As an informed exporter, it is important to know the major economic indicators of the countries where you are exporting. This is important to foresee if there are any possible chances of payment defaults. If there is, changes can be made in the payment terms. Hence, in order to aid this decision making process, we present the findings provided by the Euler Hermes in weekly frequency. Major indicators like GDP, sectoral development changes, major economic policies decision, sentiments after any new political appointment, bank rate changes etc. help in painting the economic condition of the country for the whole week.

Protectionism:

President Trump imposed 10% tariffs on USD200bn of Chinese imports (effective from September 24th) set to rise to 25% by the year-end if no deal is reached. As a consequence, the US average import tariff would increase from 5.2%, equivalent to levels seen in the ‘80s, to 6.7% by year end. As a reminder it stood at 3.5% in the beginning of this year. China has announced retaliatory measures on USD60bn imports from the US in addition to the previous USD50bn previously implemented. Overall, global trade growth is expected to slow to +3.8% in 2018 and +3.6% in 2019 (after +4.8% in 2017). Yet, further US tariffs put global trade growth on a dangerous path. The US administration announced that it could go further with tariffs on USD267bn of additional imports, which would mean that all imports from China are taxed higher. This would translate into around 9% US average import tariff.

Argentina:

Argentina’s GDP fell -4.03% q/q  in Q2, which was broadly aligned with expectations, after a +0.8% growth in Q1. Compared to the same quarter last year, the economy contracted -4.2% y/y after growing +3.9% in Q1. Private consumption declined (-1.1% q/q) while exports were the hardest hit  (-14.2%) due to the exceptionally bad crop harvest after the worst drought in several decades. The drop in investment follows high economic policy uncertainty starting early May. Going forward, while the effect of the draught should dissipate, private consumption will continue to weaken as the ARS depreciated further in Q3 so far  and as inflation is expected to end the year close to +40% (against +25% in January), hurting purchasing power. We expect tighter fiscal consolidation, the huge interest rate shock and policy uncertainty to add to the inflation and currency depreciation plagues.

 Turkey :

The Monetary Policy Committee (MPC) raised its key policy one-week repo rate by 625bp to 24% at its regularly scheduled meeting on 13 September, defying President Erdogan’s calls for lower rates. In order to regain investor sentiment on a sustained basis and stop the ongoing currency crisis from further deepening, monetary tightening needs to be accompanied by decisive fiscal tightening, at least. Also, President Erdogan issued a decree curtailing the use of foreign currencies in domestic transactions. Contracts will have to be converted to TRY within 30 days. Details have to be revealed yet, but the decree has caused confusion and will likely adversely affect thousands of companies whose contracts are currently priced in USD or EUR, including many government contracts in construction activities.

France :

It is now obvious that France experienced in 2018 a visible deceleration from the 2017 economic performance. Growth forecast for France is revised down to +1.5% (+2.3% in 2017). The missing consumer is not the entire story, since residential investment was the other big disappointment. Both household consumption and investment stalled during first Half. Purchasing power issues were a drag on performance, along with policy moves. However, there are reasons to expect for a recovery soon, since those burdensome factors should fade. In the corporate sector, high capacity utilization rates bode well for a good momentum (+3.7% in 2018).

U.S.:

Retail sales rose +0.1% m/m, but an upward revision to June kept the y/y rate at a strong +6.6%. Restaurant sales rose for the fourth straight month to +10.1% y/y, a good sign of discretionary spending. Gasoline sales rose to +20.3% y/y, but autos fell for the third straight month to +4.0% y/y. Producer prices were driven down by trade services to +2.8% y/y from +3.3% despite price increases from tariffs; core prices fell to +2.3% y/y from +2.7%. Manufacturing industrial production rose the highest in over six years, but a separate report showed homebuilder sentiment at the lowest in a year.

Russia:

The Central Bank of Russia (CBR) raised its key policy interest rate by 25bp to 7.50% earlier this month, bringing an end to the monetary easing cycle that began in February 2015. The latest move reflects that the CBR expects annual inflation to return to its 4% target faster than initially thought, after consumer prices rose by +3.1% y/y in August, up from +2.5% in July, mainly driven by food price inflation and the weakened RUB. The currency lost -8% vs. the USD in August alone after the announcement of new, tougher U.S. sanctions against Russia at the start of that month. The CBR also expects advanced price increases by some companies later this year ahead of the VAT hike from 18% to 20% at the start of 2019. Euler Hermes expects annual consumer price inflation to reach about +3.8% at end-2018 and to average +4.4% in 2019. The CBR forecasts somewhat higher inflation next year; hence we expect further monetary tightening, especially in H1 2019.

Africa:

Africa’s growth was supposed to accelerate in 2018. It will not, as growth should stall at +3.3%. The disappointment is concentrated in some commodity exporters, those where weak institutions and business environment prevented appropriate investment in the past. Output goals were missed and growth is disappointing. South Africa is a case in point (+0.7% growth in 2018), but this example is not isolated. Algeria (+1.8%), Angola (+0%) and Nigeria’s (+2%) outlooks also had to be revised on the downside due to weaker than expected performances in H1 in their commodity exporting sector. Debt and liquidity are aggravating factors in some cases, weighing on day to day business operations. This issue is now pervasive in some southern African economies, where past debt financing of the current account deficits is proving to be bad cholesterol.

Japan:

The trade deficit deteriorated further in August (-JPY445bn after -232bn in July). Nominal exports increased moderately by +6.6% y/y in August after +3.9% in July. Imports growth was strong reflecting higher cost of energy. Looking ahead, the economy is faced with rising risks. The trade outlook is hindered by rising protectionist measures from the US and elevated energy costs. Domestically, lower industrial activity over the two past months and weaker corporate confidence call for slower momentum in the near term. In that context,  monetary policy is expected  to remain accommodative with a policy rate at -0.1% at least until 2020. The fiscal policy will likely remain neutral as PM Abe calls for the implementation of the sales tax after his re-election as the leader of the LDP.