Company confidence indices are up despite the context of persistently high political risks. Financial markets and business confidence are currently buoyant and households and companies appear not to be delaying investment or consumption decisions.
Behind this is a lessening in the risk of deflation both in advanced economies and China combined with favourable financing conditions in the Eurozone, except for Portugal and Greece.
This marked upturn in business confidence in advanced economies and an economic recovery in the emerging countries (forecasts: Russia +1% GDP growth in 2017 and Brazil +0.4%) have led Coface to upgrade the global growth forecast to +2.8% and that of global trade to +2.4% (after +1% in 2016).
Effects still hard to detect
However, business activity will remain constrained by high and increasing debt in emerging economies along with the threat of protectionist, political and social risks in advanced and emerging countries.
The Czech Republic (newly upgraded to A2) and Latvia (newly upgraded to A3), are being well integrated in the European chain of production. The Czech Republic is benefiting from solid car sales in the EU.
Israel (newly upgraded to A2) has combined solid growth with low unemployment and inflation. After undergoing an initial downgrade last June, Mozambique was further downgraded to E, "extreme risk", on account of serious threats to its political stability and recent payment defaults.
Good news for metals in China and Brazil, and for construction in France and Brazil
In terms of sector risks, the metals sector has for the last three years been the most at-risk sector. But there are improvements. Growth in metals production is slowing considerably in China, while prices are increasing, being sustained by a high level of activity in the construction and automotive industries in the US and improvements in these sectors in Western Europe.
The imposition of customs tariffs on imports of Chinese steelmaking products has also given respite to steelmakers in Europe and Latin America. In this context, Coface is updating the assessments of the steel sector in Latin America from "very high risk" to "high risk" driven by Brazil and emerging Asia due in particular to the rise in domestic demand in China.
In Latin America, and particularly in Brazil, there is a positive trend in the construction sector due to a rapid fall in central bank interest rates and energy costs, despite uncertainty concerning investment projects. The risk in these sectors has improved to "high".
In Western Europe, two sectors stand out. In France, the construction sector is now "medium risk", benefiting from an upturn in the building of new housing due to low interest rates and tax incentive mechanisms. The United Kingdom is facing stagnation in household purchasing power, affected by inflation, downgrading of risk for the retail sector to "high".