Despite the many obstacles in its path (diverse and varied political risks, high volatility of commodity prices, supply constraint s in advanced economies, to name but a few), world growth in 2018 managed to sustain its 2017 rate (3.2%). However, the multiplication of these pitfalls began to slow growth down by the end of the year, to the point of darkening the outlook for the year ahead (Coface forecast: 3.0%). Although the extent of this decline seems modest, it is sufficient for business credit risk to increase: Coface anticipates that the number of corporate insolvencies will increase in 24 of the 39 countries for which this data is available, which account for 65% of global GDP (Graph 1). This is five and nine more countries respectively than in 2018 and 2017. The United States has yet to be part of this, even though its peak growth rate also seems to have been exceeded.
Unsurprisingly, industry provides the impetus for the economy, notably the automotive sector, whose Coface assessment of corporate credit risk has deteriorated in eight countries this quarter (including seven in Europe). This has impacted growth prospects: growth is unlikely to exceed 1.4% in Germany and France in 2019, 2.2% in Spain, and 0.5% in Italy. In this environment, world trade is not spared: Coface expects its growth to reach only 2.3% this year – 1 and 2 percentage points lower than in 2018 and 2017 respectively, but still higher than the low point of 2016.
However, slowing growth in advanced economies – particularly in the United States – has at least one positive eff ect: by reducing expectations of further key interest rate hikes by the US Federal Reserve, the risks of capital outflows from emerging markets are limited.
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