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04/12/2019
Economic Publications

All Coface Publications

04/03/2019
Economic Publications

Latin America: Brazil and Mexico’s Oil Industries – Opposite Policies?

In the context of a global oil market that is likely to remain volatile (Chart 2), the two largest Latin American economies – Brazil and Mexico – are expected to implement significant changes in their energy policies in the medium term. Both countries have appointed new presidents in the last year following polarised elections: in Brazil the right-wing president Jair Bolsonaro took office in January 2019, while December 2018 saw the arrival of left-wing André Manuel Lopez Obrador (AMLO)1. Similarly, the two oil industries share two main common features: their state-owned companies have experienced significant financial and governance issues, and both countries are crude oil exporters and net oil derivative importers. Conversely, in terms of energy policies, they appear to be taking opposite directions.

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04/02/2019
Economic Publications

China Payment Survey 2019: Longer Delays as Growth Falters

The Chinese economy experienced some challenges i n 2018. Corporate bond defaults in US dollars quadrupled, reaching an amount of USD 16 billion, while the number of bankruptcy cases settled through the Supreme Court of the People’s Republic of China spiked to 6,646. Deleveraging
efforts led to tighter liquidity conditions during the first half of 2018. This coincided with an escalation of trade tensions between the United States and China, which eroded consumer sentiment, resulting in weaker domestic consumption.

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03/13/2019
Economic Publications

Turkey’s economic slowdown continues, but exports offer some support

Turkey is experiencing a severe economic slowdown, coupled with a jump in inflation, as a result of the sharp depreciation of the lira during 2018 . This sharp depreciation has resulted in reduced consumption, and has impacted investment dynamics in the domestic market. The import-dependent structure of production has pushed the inflation rate to all time high levels, which forced the central bank to deliver a large rate hike in September. Although this rate hike has helped the Turkish lira to recover from these historical weak levels, it caused borrowing costs to rise extremely high, making funding extremely costly for both businesses and households. Growth is expected to remain very subdued and inflation at double digits.

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03/13/2019
Economic Publications

Poland Payment Survey 2019: Robust Economic Growth as not Eliminated Payment Delays

For 70 years, Coface has helped companies trade safely around the world. Our credit insurance protection and credit management services help ensure that our 40,000 clients will get paid for the merchandise or services delivered to their customers.

With 4,200 employees located in 67 countries, Coface has the global coverage and the on-the-ground knowledge to make thousands of credit decisions each day. We work in partnership with our clients at every stage of their business life cycle, helping them to anticipate and evaluate risks in order to make the right credit decisions.

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01/07/2019
Economic Publications

Tighter global liquidity and Asia: not all gloom and doom

Asia has been under pressure following from tighter global liquidity in 2018, led by a rapid pace of interest rate hikes by the Federal Reserve (Fed) of the Unites States (US). Narrowing interest rate differentials have led to slimmer risk premiums for investors in Asian emerging markets (EMs).
This drove capital flows away from the region and into US dollar-denominated assets. Capital outflows also resulted in depreciation relative to the US dollar, leading a number of central banks in the region to hike rates and to intervene in markets to defend their currencies. The Fed is expected to continue hiking rates in 2019, which could further aggravate outflows. Our index measuring relative vulnerability to outflows points to divergence in Asia.

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12/04/2018
Economic Publications

Corporate insolvencies in France: all good things come to an end

The third quarter of 2018 marks a turning point for companies in France: for the first time in two years, insolvencies increased by 2.3% compared to the same quarter of the year previous. This trend reversal is consistent with the slowdown in growth to 1.6% in 2018. As this decline in French growth can chiefly be attributed to household consumption, sectors such as personal services, food retail, and automotive have been the most affected by the rebound in insolvencies. At the same time, the slowdown in construction sector activity (27% of the total number of insolvencies) is also reflected in the recent rise in insolvencies. The trend is the same in personal services (which accounts for one insolvency per five).

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11/19/2018
Economic Publications

Could SMEs become the weak link in China’s economy?

When considering risk in the Chinese economy, a lot of the discussion has focused on large State-Owned Enterprises (SOEs), or large private conglomerates. However, headwinds impacting an understated group of smaller firms have the potential to be much more disruptive: Small and Medium Enterprises (SMEs) account for the majority of enterprises and a sizeable proportion of employment. However, the need to address financial stability risks associated with China’s vast corporate indebtedness – most of which has historically been associated with SOEs – has left SMEs scrambling to access financial resources to meet their working capital and long-term expansion needs.

