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Sector Assessments Revised In 6 Global Regions

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  • In Europe, dynamic household consumption is boosting many sectors
  • The health of UK industries is deteriorating and hinges on post-Brexit decisions
  • Strong regional disparities persist – five out of the six downgrades are in emerging markets 

Brexit poses political problems just as the European economy is staging a recovery  

The uptick in household consumption reflects restored confidence among households and companies in Western Europe. This positive dynamic has led the Information and communication technology (ICT) and Automotive sectors to be reclassified as low risk in Western, Central, and Eastern Europe. The rise in new vehicle registrations has benefited both auto manufacturers and companies in the Metals sector. Although metals are still associated with high risk, the assessment for this sector has been upgraded since the automotive industry accounts for 12% of the sector and construction for 50%. The moderate improvement observed at the beginning of the year in Construction has been confirmed. This situation, along with the rise in building permits in Spain (35%),Germany (12.5%), and France (7.6%), has led to the sector to be reclassified as average risk

Despite the positive trend in household spending, the Textile sector has been plagued by intensified internal competition, particularly in the industry’s mid-range segment.

Although the region is gaining momentum, three sectors are under surveillance in the UK following the anticipated split with the European Union. In the short term, construction (6.1% of GDP) will be hampered by rising import prices due to the depreciation of the pound sterling. The pharmaceutical and automotive sectors may be negatively impacted by entry barriers, as goods from these industries are among the most heavily exported (7.8% and 11.3% of exports, respectively.) 

A shift between emerging and developed markets 

Latin America is still associated with the highest risk in the world, with its Energy, Steel, and Construction sectors all classified in the maximum risk category (very high risk). On the positive side, Brazil, like many other Latin American countries, is seeing the manufacture of paper pulp enhanced by the fall of the real against dollar in 2015 (47%). During the first five months of 2016, Brazilian exports surged by 10%, reducing risks in the Paper-Wood sector (reclassified as average risk).  

Among the 12 sectors analyzed by Coface, the Pharmaceuticals sector remains the least risky globally. Despite the challenging international environment, the sector is benefiting from increasing healthcare demand in emerging economies and a business model based on reimbursement in advanced economies. This is causing companies to invest. Given the high level of profitability observed in North America, we are reclassifying the Pharmaceuticals sector there as very low risk. However, US growth is losing momentum in 2016 (1.8%) and retail sales are slowing, reflecting more muted consumption. North America’s Textile sector, which has been impacted by this slowdown, has been downgraded to high risk.

OIL dependent regions bucking the global trend 

Even though stronger economic trends can be seen overall, some regions have highly distressed sectors. 

The Middle East, which is mainly dependent on oil exports, has adopted austerity policies that are detrimental to other sectors. These measures are hindering economic activities that rely on robust household consumption. The developments are the result of lower oil prices, which have led to a decrease in fuel subsidies. Automotive, Agrofood, Retail and Textile-Clothing have all been downgraded to high risk


Policies imposing cuts in public expenditure have also impacted countries in emerging Asia. This is particularly so in the Construction sector, where company debt has reached record levels due to increased customer late payments. The sector has therefore been downgraded to very high risk. However, the Agrofood industry is faring better and expanding due to a slight rally in agricultural commodity prices. 



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Annie Lorenzana

North America
MOB: +1 (407) 221-3496

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