European crisis not yet over, but trade outlook positive, confirms Coface conference experts

News | 25 January 2013

Jean-Marc Pillu

Coface Group, the Natixis-owned French credit insurance provider, launched its new visual identity and new tagline, 'Coface for safer trade', shortly before 1500 delegates descended from all round the world to its annual country risk conference held on 22 January in Paris.

However, the world is not becoming a safer place to do business and, according to chief executive Marc Pillu, the effects of the recent global financial crisis continue to hamper economic recovery.

“The probability of a systemic crisis in Europe is increasingly remote, which is good news. However, activity in the eurozone will continue to contract in 2013. Subdued consumption, budget austerity and downturn of the labour market, with companies significantly tested by the major recession in 2009, have led to many and costly insolvencies. Admittedly, the financial crisis is on the way to being resolved, but the crisis in the real economy illustrated by companies’ persistent fragility, will not end in 2013,” he said.

Globalisation under stress

From left to right: Yves Zlotoswki, Marc Auboin, Raphael Kahane (moderator from the news station France 24), Frederic Sanches,  Peter Luketa

In the panel discussion, 'globalisation under stress', the debate between WTOs' Marc Auboin, Coface's chief economist Yves Zlotowski, along with  Peter Luketa (Global head, export credit and global specialised finance, HSBC) and Frederic Sanchez (chair of executive board, Fives) pulled out the export and trade issues affecting world economic growth.

"Exports cannot compensate for domestic gridlocks", said Zlotoswski, pointing out that while they are they are economic country lifesavers, emerging countries want to protect their domestic industries. Sanchez, representing the corporate perspective - the French industrial engineering group turns over EUR1.2bn - said: "you have to work on a facilitating trade, adding, "the right way to deal with protectionism measures is to set up operations in those countries."

Auboin  predicted that world trade would increase two-fold within the next 15 years and said that the pressure was on the banks and agencies that fund international trade, reminding delegates that 80% of the US$16trn reported for 2011 was based on international short term credit - less tha 360 days. He was also upbeat about progress made to reduce protectionism, adding: "we are not naming and shaming but have a stock of measures. "   

The afternoon session had thought-provoking sessions on how the rise of middle classes in emerging economies is fuelling consumption. Amitabh Kundu, Professor of economics, Jawaharlal Nehru University told delegates not to just concentrate on the main cities: "A massive opportunity awaits global business in small towns and villages of India," he said. A video of his full speech can be viewed here on YouTube.

 Coface country risk assessment

Based on its day-to-day contact with companies worldwide, Coface has issued a cautious scenario for the global economy in 2013. The recovery of advanced countries is still in hostage to public and private debt. Household and corporate confidence has not been restored, given the worsening situation of labour markets and the incomplete institutional reforms in Europe. It also warns the lack of visibility in US budget policty may also impact US growth. Coface precits a continued recession at -0.1% in the eurozone with a persistent contraction in activity in Southern Europe. Growth in the US will slow to +1.5%, while emerging countries will post an average healthy and sustainable +5.2% growth.

A summary of Coface's country risk assessment changes is set out in Figure 1 and detailed summaries of the 158 countries it assesses (on the basis of corporate feedback on invoice settlement) are available at: Note that ratings range from A1, where the probability of enterprise default is 'very low' to D where the probability is 'very likely'.

Figure 1: Summary of country risk changes

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