With risks in advanced countries deteriorating without let up since 2008, the gradual improvement in corporate risks in emerging countries is continuing, says Coface.
Coface attributes the new hierarchy of risks to the greater resistance of emerging nations to external crises as being the result of more responsive, but prudent, economic policies. Furthermore, economic growth in emerging countries benefits from the uninterrupted expansion of their middle classes.
Coface has accordingly upgraded the assessment of Indonesia to B and has placed the B grade for the Philippines under positive watch. With little correlation with the European recession, high growth and progress in public finances and in their banking sectors, risks have been significantly reduced in both economies.
However, Coface is continuing to warn companies of persistent risks in emerging countries. There is still political and social tension along with omissions in governance.
A fully expanding middle class is more demanding in terms of law, anti-corruption measures, freedom and transparency. Political institutions in emerging countries are being challenged to adapt to the new situation.
Coface has issued a cautious scenario for the global economy in 2013. The recovery of advanced countries is still in hostage to public and private debt. Furthermore, household and corporate confidence has not been restored given the worsening situation of labour markets and the incomplete institutional reforms in Europe.
The lack of visibility in U.S. budget policy may also impact American growth. Coface predicts a continued recession at -0.1% in the Eurozone with a persistent contraction in activity in Southern Europe. Growth in the USA will slow down to +1.5%, whilst emerging countries will post growth that is both healthy and sustainable at +5.2%.
As for individual country assessments, Italy and Spain have been downgraded for the second time in a year, whilst the A1 rating of Japan has been placed under negative watch given the risk of falling exports, in particular to China.
Among emerging countries, Coface has upgraded Indonesia which has demonstrated remarkable resistance to the recession in advanced countries.
In contrast, the country risk assessment for India has been downgraded to A4 and the Indian model is being brought into serious question.