Several countries’ risk profiles revised - up and down

The recession in Southern Europe is becoming increasingly severe in Spain and Italy, and has spread to Cyprus. The contraction in activity in these three countries is expected to be respectively 2%, 1.8% and 1.3% for the year 2012. International risk assessor, Coface, said the first signs of struggle in the Indian economic growth model and deterioration in the business climate in Argentina were also beginning to emerge. However, Indonesia – bolstered by its domestic market – is demonstrating a significant ability to withstand external shocks, according to a Coface statement. “In this increasingly difficult environment for companies, Coface has downgraded the assessments for six countries, including Spain, Italy, Cyprus and India, and upgraded those of four countries,” according to the statement. Because of the worsening economic situation in Southern Europe, Coface has placed the A4 assessments of Spain and Italy under negative watch and downgraded that of Cyprus, where the situation is raising concerns, from B to C. With regards to India, Coface has placed its (A3) global assessment of the country, and specifically the (A4) business climate assessment, under negative watch. In India, weakening external demand and the tightening of monetary policy between March 2010 and October 2011 is holding back growth. Coface is expecting GDP to grow by 6.5% over the year. Coface has cut its rating for the business climate in Argentina from B to C, following the enforcement of restrictive exchange controls, which make it difficult for both import and export companies to access currency. Coface has placed its country (B) and the business climate assessments (C) for Indonesia under positive watch. The domestic market is being boosted by favourable demographic factors, and exports of raw materials to China are helping to sustain the vigour of its growth. The continuing improvement in its sovereign risk, the reforms implemented to restructure the banking sector and the on-going fight against corruption has enhanced the strength of the economy and its ability to withstand the worsening world economic climate.