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USA: recovery plan paves way for record trade deficit

As the world’s largest importer and second largest exporter of goods, the United States (U.S.) has run a trade deficit since the early 1970s. This trade deficit has regularly been a source of tension in economic and trade policy debates. Most recently, President Donald Trump’s administration has reignited this debate, arguing that it costs U.S. jobs and reflects unfair trade practices by partner countries. Despite escalating trade tensions and tariffs that were intended to reduce this imbalance in trade in goods, Donald Trump leaves a legacy of a larger trade deficit to President Joe Biden’s administration than when he entered the White House four years earlier. After a year 2020 in which trade flows were disrupted by the COVID-19 pandemic, the trade deficit even reached a record high of more than 900 billion U.S. dollars (USD).

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Insolvencies in France: +22,000 businesses left dangling

In France, the number of corporate insolvencies in January 2021 fell by 38% year-on-year – exactly the same drop as in 2020. Although the economic & health crisis has not affected all sectors the same way, insolvencies have fallen significantly across the board. However, taking into account government support measures and the drop in turnover by sector, insolvencies in France should have risen by 6.5% in 2020. Learn more about 2020’s “hidden insolvencies” in our Focus.

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The business insolvency paradox in Europe: miracle and mirage

The true impact of the Covid-19 crisis will remain unclear until companies release their financial reports. We have therefore simulated companies’ financial health by calculating a sectorial solvency ratio (gross operating profit/net debt), taking into account both the negative revenue shock and the positive effect of government assistance. We ran these simulations on 6 sectors in the 4 largest eurozone economies using data on turnover, furlough use, state-backed loans and, for France, the Solidarity Fund. We examined a sample of sectors typically accounting for ~80% of total insolvencies. Sectoral granularity is a key element of our analysis: sectors have not all been equally hit by the crisis, nor benefited from the same government aid. Crucially, not all sectors contribute equally to overall insolvencies, due to overrepresentation in the aggregate figures (even in normal times).

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Middle East & Africa: volatile oil prices lead to varying effects on producing countries, including diversification

The COVID-19 pandemic's negative impact on global GDP growth and trade volumes caused a sharp decline in oil prices. After falling to USD 15 in mid-April, Brent crude prices recovered to an average of USD 41.7 for the year 2020 vs. USD 64.3 in 2019. Coface expects oil prices to remain volatile in the upcoming quarters, with an average forecast for 2021 of USD 60 per barrel at the time of writing. This temporary plunge in prices has affected Middle-Eastern and African oil exporters differently, in line with their national output’s dependence on oil, as well as their fiscal strength and international reserves. Countries like Oman, Iran, Angola, Congo, and Equatorial Guinea have a higher degree of oil dependence in terms of GDP. Bahrain, Algeria, Chad, and Nigeria have a smaller share of their national output depending on the hydrocarbon sector, but are highly dependent on oil in terms of exports and fiscal revenues. Therefore, both categories face a higher risk of economic disruption due to volatile energy prices.

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COFACE COUNTRY & SECTOR RISKS HANDBOOK 2021

Her yıl hazırladığımız “Sektör ve Ülke Riskleri El Kitabı” 2021 yılında dijital olarak yayınlandı.
Dünyadaki en yaygın ticari alacak sigortası şirketi olarak, proaktif bir yaklaşımla tüm iş ortaklarımıza ülkeler ve sektörler hakkında ayrıntılı risk analizleriyle katma değer sağlamayı amaçlıyoruz.
162 ülke ve 13 sektör hakkında Coface’ın genel risk değerlendirmelerinin yanı sıra ekonomilerine ilişkin bilgiler, güçlü ve zayıf yönleri, ticari ortam riskleri, ülke notları ve şirketlerin ödeme ve tahsilat işleyişleri gibi ticaretinize yön verebilecek tüm önemli ayrıntıları bulabilirsiniz.

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COUNTRY RISK ASSESSMENT MAP - Q4 2020

New edition of the country risk map. Consult, download and print the map of the 162 countries assessed by Coface.

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SECTOR RISK ASSESSMENTS 4th quarter 2020

13 major sectors assessed worldwide. Coface assessments are based on 75 years of Coface expertise and on the financial data published by listed companies from 6 geographical sectors. 5 financial indicators are taken into account: turnover, profitability, the net debt ratio, cashflow, and claims observed by our risk managers.

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Poland Corporate Payment Survey 2021:amid support programmes, corporate payment delays have shortened during the pandemic

The fifth edition of Coface’s survey on corporate payment experience in Poland was carried out in November 2020, with330 companies participating in the study. At that time, Poland was being hit by a second wave of the COVID-19 pandemic, with a significantly higher number of infections than during the first wave in spring. Nevertheless, lockdown measures were slightly less restrictive in autumn 2020in order to limit the economic contraction. According to preliminary data, GDP growth in Poland dropped by2.8% and should then recover in 2021, reaching 4.0%according to Coface’s forecast.  

