Global credit insurers are in a unique
position to gauge the general business
climate in economies around the world.
Rather than basing their assessments
and forecasts on months-old data, credit
insurers use near real-time data.
The insurers’ economists collect
and analyze the payment histories of
millions of companies and combine
this data with micro- and macro-economic analysis and political risk
Coface, one of the world’s leading
credit insurers, uses this data to publish
its annual Country Risk Report (www.
Coface-USA.com, click on Country Risk
and Economic Research) which offers an
assessment of the credit risk and business climate in 158 nations.
Frequently, world events and economic upheavals require that Coface
update its country reports. For example, Japan, long trapped in a period
of stagflation, is now showing signs of
life. And Ireland, staggered by the collapse of its banking system, is making
a remarkable comeback. The Philippines, despite an ongoing recession
in Europe, are showing good promise.
South Africa, on the other hand, faces
economic downturn for the long haul.
Here are updates on these four
◗;The Yen’s depreciation since the
end of 2012 has underpinned
exports in value and improved Japanese business financial results.
◗;Fiscal stimulus has sustained public
investment in infrastructure.
◗;The rise in stock indices has
enhanced household wealth and
boosted private consumption.
◗;1.4% growth is expected in 2013.
Prime Minister Shinzo Abe’s expansionist monetary policy has already
had a big impact on Japan’s economy.
The dramatic depreciation of the
Yen has driven share prices signifi-
cantly higher, strengthening house-
hold wealth. As a result, families
increased their spending in the first
quarter of 2013. Investment, however,
Private consumption is expected to
decrease in the coming months, and
increase again towards the end of the
year as Japan prepares for an increase
in consumer taxes from 5% to 10% in
2014 and 2015. The government’s fiscal
stimulus to boost growth through
public investment in infrastructure
should also help sustain activity. Private investment, however, is not likely
to see any significant upturn.
The depreciation of the Yen since the
end of 2012 (-22% between November
2012 and June 2013) has helped revitalize exports and lead to an improvement
in the financial results of major international companies. The weaker Yen
should also partly offset the factors that
put Japanese exports under pressure
in 2012, i.e., recession in the Eurozone,
which accounts for 12% of exports.
Meanwhile, Japan’s territorial
conflict with China over the Senkaku-Diaoyu islands is worrying, as China
accounts for nearly 20% of Japanese
Finally, government fiscal adjustments in the United States could
affect sales (16% of exports go to the
US), depending on the scale of tax
increases and spending cuts. Subject
to an easing of geopolitical tensions
with China, exports are expected to
rise slightly, but not enough to enable
external trade to contribute positively
to growth, as imports will remain
sustained by purchases of energy to
replace lost nuclear power.
◗;Growth stronger than expected in
2012 (+0.9%) and likely to remain
positive this year (+0.9%) and to
strengthen in 2014 (+ 1.8%).
◗;The current-account surplus surged
to 4.8% of GDP, reflecting not only the
contraction in domestic demand, but
also competitiveness gains.
◗;Investor confidence strengthened
and the country started to tap the
international bond market again.
Ireland, which remains a very open
economy, saw growth slow in 2012 as a
result of the European crisis. However,
that slowdown was less severe than
expected thanks to strong domestic
GDP growth should remain close to
1% in 2013. Foreign trade will continue
to contribute positively to activity.
Many sectors have made productivity
gains which will boost export performance. Chemicals, IT and telecoms
equipment, for example, are expected
to post satisfactory results. However,
the expiration of certain patents may
slow growth in pharmaceuticals. Agri-food remains a key segment, but falling margins and several bankruptcies
point to a weakening sector. Exports
of services, in particular business and
IT, now make up half of Ireland’s exports and are currently growing faster
than exports of manufactured goods.
Sectors oriented towards domestic
demand will continue to suffer from
Ireland’s economic crisis. Private and
public consumption will continue to
contract, but at a slower pace than
in 2012. Austerity measures and the
scarcity of credit have put downward pressure on domestic demand,
but household debt – even while it
remains huge (195% of disposable income at the end of 2012) – has started
to narrow. Residential property prices
have stabilized and the labor market
improved (the unemployment rate declined to 13.7% in the first quarter of
2013). But for the time being, construction and distribution continue to pose
a high credit risk.
◗;Macroeconomic fundamentals have
◗;The country posted a growth of