- Euler Hermes announces that 18 country risk ratings have been downgraded in the first quarter in 2020 due to the risk of a prolonged recession and a wave of bankruptcies caused by the Covid-19 outbreak
- The world leader in credit insurance also lowered 126 sector ratings across automotive, transportation, electronics, and retail in numerous countries
- PARIS, 30 MARCH 2020 – Already weakened by numerous factors of uncertainty (Brexit, trade tensions, electoral deadlines), the global economy now faces a new challenge: the Covid-19 pandemic. Not only do we witness a heavy human cost, it is also taking a toll on businesses around the world, disrupting supply chains and business operations, affecting household and market confidence, and severely limiting international trade.
- Therefore, according to Euler Hermes, global economic growth in 2020 will register a strong slowdown, reaching only +0.5% (+2.5% in 2019). In parallel, international trade will contract this year at -4.5%. As a result, the risk of non-payments will rise significantly. Euler Hermes expects insolvencies to increase by +14% in 2020. In this weak international landscape, numerous countries and sectors will be hit hard.
Country risks : a compass for anticipating « sudden stop » risks (brutal interruption of capital flows)
“The visible and potential consequences of the Covid-19 pandemic are integrated into our country risk analysis. We are still paying attention to the situation of other developed countries, notably France, Germany, Spain, and the United States. These countries have the necessary means to protect their businesses but their situation could rapidly become more complicated should their measures of isolation and the freezing of their economies last longer”, warns Ludovic Subran, Chief Economist of Euler Hermes and Allianz.
A record number of changes to sector ratings since the methodology’s launch
Euler Hermes has downgraded 126 sector risk ratings across the world. This is a new historic level, never seen before: The previous record was in Q1 2016, which saw a total of 70 sectors risk ratings downgraded. It is important to highlight that in 60% of cases, these changes have led to the sector rating going from “moderate risk” to “high risk”. These two signs prove that the global economy and businesses are going through an unprecedented, extremely complex and uncertain time.
The automotive sector is the most severely impacted. Euler Hermes has downgraded it in 26 countries. It is followed by the transportation sector (downgraded in 21 countries), electronics (14), and retail (12). Pharmaceuticals and software and information technology are the two most resilient sectors. From a regional perspective, Western Europe suffers the highest number of sector rating downgrades with 52 cases. This region is followed by Asia Pacific (29) and Central and Eastern Europe (24).