Coface Estimates 2.5% Global Economy Decline In 2009

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The global economy will recede by 2.5% in 2009 and grow a weak 1.7% in 2010, according to the latest projection by Coface. In a recent press release, the firm sees industrialized countries losing 3.9% in 2009 and gaining a mere 0.5% in 2010, while emerging countries will close this year with a 0.7% growth and next year with a much better 4.1% advancement.

Thus the difference in world growth between 2007 and 2009 reaches 6.6 points, an exceptionally large growth contraction. The CIS and emerging Europe are zones where the contraction in growth is the greatest.

• Coface maintains ratings for most European countries

The ratings for most European countries are unchanged, except for Austria, the Netherlands and Finland (ratings downgraded from A1 on negative watch to A2) due to a falloff in foreign demand. Coface also places Portugal"s A3 rating on negative watch due to the sharp contraction in household consumption and the drop in exports and investment.

Emerging Europe is the zone whose real economy is most affected by the crisis and whose currencies are still fragile. Slovakia (A3) has been placed on negative watch due to the substantial drop in economic activity, as well as the Baltic countries due to the magnitude of the recession, which weighs on their heavily indebted companies.

Latin America shows a certain ability to resist the world crisis, but Central America is suffering from the North American recession. Thus Coface has placed on negative watch the ratings of small economies that continue to suffer the consequences of the crisis in the United States (Costa Rica, El Salvador and Guatemala). In Venezuela, the access to liquidity in dollars is becoming harder, which results in a rise in late payments.

Asia Pacific is the zone that concentrates the most positive signs. Signs of recovery are already perceptible in the zone"s two largest economies. Nevertheless Coface maintains the negative watch placed on China"s A3 rating in January 2009 due to recurrent problems of private sector companies, where the default payment risk is the highest.