The Credit Crisis Now Affects All Regions

During the 13th Country Risk Conference, Coface announces the downgrades of 22 country ratings. For the first time, two of the biggest emerging countries are negative watch-listed simultaneously: China and Russia.

On a worldwide level, the growth differential anticipated is now 3.1 GDP points from 2007 to 2009. It was only 2.5 points between 2000 and 2001 during the previous credit crisis due to the collapse of the Internet bubble. This slacking of growth explains the rise of over 50% in the Coface payment default index between 2007 and 2008. Coface forecasts that the credit crisis will only end when the year 2009 comes to a close.



The credit crisis which started at the beginning of 2008 seems to have taken a new dimension in the fourth quarter when businesses in countries that had managed to hold out so far (such as Germany) are, in turn, being affected. Given the new global growth forecast of 0.9% for 2009, this crisis resembles those of the early 1980s and 1990s if we consider the growth drop. The slowdown in growth from 2007 to 2009 should be 3.1 points – just as from 1979 to 1982, and from 1989 to 1991. Nonetheless, it is below that of the 1st oil shock. For the year 2008, Coface registered an increase of 47% in its payment default index with a speeding up during the fourth quarter.

The global country risk overview presented during the Conference emphasizes how the credit crisis has spread since it started in January 2008 in the United States, then reaching the other so-called “bubble” countries (the United Kingdom, Spain, Ireland, etc.). No area seems to be spared any longer. The industrialised countries close to the epicentre of the crisis, then the countries with no speculative bubbles but sustaining flat growth (Italy, France, Germany, Japan, etc.) have, in turn, been affected in addition to the fragile emerging countries (South Africa, Viet Nam, etc.). 



As all industrialized country ratings were downgraded in 2008, Coface places under negative watch two BRIC countries, which had resisted up until now. “The credit crisis is now affecting two major emerging countries – Russia and China – despite the comfortable macro-economic and financial situation they had been enjoying over the recent years,” explains François David, Coface Chairman. “However, companies in these two countries were showing signs of strong vulnerabilities – already pinpointed by Coface – heightened by the current slowdown.”

Coface forecasts 7% growth for China in 2009. The Coface survey on Chinese company payment behaviour, conducted over the last 6 years, has enabled to spotlight the effects of excessive competition on the private sector’s contracting profit margins. In this context showing evidence of micro-economic vulnerability, the turndown in growth will result in an increase of payment defaults on the part of Chinese companies. China’s A3 rating has therefore just been placed on negative watch. As for Hong Kong and Taiwan, they have been downgraded to A2.

For Russia, Coface forecasts growth of 2.5% in 2009. Coface business-to-business payment experience in Russia deteriorated in 2008, mainly due to persistent deficiencies in corporate governance, these problems already taken into account in Russia’s B rating. The country is now severely affected by the crisis (drop in credit, fall in oil prices). Russian companies’ foreign debt rose by 140% since 2005, which should generate further payment default, hence why Russia’s rating has been placed on negative watch. 


Press Contact: Nathalie Ott / +33 (0)1 49 02 16 29 / 

About Coface

Coface's mission is to facilitate global business-to-business trade by offering its 130,000 customers four business lines to fully or partly outsource trade relationship management and to finance and protect their receivables: credit insurance, factoring, ratings and business information and receivables management. Thanks to the worldwide local service delivered by 7,000 staff in 65 countries, over 45% of the world's 500 largest corporate groups are already customers of Coface. Coface is a subsidiary of Natixis whose share capital (Tier 1) was 12.9 billion euros end June 2008.

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