The United States joins the best risk category, according to Coface. Now with an A1 assessment, like Japan, Canada and Switzerland, the country is experiencing dynamic and balanced growth (forecast at 2.7% for 2014 by Coface), benefiting both from sustained household consumption and corporate resiliency.
The profitability level of companies in the U.S. is now back at its pre-crisis level with a relatively low debt burden. Another contributory factor in the reassessment of the United States was the settling of the public debt ceiling crisis at the beginning of 2014.
Meanwhile, the United Kingdom, after a two year break, has seen a return to its A3 positive watch assessment. Growth (forecast at 2.1% in 2014), driven so far by household consumption fed by easier credit access, will be further boosted this year by increased levels of investment. Confidence is improving among companies, even though some sectors, including manufacturing, are lagging behind others, such as financial services and construction.
Emerging economies under pressure
The slowing of growth due to supply issues continues in the major emerging economies, says Coface.
Two BRIC countries have been particularly hard hit by the dip in investments.
In Brazil, downgraded to an A4 assessment, growth potential has also been impacted by slowing consumption and by structural problems: inadequate infrastructure, a shortage of qualified labour and bureaucratic barriers.
In Russia, geopolitical tensions are aggravating an already weakened economy, leading Coface to place its B assessment on negative watch. The Ukrainian crisis, as well as the increase in capital outflows, will have negative consequences for an already slowing rate of growth (forecast at 1.0% in 2014, after 1.3% in 2013) with a decline in investment.
As political fragility is one of the criteria applied by Coface, the assessments of A4 for Turkey and C for Venezuela are placed on negative watch, reflecting the complex political crises.
In Turkey, the risks of political tension cannot be discounted ahead of the upcoming municipal and presidential elections (March and August 2014). Coface is expecting growth to slow to 2% in 2014, impacted by tighter monetary policy and high inflation. As for companies, the payment experience registered there by Coface has been deteriorating since December 2013.
In Venezuela, there is a recession and hyperinflation against a backdrop of social and political problems. The situation will remain fragile until the legislative elections in September 2015, in particular for companies running the risk of nationalisation and subject to import rationing and controls on prices and margins. Suppliers, both foreign and local, to the State and the oil and gas sectors are suffering long payment delays.