Coface lowers risk outlook of Greece, Cyprus
The strength of companies in Europe and the United States is deteriorating, says French credit insurer Coface Group, which has placed eight developed countries on 'negative watch' and downgraded its risk assessments for Greece and Cyprus.
Greece dropped by one notch to C, which means the business environment is difficult, and Cyprus to B, which rates the country's business climate as 'mediocre'.
The risk downgrades came in the wake of high expectations for a solution to the European debt crisis at a meeting of Group of 20 finance chiefs in Paris, which ended on Saturday with an announcement that ministers backed a bank rescue.
Coface, noting that the economies of developed countries had worsened since summer, removed Germany, Austria, Belgium, France and the Netherlands from its positive watch list.
'The deterioration of foreign trade and particularly the risk of an increase in consumers' and companies' distrust forewarn a very modest growth over the rest of the year,' said a Coface research report.
Two other European countries, Italy and Portugal, were placed on negative watch. 'The hardening of budget austerity measures should keep the Italian economy in quasi-stagnation and the Portuguese economy in recession in 2011 and beyond,' the report said.
The US was removed from positive watch as Coface expected the nation's recovery to be constrained by politics. US President Barack Obama has proposed a US$447 billion stimulus plan to boost the economy and create jobs, but the Republicans are seeking to block it.
'The absence of consensus [among] political actors on solutions that should be taken in order to tackle the sovereign crisis or weak American growth is one of the drivers fuelling this crisis of distrust,' Coface chief economist Yves Zlotowski said.
Tong Diyi, a general manager at Beijing-based Longwin Asset Management, said a weak world economy should not have much impact on China. 'Besides, I think many outlooks have been a bit too pessimistic,' he said.
'Though I agree the [European Union] and US are in recession, I think it will not be as severe as some forecasts claimed. Economic growth in these areas will be very slow, but it won't develop into a financial crisis like in 2008.'
But China's exports slowed down last month, rising just 17.1 per cent year on year compared with a pace of 24.5 per cent in August.
Bocom International said in a research note that it cut China's export growth outlook from 16 per cent to 10 per cent for next year because of an expected European and US slowdown.
It expects the EU to grow about 2 per cent and the US 1 per cent next year and bases its projection for Chinese export growth on that forecast.
Euro5b
The estimated amount of Greek debt that Cyprus' banking sector holds this year
