Coface upgrades business credit ratings of Czech Republic, Portugal and Vietnam

Coface, the international credit insurer, has upgraded the business credit rating of the Czech Republic, Portugal and Vietnam.

Czech Republic: A3

Coface expects the Czech economy to register fair and accelerating growth both for this year and 2016 (2.5 and 2.8% respectively) and order books are expanding.

Internal demand should be buoyant, in particular household consumption, which will be sustained by rising employment and salaries, as well as moderate and temporary fiscal loosening which the decent fiscal situation makes feasible.

Public consumption and investment growth are robust. Authorities have hastened the use of European funds before they expire, leading to a rise in public investment in transportation infrastructures. Moreover, military expenses will grow temporarily in 2015.

Exports will benefit from the economic recovery in Western Europe which absorbs 80% of exports and, particularly, from the European automotive market recovery given a strong presence of the Czech industry in the European manufacturing chain. The Koruna anchorage to the euro is solid and the depreciation of euro will keep exports competitive.

Despite partial defection from Russian tourists, tourism remains strong, contributing to the surplus of the services balance. Local banks, which for the most part are subsidiaries of foreign groups, are solid, with low non-performing loans, and largely financed by local deposits.

Portugal: A4

The exit from the bailout plan has been successful. There has been no recourse to a precautionary credit line in June 2014 and there has been an early repurchase of one quarter of the IMF credit in March 2015.

The fiscal stance is improving and external accounts are rebalancing. The economy is recovering and growth is likely to reach 1.5 % this year and next year.

The recovery is confirmed by corporate indicators: higher corporate margins, a decline in bankruptcies in 2014 and satisfactory Coface payment experience.

Vietnam: B

The economic performance has improved with 6% GDP growth in 2014 and inflation is now under control. The country enjoys large FDI inflows, especially related to high-value products such as smartphones. Private consumption is now accelerating due to low inflation and improved consumer confidence. The external risk has declined: there is a current account surplus and international reserves have increased.