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11/06/2018
Economic Publications

Wind Energy: How long will the wind stay in the industry’s sails?

Wind energy undoubtedly has a bright future, with many countries around the world eager to develop this source of power due to its affordable cost of production, its ease of use, and the abundance of wind. The rise of offshore wind, with an increasing number of turbine projects in the sea, seems to be the beginning of the creation of maritime energy infrastructures that will be able to benefit from the stronger ocean winds. Developing countries, with their restrained means, show a will to empower community with this kind of technology, helped by decreasing costs, access to funding, and the knowledge of advanced economies with a strong track record and more experience.

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10/31/2018
Economic Publications

UAE: A new place in new world trade?

The United Arab Emirates (UAE) has the second largest and the most diversified economy in the Gulf Cooperation Council (GCC). Thanks to authorities’ efforts to diversity exports over the last three decades, the share of the oil sector in GDP and in overall exports declined to 30% and 16% respectively in 2016 (compared with 43% and 76% in 2001). The country has become a regional hub for trade and logistics. This encouragement of new industries has helped the federation to increase its comparative advantage in sectors such as metals, minerals and plastics while also maintaining its competitiveness in oil sector. In order to promote economic integration and widen trade ties, the UAE has signed various agreements with many countries in economic, trade, investment, and technical fields. The strategic location of the country allows it to play a central role in re-exporting goods from different countries around the world towards Arab nations. Re-exports account nearly 60% of total exports.

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10/23/2018
Economic Publications

A New Deal of Cards for Emerging Markets

The past quarter has been marked by a continued rise in oil prices and capital outflows from emerging markets, fueling the depreciation of their currencies (see Graph 2, p. 4). The worsening currency crises in Argentina and Turkey this summer (which led us to downgrade their country assessments in the second quarter of the year) are emblematic cases.

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10/23/2018
Economic Publications

US Trade Protectionism: what are the knock-on effects on global value chains?

While policies to open up trade have been a standard feature since the creation of the World Trade Organization (WTO) in 1995, the 2008-2009 crisis proved a turning point. The crisis boosted protectionism, which then climbed to new levels with the arrival of Donald Trump as President of the United States. Since early 2018, the US government has kept its word on several of its threats in terms of trade protectionism by launching customs duties on imports for various products: solar panels and washing machines (January), as well as steel and aluminium (March, then in June for the EU, Mexico, and Canada, concluding with Turkey in August).

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10/10/2018
Corporate Publications

Central & Eastern Europe Insolvencies:Good times come to an end

A favourable economic environment was not enough to reduce company insolvencies in Central and Eastern Europe (CEE). While average GDP growth accelerated to 4.5%, i.e. the highest level in nine years, insolvencies increased by 6.4%. This latter figure ends the improving trend in business insolvencies, which decreased in both 2015 and 2016. 2017 saw an increase in insolvencies proceedings in nine countries1 and drops in only five2. The regional breakdown indicates a wide variety of dynamics, ranging from a 27.1% decrease in insolvencies in Slovakia, through to a slight increase of 2.4% in Estonia and a surge of 40.1% in Croatia.

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09/26/2018
Economic Publications

Rising Political Risks Cloud Outlook for Asian Economies

Political risks in Asia have increased, according to Coface’s Political Risk Model. Asia currently ranks above the world average in terms of political risk, behind the Middle East and North Africa (MENA), Sub-Saharan Africa and Latin America. Although political risks in Asia have remained broadly stable relative to other parts of the world, some exceptions are notable. These risks could cloud the outlook for some economies going forward. Much of the systemic sources of political risk are related to the continent’s dynamic growth and existing social fragilities. It appears that most of the
increases in recent years have been due to rising political fragilities, associated with a proliferation of less democratic styles of governance.

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08/28/2018
Economic Publications

Businesses in Greece: finally, a fresh start?

With Greece about to pull out of its third bailout package, signs of economic recovery are multiplying: 2017 was a year marked by the return of positive growth (+1.4%), and despite weakening growth in the euro-zone – Greek GDP growth is expected to be close to 2% in 2018, with Greek households and businesses remaining more optimistic in the first half of the year than in 2017. The recent improvement in the economic momentum is far from removing the stigmata of the crisis: from 2008 to 2015, GDP and investment fell respectively by 25% and 60%, the unemployment rate reached 28%, and business turnover collapsed by a third. Wages and property prices halved. Greek banks – despite their recapitalization in 2015 – are still recording high rates of non-performing loans. The International Monetary Fund (IMF) and the European Commission estimate that it will take 10 years before the economy returns to its pre-crisis level. However, reforms undertaken since 2008 have led to a consolidation of the public accounts, which have posted primary surpluses since 2016.

