Ireland, India and Japan are among the countries downgraded, which includes both developed and emerging economies. Major developed nations such as the UK, France and the US are being monitored closely but are yet to be downgraded as their strengthened financial foundations allow for greater ability to back businesses.
Some 60% of the 126 sector risk ratings downgraded have also moved from ‘moderate’ to ‘high risk’, highlighting the dangers the global economy faces. It marks a dramatic jump from the previous record for sector risk downgrades of 70 in Q1 2016.
Automotive and transportation are the industries most severely affected by downgrades, in 26 and 21 countries respectively, as well as a large proportion in electronics and retail. Western Europe had the highest level of sector rating downgrades, with 52.
The pharmaceuticals and software and IT sectors were the most resilient, owing to their prominence in the worldwide fight against coronavirus.
Coronavirus is the latest – and hardest-hitting – challenge faced by the global economy but Euler Hermes says trade tensions, geopolitical uncertainty and Brexit also threat major disruption in 2020.
Meanwhile, the firm has revised its economic forecasts for 2020. It expects a significant slowdown in global economic growth, with GDP expected to contract by -3.5% this year, twice as much as in 2009. The insurer also forecasts international trade will contract by -15% and insolvencies by will rise by 20%.
Maxime Lemerle, head of sector and insolvency research at Euler Hermes, said: “We have never known a situation like this for the global economy and downgrading a record number of country and sector risk ratings reflects that.
“But what’s more concerning is that this is just the start and things will get significantly worse before they get better. It goes without saying that businesses will need all the support they can get to enable them to continue to trade – both at home and overseas – with the confidence needed to ride out these economic storms.”
Euler Hermes publishes its country and sector risk ratings every quarter to measure the development of non-payment risk in trade receivables. It monitors and evaluates a total of 242 countries and 18 sectors through continuous tracking of 40 short- and long-term economic and financial indicators.
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