Post on 26-Mar-2015
Coface Country Risk Conference 2012
Yves ZLOTOWSKI,Chief economist, Coface
Risks overview
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
Coface Country Risk Conference 2012
"This time, it’s really different"
World growth and payment incident index
-2
-1
0
1
2
3
4
5
6
7
8
9
19
701
971
19
721
973
19
741
975
19
761
977
19
781
979
19
801
981
19
821
983
19
841
985
19
861
987
19
881
989
19
901
991
19
921
993
19
941
995
19
961
997
19
981
999
20
002
001
20
022
003
20
042
005
20
062
007
20
082
009
20
102
011
(e)
20
12(f
)
%
-60
-30
0
30
60
90
120
150
180
210
240
270
World growth (%, current exchange rate) Payment incident index (base 100= world average 1995-2000)
1st oil shock
Recession in the US
2nd oil shock
Internet bubble and 9/11
Securitization crisis and Fall of Lehman
Coface Country Risk Conference 2012
Heavy indebtedness…
Corporate debt (% of GDP)
Public debt (% of GDP)
0
20
40
60
80
100
120
140
dé
c-9
4
dé
c-9
6
dé
c-9
8
dé
c-0
0
dé
c-0
2
dé
c-0
4
dé
c-0
6
dé
c-0
8
dé
c-1
0
France GermanyItaly SpainUnited-States United Kingdom
0
20
40
60
80
100
120
140
1994
1996
1998
2000
2002
2004
2006
2008
2010
France ItalySpain United KingdomUnited States Germany
Coface Country Risk Conference 2012
External debt (ratios and in chained dollars)in countries under stress
Cumulated public debt in euro zonestressed countries
A different crisis: size matters and jeopardizes possible bail-out
197 233 211392
1820
0
100
200
300
400
500
600
700
800
900
1000
Indonesia1997
Russia1998
Argentina2011
Greece2009
Italy 2011
0
200
400
600
800
1000
1200
1400
1600
1800
2000
External debt / GDP (%)External debt / exports (%)
External debt (in 2011 chained dollars)
517 1016 20522719
477122%
17%
8%4%
39%
0
1000
2000
3000
4000
5000
6000
GR
GR
+P
O+
IR
GR
+P
O+
IR+
SP
Ita
ly o
nly
GR
+P
O+
IR+
SP
+IT
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Bns USD
% of Euro zone GDP
Coface Country Risk Conference 2012
A different crisis: financial integration turns a local crisis into a systemic crisis (main BIS banks exposures)
France Germany
Italy Spain
28%
11%
5%
5%
5%
0% 5% 10% 15% 20% 25% 30%
Poland
France
United Kingdom
Austria
Germany
28%
15%
13%
10%
6%
0% 5% 10% 15% 20% 25% 30%
Portugal
Mexico
Brazil
United States
United Kingdom
17%
16%
7%
6%
5%
0% 5% 10% 15% 20%
Netherlands
Spain
France
United Kingdom
United States
17%
12%
9%
8%
7%
0% 5% 10% 15% 20%
Belgium
Germany
United Kingdom
Italy
United States
Coface Country Risk Conference 2012
Any sovereign debt “treatment” is likely to impact companies
● Argentina-Russia treatment: unilateral defaultCredit crunch + increasing financing costs + recession shock
● Turkey-Brazil treatment: long-lasting deep fiscal adjustmentLate payments by the public sector + anaemic growth
● India-Lebanon treatment: banks are “encouraged” to keep debt exposure
Crowding out effect
Coface Country Risk Conference 2012
2012: Decoupling world growth
3,82,5
7,0-1,8
-3,81,9
4,42,7
7,13,1
1,35,7
2,71,1
5,0
-5 -3 -1 1 3 5 7 9
ave (2003-2007)
2009
2010
2011 f
2012 f
World Advanced Economies Emerging CountriesGDP Growth (%)
Coface Country Risk Conference 2012
The increase of non payment is already felt
Evolution of payment incidents registered by Coface(annual growth rate)
-0,5%
28%
19%
-10% 0% 10% 20% 30%
USA
Euro zone
World
Coface Country Risk Conference 2012
