G-Grade Q4 2017

New trends in country risks: AU G-GRADE Q4 2017

The global economic situation is improving…all the economic indicators confirm this. On the same trend, global underwriters such as Atradius, Coface, Credendo and Euler Hermes have upgraded the country risk rating of numerous countries, and we notice on this quarter much more upgrades than downgrades.

  • Highest upgrade: Indonesia is a good example and has been upgraded by 3 of the 4 insurers. The strong domestic demand (thanks to the emergence of the middle class) is boosting the GDP Growth, which is expected to reach 5.2% in 2017 and 5.3% in 2018 according to IMF forecast. Thanks to a very low level of Government Gross Debt, there is room for public investments in infrastructures, and the construction sector will remain robust. On the same hand, the government has made significative effort to improve the business climate and this attracts foreign investments. However, clouds remain such as corruption, lack of transparency and dependence on China, especially taking into account the weakening demand from the giant neighbour).
  • Highest Downgrade of the quarter: highly dependent on the oil price, Gabon was resilient up to now, and was able to soften the impact of the major oil price slump thanks to its currency (CFA Franc). However, the overall political situation (numerous strikes) and the increasing level of debt is shaking the previous political stability. On top of this, according to IMF figures, GDP growth was 4,4% in 2014 and expects to drop to 1% in 2017. Other upgrades, in Africa :
    • Egypt: Since the end of 2016, Egypt has made large reforms to make its economic system more in line with IMF expectations allowing the increase of external financing. Considering this positive downturn the business environment in Egypt appears to be one of the most favourable of the region
    • Senegal: In western Africa, Senegal performance appears to be the most dynamic among its peers. Despite a negative current account balance, the attraction of funding is sufficient to maintain the country in good health.
    • Uganda: Its level of foreign exchange reserves performs at a good level and the country keeps investing in its infrastructure.

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