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.

ITALY:

The high number of signals of risk in Q2 2018 is reminiscent of the situation in the years 2012-2013: rise of sovereign spreads in the Eurozone, increased protectionism, higher oil prices, capital outflows from major emerging countries, global trade on the downturn. Even if the extent of the impact is not the same, taking account of a far lower oil barrel price (75 USD at the start of June 2018 compared to around 110 USD in 2012), and the yield of a 10-year Italian government bond less than twice as high, these signals confirm that the peak in world growth has passed. The credit risk of companies is increasing in the advanced economies where, after the start of the year being marked by a loss of confidence linked to rising protectionism, a slowdown in growth is to be observed (forecasts of 2.2% in 2018 and 2% in 2019 for the advanced economies; forecasts of 2.1% for 2018 and 1.8% in 2019 for the Eurozone). Coface has therefore downgraded the country assessment of Italy to A4, where the companies that are particularly indebted will be vulnerable to a potential hardening of the bank lending conditions. The United States stands out as an exception, spared at this stage from this slowdown (growth forecast of 2.7% in 2018, following on from 2.3% in 2017).

AFRICA:

If suppliers were to offer African companies payment terms of 30 days after delivery of goods and services, rather than demand payment in cash in advance, this could release more than USD 33.5bn of additional working capital to be put to more productive use in 2018, according to Euler Hermes. The parallel development of trade finance is key to seize this great opportunity for the African continent. This huge amount of money wasted each year is a clear argument to develop domestic production capacity, since imports come with a cost due to low DSO . Here are a few examples:

• Oil exporters (Algeria, Nigeria, Angola, Libya…) account for USD 14bn wasted in cash vaults as a result of short DSOs, with Algeria (USD 5bn, 3% of GDP) at the top of this ranking. Republic of Congo for instance would free up the equivalent of 11% of its GDP (USD 0.9bn) with longer DSOs.
• In fast growing East African economies, greater DSOs would also be a non-negligible growth boost. In Kenya for instance, it would free USD 1.6bn (2% of GDP), and about the same amount in Ethiopia.
• Potential gains are weaker in value in West Africa (USD 0.4bn in Senegal, 0.7bn in Côte d’Ivoire) but range from 2 to 2.5% of GDP. On the contrary, it means that these gains are lower in relative terms in countries with the highest income level: South Africa (0.4% of GDP), Morocco (1% of GDP).

The world is suffering from too long DSO in many places, but African figures show some divergence. Stéphane Colliac, senior economist for Africa at Euler Hermes, said: “Big players are often bad payers, when small players have no opportunity to pay late. It is especially true in Africa: there is a paradox when we see that key State Owned Enterprises are able to postpone their payments by several years (e.g. in Angola or in the past in Egypt) while others have no other choice than cash payment. As an example, Moroccan main corporates have 84 days of DSO but 30% of the transactions (those involving smaller ones) are still paid in cash.”

EFFECTS OF TRADE WAR ON ICT INDUSTRY OF CHINA AND METAL INDUSTRY OF CANADA:

The premises of the trade war that were announced at the start of the year have been confirmed. The US protectionist policy has been intensified, targeting Chinese exports, including many “Made in China 2025” ICT products, which explains the downgrading of the Chinese ICT sector to the “high risk” category.

Among the countries recently concerned by the coming into force of the US protectionist measures targeting steel and aluminium, it is Canada that will be the most affected, hence the downgrading of the Canadian metals sector to “very high risk” (87% of its steel exports are for the United States).The metals sector is developing favourably in the USA, leading Coface to upgrade its assessment to “medium risk”.