Coface: growth will continue, but ‘overheating’ risk will remain for businesses
In its latest rating, Coface international credit risks insurance company has upgraded ratings for Ukraine, Georgia, and Netherlands. Experts say there is a possibility of businesses overheating. That and political tension will be among the main business risks in 2018.
According to the new business risk rating, global trade growth has had a very positive effect on multiple open economy countries. Indexes have been improved for Netherlands (A1), South Korea (A2) and Taiwan (A2) in this quarter. With consumers’ and businesses’ confidence gradually returning, the business environment is set to improve in Greece as well. Indexes of Baltic States remain unchanged – A3 or satisfactory for Latvia and Lithuania. Estonia’s index is A2.
In spite of high political risks, Coface has improved indexes for Ukraine (C), Georgia (B) and Moldova (C). Kazakhstan’s business environment has benefited from growing oil collection and investments in China’s New Silk Way project. Risk assessment has been downgraded for Saudi Arabia (C), where increasing political tension hurts the business environment. In addition, economy of the Middle Eastern country relies a great deal on oil prices, which remain volatile.
Coface experts mention that three main business risks in 2018 are associated with overheating in developed countries, bank crisis risk in China, as well as political risks around the world. 2018 will be a year of elections for many countries, especially in Russia and Mexico, where high political risks are maintained by risks of social instability.
«History shows that low unemployment levels in Germany, USA and Central Europe means companies there are coming close to their maximum production capacity. This increases the risk of businesses overheating, which could in turn lead to supply restrictions, delaying growth. This means businesses have to look for new ways of increasing productivity and competitiveness. This is especially noteworthy in a time when most business sectors are going through workforce deficit,» says Coface manager in Baltics Mantvīds Štareika.
Looking at certain business sectors, it becomes clear that 2018 may be beneficial for the metallurgical industry, considering recovery of metal prices. Risk assessment for ICT industry in Western Europe has been upgraded from medium to low. In Northern Europe, improvements have been noticed in the energy sector. Current trends in the automotive sector in the UK do not match the industry’s situation in Western Europe. The risk of a heavy Brexit scenario has impacted investments, production and sales volumes. This was caused by decline of confidence by households and investors. Because of that risk assessment was increased for this sector.