Despite the deepest recession recorded since the collapse of communism, the Polish economy and companies were supported by various government measures aimed at softening the impact of pandemic on business activity. These measures also affected payment delays, which paradoxically decreased despite the significant economic contraction triggered by the pandemic. Indeed, our study shows that Polish companies experienced average payment delays of48 days in 2020, i.e. 9 days less than in our previous2019 survey. The agri-food sector fared best, with payment delays of “only” 33 days. Another paradoxis that the biggest improvement in shortening delayswas reported by transport (44 days shorter than a year earlier), while being the sector at the heart of the mobility crisis, then followed by the construction sector (25 days shorter). However, despite these improvements, transport and construction companies again experienced some of the longest paymentdelays, at nearly 78 and 79 days, respectively. This time around, the energy sector is the one with the longest payment delays, at 80.5 days.  

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An unequal recovery

A year after the first cases of COVID-19 appeared out side China , the uncertainties linked to the pandemic are still considerable despite the announcement of the arrival of several vaccines at the end of 2020.These uncertainties can be summarised in one question: when can we expect herd immunity? This will depend on the speed at which the population is vaccinated and will condition the end of the “stop and go”, i.e. successive containment processes that are harmful to economic activity. Meanwhile, the first half of 2021 should resemble 2020, which was marked by the strongest global recession since the end of the Second World War (-3.8%). Assuming that the main mature economies manage to vaccinate at least 60% of their population (the approximate threshold that theoretically achieves collective immunity) by the summer of 2021, the recovery would then be strong, with world growth reaching +4.3% on average in 2021, while world trade would increase by +6.7% in volume (after-5.2% in 2020). As for corporate insolvencies they declined in all regions in 2020 (-22% in the Eurozone, -19% in Asia-Pacific and -3% in North America) thanks to governments’ support plans, of which the continuity will condition the survival of many companies this year: without them, Coface estimates that the number of insolvencies would have increased by 36% globally last year (vs. an observed decline of 12%).  

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Germany Corporate Payment Survey 2020:German companies have switched to “crisismode” and offer less payment terms

This is the fourth edition of Coface’s survey oncorporate payment experience in Germany,conducted in July and early-August 2020, with753 participating companies located in Germany.Unsurprisingly, COVID-19 and its effects on theglobal and German economy is the predominanttopic of this survey. One major finding is that German companiesare getting worried. This year, only 62% of participants offeredpayment terms, which is significantly less than the 81% in 2019(2017: 83%, 2016: 84%). It is difficult to clearly assess if the lackof payment terms is exclusively the result of COVID-19, or if thisis part of a general “new normality”. This can only be clarifiedby the data of the following years. Nevertheless, this year,more customers pointed to the tight liquidity of the market orexplicitly named COVID-19 and its effects1 as the main reasonsfor offering payment terms. The preference for shorter paymentterms increased. Half of the surveyed companies requestedpayments to be made between 0 and 30 days.    

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Global renewable energies: continued ascension despite the COVID-19 pandemic

Renewables have strengthened over the past 20 years , particularly in the power generation sector, increasingly gaining market shares from traditional energy sources such as coal, oil and nuclear. China is a major producer of renewable energy and a global leader in energy transition.

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The Netherlands Corporate Payment Survey 2020: More payment delays alongside COVID-19

This study is the very first Coface surveyon corporate payment experience in theNetherlands. Originally, this survey hadbeen conducted between February andearly-March 2020 (the first quarter of2020, Q1 2020), with 301 participatingcompanies located in the country. However, at the end ofthe survey period, COVID-19 struck the world and changedthe economic outlook drastically. Accordingly, in order tofactor in this change of companies’ payment experience,we conducted a new survey between early-May and lateJune (the second quarter of 2020, Q2 2020), in which 114companies participated. The results differ remarkablywithin these few months. Admittedly, some might be due tothe different set of participants, but others mirror the neweconomic status-quo. 

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Post-pandemic production relocation: an opportunity for CEE countries

EXECUTIVE SUMMARY
The COVID-19 crisis has triggered a discussion on increasing supply chain resilience to foreign supply shocks. Before the pandemic’s arrival in Europe, a lockdown of factories that temporarily suspended manufacturing in China put the supply of intermediary goods at risk. In order to limit such risks, supply chain managers are likely to diversify their sources of supply. While China is not expected to lose its position of global supplier, the aftermath of the pandemic could bring opportunities for Central and Eastern European (CEE) countries in this diversification process, with a higher share in global supply chains.

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Global Transport: What does the future hold beyond COVID-19?

The COVID-19 pandemic has triggered a mobility crisis, mainly because of physical distancing requirements and the necessity to avoid confined spaces, to limit the virus’ propagation. This has had a disastrous impact on the global transport sector1, with air passenger transport being the most affected segment. According to IATA (International Air Transport Association), air traffic decreased by 94% year-on-year (YoY) in April 2020, and is not expected to return to its pre-COVID level before several years. Moreover, other segments of the transport sector (maritime, rail) are also experiencing a strong deterioration in activity at the global level, even though some markets (such as rail freight between China and Europe) are benefiting from the situation. The crisis is also affecting planemakers and their suppliers, whose financial health heavily relies on aircraft activity.