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07/04/2018
Economic Publications

Asia Payment Survey 2018: Regional giants grapple with rising credit risks

Coface’s 2018 Asia Payment Survey covers nine economies. Data collection took place during the fourth quarter of 2017, and valid responses were collected from almost 3,000 companies. Respondents in Asia were under pressure to further extend their payment terms. Average payment terms increased to 64 days in 2017, up from 59 days in 2016. This is in line with the trend observed in Asia since 2015. Payment delays also increased in 2017, according to our survey. The proportion of respondents who experienced payment delays exceeding 120 days increased to 16.5% in 2017, from 12.5% in 2016. Payment delays were longest in China and India; shortest in Malaysia, Taiwan, and Japan. Divergences were also apparent among sectors: the energy and construction sectors featured the highest proportion of respondents reporting payment delays of 90 days or above.

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07/02/2018
Economic Publications

Race for market share in Africa: the European pack is catching up with the French breakaway

In December 2013, the New Economic Partner ship Forum was held in Paris with the aim of reviving trade between France and Africa. At the end of this Forum, then-President François Hollande announced the ambitious goal of doubling trade between France and Africa over five years. A few months later, the drop in oil prices extinguished all hope of achieving this objective and reduced the total value of trade (sum of imports and exports) between these two zones from 73 billion US dollars in 2013 to 54 billion USD last year. In 2017, France also lost its status of leading European supplier to Africa to Germany. This observation symbolizes the continued erosion of French companies’ market share in Africa: exports accounted for almost 11% of flows to Africa at the beginning of the millennium, but halved by 2017 (5.5%).

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06/26/2018
Economic Publications

Barometer country and sector risks barometer Q2 2018

Rising sovereign spreads in the eurozone, increased protectionism, higher oil prices, capital outflows from major emerging countries: warning signals multiplied in the second quarter of 2018. Many of these provoke a feeling of déjà vu, evoking the 2012-13 period. At that time, the International Monetary Fund1 (IMF) stressed that the crisis in the euro area was still relevant, and that rising geopolitical tensions and their consequences on oil prices
were among the main risks weighing on global growth. And, although the IMF reminded us that optimism was in order with regard to the American economy, the risks of falling back into recession (“double-dip”) after the brief 2010-
2011 lull made headlines in many countries throughout 2012. World trade was struggling to recover, in part because of continued protectionist measures from 2009 onwards.

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06/05/2018
Economic Publications

Taking stock of global metal sector trends and outlook

The most-widely traded base and ferrous metals have benefited from a bull market since mid- 2016. Prices have increased on the back of robust global economic growth and technological shifts that have triggered a surge in metal use. Such an uptick in demand has not been observed since the period following the 2008-2010 economic and financial crisis. The use of these metals has been buoyed by highly synchronized growth recovery in the major economies, and has helped the mining and smelting sectors to recover after the end of the commodity super-cycle in the late 2000's.

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06/05/2018
Economic Publications

Turkey Payment Survey 2018: Payment terms expand amid positive economic expectations

This is the first corporate payment survey in Turkey aiming at indicating how payment terms stand in different sectors, how companies manage credit management practices and evaluate future payment experiences. The data collection was conducted in January and February 2018 through phone calls with 2615 companies in 81 cities. While 73% of respondents said they sold with credit terms to their clients, 35.3% of them mentioned they do not have a department responsible for credit management. Only 0.1% said they have a department in charge of trade receivables management.

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06/05/2018
Economic Publications

Political Risk in Latin America: Back to the future?

Latin America has experienced a difficult period since 2014. The slump in commodity prices has impacted activity via several channels (such as lower investments, export revenues, and a tighter public budget). After two years of recession, the region’s GDP growth finally rebounded in 2017 by an
estimated 1.1% year-on-year, and is expected to gain further traction in 2018 (growth forecast: +2.4% YOY). However, this optimistic outlook is linked to favorable global trends than domestic merits. Although a still-gradual tightening monetary cycle in advanced economies (especially in the United States), as well as a soft deceleration in China and the resulting improvement in commodity prices, has aided Latin America, the poor political environment has stained the region’s image in the eyes of much-needed foreign investors – particularly with the multiple political and governmental corruption scandals since 2014.

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