Constrained outlook in the UK, stability in the US
1,7
-0,9
0,9
2
1,8
0,4
-1,5 -1 -0,5 0 0,5 1 1,5 2 2,5
United States
Japan
United Kingdom2012f
2011e
GDP Growth (%)
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, %)
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
mar
s-01
mar
s-02
mar
s-03
mar
s-04
mar
s-05
mar
s-06
mar
s-07
mar
s-08
mar
s-09
mar
s-10
mar
s-11
investment loans to corporate
-4%
-3%
-2%
-1%
0%1%
2%
3%
4%
5%
mar
s-01
déc
.-01
sep
t.-0
2
juin
-03
mar
s-04
déc
.-04
sep
t.-0
5
juin
-06
mar
s-07
déc
.-07
sep
t.-0
8
juin
-09
mar
s-10
déc
.-10
sep
t.-1
1
0%
1%
2%
3%
4%5%
6%
7%
8%
9%
Household consumption - % change - (L)
Household saving rate - % of DI - (R)
Coface Country Risk Conference 2012
Recession in the Euro zone in 2012
0,4
0,7
0,1
0,3
0,1
-0,1
-0,3
-1,2
-1,5
-4
-6
-7 -5 -3 -1 1 3 5
Austria
Germany
Belgium
France
Ireland
Netherlands
Euro zone
Spain
Italy
Portugal
Greece
2012f
2011e
GDP Growth (%)
Coface Country Risk Conference 2012
Germany vs. France
0,7 1,10,4
0,20,4
0,1
-0,4-0,2
0,40,30,3
0,2
-40%
-20%
0%
20%
40%
60%
80%
100%
Italy France Germany
Household consumption Business InvestmentExternal demand Public Demand
Contribution to GDP Growth (average 1997-2010)
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
Germany France Spain Italy
0
13
27
40
53
67
80R&D expenditure totales(% of GDP)
Triadic patents(per million people)
28
22
10
17
26
26
27
23
14
31
37
32
18
30
45
0 10 20 30 40 50
Germany
France
Spain
Italy
UK
US andCanada
other Asia
China andIndia
Coface Country Risk Conference 2012
Country risk assessment
Coface Country Risk Conference 2012
Robust growth in emerging countries
4,4
5
6,7
3,4
1,7
3,7
4,7
3,9
7,5
5,7
3,2
4,2
-6 -4 -2 0 2 4 6 8 10
Emerging Countries
Emerging Asia
Latin America
Emerging Europe
MENA
Sub saharan Africa 2012p
2011e
2010
2009
GDP Growth (%)
Coface Country Risk Conference 2012
Emerging Asia : country risk assessment
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% 31%
47%
0%
20%
40%
60%
80%C
zech
Rep
ublic
Slo
ven
ia
Hun
gary
Pol
and
Rom
ani
a
Cro
atia
Slo
vaki
a
Bul
gar
ia
Ser
bia
Latv
ia
Tur
key
Est
onia
Lith
uan
ia
Em
. E
uro
pe a
ve
Coface Country Risk Conference 2012
Emerging Europe: ..and the credit channel will impact CEE countries
0
500 000
1 000 000
1 500 000
2 000 000
2 500 000
3 000 000
3 500 000
4 000 000D
ec.2
004
Jun.
2005
Dec
.20
05
Jun.
2006
Dec
.20
06
Jun.
2007
Dec
.20
07
Jun.
2008
Dec
.20
08
Jun.
2009
Dec
.20
09
Jun.
2010
Dec
.20
10
Jun.
2011
0
200 000
400 000
600 000
800 000
1 000 000
1 200 000
1 400 000
1 600 000
Emerging Countries
Emerging Europe
Exposure of European Banks to Emerging Market entities (Mns USD)
Coface Country Risk Conference 2012
Emerging Europe: Country risk assessment
Coface Country Risk Conference 2012Coface Country Risk Conference 201221 Coface Country Risk Conference 201221
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
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
0
5
10
15
20
25
30
35
40
45
50
2006 2007 2008 2009 2010
Morocco Russia Tunisia EgyptSenegal Congo (RDC)
Russia
Iran
Tunisia
Morocco
Libya
Egypt
Syria
Kenya
Nigeria
Burkina Faso
Niger
Cameroon
Algeria
Ethiopia
0 1 2 3 4 5 6 7 8
Russia
Ir an
T unisia
Alger ia
Mor occo
Libya
E gypt
Syr ia
Camer oon
Kenya
E thiopia
Niger ia
Bur kina Faso
Niger
Coface Country Risk Conference 2012
Middle East – North Africa: Country risk assessment