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United States: Two-speed business bankruptcies

EXECUTIVE SUMMARY The COVID-19 pandemic has hit the United States (U.S.) very hard, inflicting a heavy human and economic toll. The abrupt halt in activity to contain the spread of the coronavirus from March onwards has resulted in a 5% contraction in the first quarter of 2020 year-on-year (YoY), the sharpest drop recorded since 2008, as well as a surge in the unemployment rate. While the economy has already been declared in recession1, the decline in GDP is expected to be even more severe in the second quarter. The gradual reopening, which began across the U.S. in May, should allow the economy to gradually recover. In its baseline scenario, Coface forecasts GDP to contract by 5.6% in 2020, before rebounding by 3.3% in 2021. Nevertheless, the resurgence of outbreaks in several states - including Texas, Florida and California - in June, which will slow or even reverse the reopening process, exposes this forecast to significant downside risks.

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Asia-Pacific Corporate Payment Survey 2020: COVID-19 will overturn last year’s incipient recovery

Coface’s annual Asia Corporate Payment Survey evaluates the payment behaviour of companies across nine economies in Asia Pacific. Data collection took place during the fourth quarter of 2019, before the COVID-19 pandemic, and valid responses from over 2500 companies in the region were collected. 2019 was dominated by trade tensions between the United States (U.S.) and China. Despite these trade disruptions, the region (excluding China) experienced an incipient recovery, favoured by supply chain shifts and additional liquidity from the U.S. Federal Reserve. The recovery will prove shortlived, as the COVID-19 pandemic severely threatens the growth outlook, with many economies in the region expected to contract the most since the Asian Financial Crisis in 1997-1998.

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Are corporate balance sheets in Spain and Italy ready for the COVID-19 shock?

EXECUTIVE SUMMARY
Spain and Italy will be amongst the economies hardest hit by COVID-19, contracting by 12.8% and 13.6% respectively in 2020, according to Coface’s forecasts. To approximate the potential impact of this contraction
on corporate balance sheets, we ran simulations on the evolution of firm solvency, using central bank data that accounts for differences across sectors and firm sizes. Results suggest that some large firms in the automotive
and metals sector in Spain could suffer from small liquidity buffers.

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Corporate insolvencies in Europe: temporary framework amendments kick the can down the road

EXECUTIVE SUMMARY
The economic consequences of the COVID-19 pandemic are of unprecedented scale in Europe. The double shock of supply and demand has resulted in the halting - at least partially - of production in many companies due to the impossibility for some employees to go to work, and in a fall in consumption1 because of mobility restrictions. The decline in revenues has deteriorated the liquidity of companies, fostered an increase in payment delays and, ultimately, of illiquidity. In most European countries, the occurrence of a situation of illiquidity compels the director of the company to declare it within a given deadline to the competent authority who will then initiate an insolvency proceeding, failing which he will be held personally liable. However, in order to simultaneously protect the structure and the recovery capacity of their economies once the pandemic is under control, the vast majority of European governments have: 1) implemented measures to support corporate liquidity, such as deferrals (or cancellations) on social security contributions and taxes, or state guarantees on loans granted by banks and 2) temporarily amended the legal framework regulating insolvency proceedings. 

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From a massive shock to a differentiated recovery

A few weeks after the first containmenteasing measures, economic activityseems to be picking up in most Europeancountries. However, about two monthsafter China, this gradual and partialrecovery will not erase the effects ofcontainment on growth: the depth of the recession in2020 (a 4.4% drop in world GDP according to Coface)will be stronger than in 2009. Despite the expectedrecovery in 2021 (+5.1%) - in the absence of a secondwave of the pandemic - GDP would remain 2 to 5 pointslower in the United States, the Eurozone, Japan and theUnited Kingdom compared to 2019 levels. The expectedincrease in household precautionary savings andcancellation of business investment because of persistentuncertainty about the evolution of the pandemic, aswell as the irrecoverable nature of production lossesin some sectors (particularly service activities and rawmaterials used as combustible) explain the lack of arapid catch-up effect.   

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China Payment Survey 2020: Payment delays will increase further

Coface’s 2020 China CorporatePayment Survey looks at thepayment behaviour of over1,000 companies in Chinain late 2019. The data wascompiled in the fourth quarter,which means that the figures do not takeinto account the impact of the COVID-19 pandemic on the Chinese economy.Notwithstanding this caveat, our surveyshows a deterioration in payment behaviourin 2019, which ultimately does not bodewell for Chinese companies in the contextof weaker activity in 2020. Coface expectsgrowth to fall to 1.0%, the lowest level in30 years, so given the historic correlationbetween economic activity and paymentdelays, we anticipate a sharp deteriorationin 2020.  

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