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Coface: Morocco displays a “convenient” country risk

Coface published, on Tuesday, February 4, the 2020 edition of its “guide to country and sector risks”. Morocco displays a risk “Convenient” (A4), the best rating in Africa, alongside Kenya, Senegal and Botswanda.

Coface is a credit insurer whose mission is to help companies develop by insuring the insolvency risk of their customers, and to make the credit decisions necessary to strengthen their capacity to sell on their national markets and export.

According to the country assessment map produced by Coface, Morocco displays a risk “Convenient” (A4), the best rating in Africa, alongside Kenya, Senegal and Botswanda.

After a year 2019 marked by the rise of protectionism with more than 1,000 measures taken worldwide, as well as the first decline in world trade in ten years, Coface anticipates an increase in international trade of only 0.8% in 2020.

According to the guide, the trade truce agreement signed between the United States and China is insufficient to restore business confidence and significantly rebound industry and world trade. Especially since only 23% of all protectionist measures taken between 2017 and 2019 concern the United States or China.

So the rise of protectionism is a global and enduring trend that businesses need to get used to.

Regarding global growth, already down by three quarters of a point in 2019, it should not rebound in 2020 (2.4% after 2.5% in 2019).

On the other hand, Coface anticipates a 2% increase in business failures worldwide, in line with 2019.

In addition, the uncertainties linked to the protectionist environment are contributing to the volatility of commodity prices, in particular those of agricultural products, metals and petroleum: Steel prices should continue to decline in the next 6 months, and thus penalizing companies in the sector. According to sectoral risk assessments at the end of 2019, in the Middle East and in Turkey, the metallurgy sector is the only sector representing a very high risk, according to financial data recollected from companies listed in the region by Coface.

On the other hand, the maintenance of oil prices at a fairly low level, despite geopolitical uncertainties (60 dollars per barrel of Brent on average in 2020 after an average cost of a barrel of 64 in 2019) will penalize some indebted producers, notably United States. At the same time, the construction sector benefits from very expansionary monetary policies.

The main risks for businesses in 2020 will be non-economic

The end of 2019 was marked by the multiplication of “hot spots” of social tensions around the world, with different levels of intensity.

This trend was largely anticipated by the Coface political risk index published in early 2019, which reached a record. In 2020, this indicator highlights a high level of social risk in several countries in Africa, the Middle East, Central Asia and even in Russia.

Since 2019, social discontent has also increasingly expressed demands for environmental protection. These environmental risks have diverse and varied effects on corporate credit risk: greater frequency of physical risks (natural disasters resulting from climate change) but also of transition risks (new more restrictive regulations, changes in consumption standards).

Growth in emerging economies is expected to accelerate slightly in 2020 (3.9% compared to 3.5% in 2019). However, public debt has reached a historically high level for these countries. It is increasing in all regions except central and eastern Europe. In Africa, public debt is close to the level observed fifteen years ago.

For businesses in these regions, this means that payment arrears from the state and large public enterprises are likely to increase this year.

The only good news is that the sovereign debt structure of emerging countries is generally more favorable than it was twenty years ago, since 80% of it is now denominated in local currency.

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