The level of payment defaults is improving in Japan and the US, but eurozone risk is on the rise, according to credit insurer Coface.
Coface's country risk assessment measures the average level of payment defaults by companies in a given country within the framework of their commercial transactions.
In Coface's view, the world economy is presently marked by divergence between the three major advanced zones: the economic contraction in the eurozone is worsening (-0.3% currently forecast in 2012 versus -0.1% previously), whereas North American growth is stabilising at 2%, and activity is recovering in Japan, with 1.8% growth after posting -0.9% in 2011.
In this contrasted economic context, Coface has upgraded its assessments of seven countries, including the US and Japan, and downgraded those of nine other countries, including Portugal and Argentina.
According to Coface, American and Japanese companies are benefiting from favourable economic outlooks. Signs of recovery in these two countries have led Coface to place the A2 assessment of the US under positive watch and to remove the negative watch on Japan's A1 assessment.
Generally, corporate debt levels are very low and companies are highly profitable. In 2011, corporate investment increased. However, American SMEs remain fragile due to difficulties in obtaining credit. Coface has observed a good performance in its payment experience with American companies.
After the abrupt downturn following the catastrophic events of March 2011, the Japanese economy is expected to recover, driven by domestic demand and stronger exports.
Exports, the traditional engine for Japanese growth, will benefit from the recovery in US economic activity and from the vitality of emerging Asian countries. Even in an environment of economic contraction, the payment behaviour of Japanese companies has remained positive.
For European companies, however, the outlook is not so good. Many are still in turmoil, unaided by the worsening economic contraction in the eurozone, particularly in Portugal, Italy and Spain, the report said.
The growth forecasts for 2012 for Italy and Spain have been revised to -1.5% and -1.2%, respectively. In January 2012, Coface downgraded these two major eurozone economies to A4 and its payment experience with these countries continues to deteriorate in early 2012.
At the same time, Coface observes a marked deterioration in the financial situation of Portuguese companies. The country's recession is likely to deepen further in 2012 (-4%). Downgraded to A4 in March 2011, then placed under negative watch in September 2011, Portugal has now been lowered by one notch to B.
The situation of Portuguese companies, like those in Spain, is characterised by an explosion of external debt, currently in excess of 180% of GDP, which explains their extreme vulnerability to negative economic developments.
Since 2011, Coface has registered a surge in non-payments, in particular in the construction, distribution and textile sectors.
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