWSKI, Chief economist, Coface Risks overview.

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Presentation on theme: "Coface Country Risk Conference 2012 Yves ZLOTOWSKI, Chief economist, Coface Risks overview."— Presentation transcript:

1 Coface Country Risk Conference 2012 Yves ZLOTOWSKI, Chief economist, Coface Risks overview

2 Coface Country Risk Conference 2012 Country risk according to Coface Country risk measures the influence of a country macro economic and institutional evolution on companies credit risk. Country risk assessment Assesses the average risk of payment defaults by companies in a given country To rate countries, Coface 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 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

3 Coface Country Risk Conference 2012 "This time, its really different" World growth and payment incident index (e) 2012(f) % World growth (%, current exchange rate)Payment incident index (base 100= world average ) 1st oil shock Recession in the US 2nd oil shock Internet bubble and 9/11 Securitization crisis and Fall of Lehman

4 Coface Country Risk Conference 2012 Heavy indebtedness… Corporate debt (% of GDP) Public debt (% of GDP)

5 Coface Country Risk Conference 2012 External debt (ratios and in chained dollars) in countries under stress Cumulated public debt in euro zone stressed countries A different crisis: size matters and jeopardizes possible bail-out % 17% 8% 4% 39% GR GR+PO+IR GR+PO+IR+SP Italy only GR+PO+IR+SP+IT 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Bns USD % of Euro zone GDP

6 Coface Country Risk Conference 2012 A different crisis: financial integration turns a local crisis into a systemic crisis ( main BIS banks exposures) FranceGermany ItalySpain

7 Coface Country Risk Conference 2012 Any sovereign debt treatment is likely to impact companies Argentina-Russia treatment: unilateral default Credit crunch + increasing financing costs + recession shock Turkey-Brazil treatment: long-lasting deep fiscal adjustment Late payments by the public sector + anaemic growth India-Lebanon treatment: banks are encouraged to keep debt exposure Crowding out effect

8 Coface Country Risk Conference : Decoupling world growth

9 Coface Country Risk Conference 2012 The increase of non payment is already felt Evolution of payment incidents registered by Coface (annual growth rate)

10 Coface Country Risk Conference 2012 Constrained outlook in the UK, stability in the US

11 Coface Country Risk Conference 2012 The United States resist Business investment and banking credit to corporates (annual growth, %) Household saving rate and consumption (% DI and annual growth, %)

12 Coface Country Risk Conference 2012 Recession in the Euro zone in 2012

13 Coface Country Risk Conference 2012 Germany vs. France

14 Coface Country Risk Conference 2012 Percent of firms exporting to distant markets (%) Expenditures in R&D and patents (%) Southern Europe faces structural challenges 0 0,5 1 1,5 2 2,5 3 GermanyFranceSpainItaly R&D expenditure totales (% of GDP) Triadic patents (per million people)

15 Coface Country Risk Conference 2012 Country risk assessment

16 Coface Country Risk Conference 2012 Robust growth in emerging countries

17 Coface Country Risk Conference 2012 Emerging Asia : country risk assessment

18 Coface Country Risk Conference 2012 Emerging Europe: the trade channel… Em. Europe: Euro zone in Total Exports of Goods (% 2010) 67% 66% 57% 56% 55% 52% 48% 45% 41% 35% 32% 31% 47% 0% 20% 40% 60% 80% Czech Republic SloveniaHungary Poland Romania Croatia Slovakia Bulgaria Serbia Latvia Turkey Estonia Lithuania Em. Europe ave

19 Coface Country Risk Conference 2012 Emerging Europe:..and the credit channel will impact CEE countries Dec.2004 Jun.2005 Dec.2005 Jun.2006 Dec.2006 Jun.2007 Dec.2007 Jun.2008 Dec.2008 Jun.2009 Dec.2009 Jun.2010 Dec.2010 Jun Emerging Countries Emerging Europe Exposure of European Banks to Emerging Market entities (Mns USD)

20 Coface Country Risk Conference 2012 Emerging Europe: Country risk assessment

21 Coface Country Risk Conference Coface Country Risk Conference Why do political changes in emerging countries occur now? Social changes in emerging countries provide a desire for change Rising middle classes with increasing demand for their aspirations being addressed Unequal growth lead to double frustration No access to employment No incentive for entrepreneurship Cultural changes in emerging countries provide the means to change : Internet access, travelling abroad, lower fecundity… In authoritarian regimes, changes occur when the governments prove they are unable to respond to this desire for change In democracies, frustrations are channeled through criminality with parallel organizations that threaten the authority of the State

22 Coface Country Risk Conference 2012 Fertility rate (births per woman)Internet users (per 100 people) A strong socio-cultural dynamic of pressure to change in the middle East

23 Coface Country Risk Conference 2012 Middle East – North Africa: Country risk assessment


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