Co­face: growth will con­tinue, but ‘over­heat­ing’ risk will re­main for busi­nesses

Baltic News Network - - News -

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.


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