is updated regularly at www.coface.com regularly is updated in this handbook contained information The

Photos: Didier Cocatrix - ©GettyImages - Robin MacDougall - Peter Mukherjee - Image Source - ©FotoliaComp - Shutterstock - Westend61s - DCOM 037 (January 2018) 2018 COFACE COUNTRY & SECTOR RISKS HANDBOOK SECTOR RISKS SECTOR COUNTRY & AND 13SECTORS FOR 160COUNTRIES AND FORECASTS ANALYSIS HANDBOOK COFACE 018 2

COFACE HANDBOOK COUNTRY & SECTOR RISKS ANALYSIS AND FORECASTS FOR 160 COUNTRIES AND 13 SECTORS2 018

This handbook is intended for: • Corporate executives with decisions to make in terms of export, project launches, or investment in high risk countries. • Managers of risk or international operations in banking, multilateral financial institutions, and insurance or reinsurance companies (acting in a private capacity or on behalf of government). • Government managers concerned with country and sector risks. • Consultants and lawyers specialized in international business. • Researchers, academics, and students interested in country and sector risks.

COFACE Country & Sector Risks Handbook 2018 01 With contributions from Contents

• Coface Economic Research Department: p.04 FOREWORD Khalid Ait-Yahia, Carlos Casanova, Bruno De Moura Fernandes, By Xavier Durand, François Fenech, Dominique Fruchter, Seltem Iyigun, CEO of Coface Mario Jung, Patricia Krause, Melina London, Julien Marcilly, Ruben Nizard, Sarah N’Sondé, Guillaume Rippe-Lascout, p.06 COFACE GLOBAL Elliot Shekell, Grzegorz Sielewicz, Sofia Tozy, Ali Trifaia, ASSESSMENTS and Pauline Weil. Assessments available to all international trade operators • Coface Information Department • Coface Communications Department p.08 HOW TO USE THE HANDBOOK Coface cannot be held in any way responsible for opinions A guide for using the expressed by those who have contributed to the preparation 160 country assessments of this Handbook. p.10 COFACE COUNTRY RISK ASSESSMENT MAP A geographic overview of the country assessments

p.12 COFACE COUNTRY ASSESSMENTS Country assessment changes of the main economies

p.15 SECTORS Coface’s sector risk assessments

p.31 COUNTRIES Economic assessment and 2018 outlook for 160 countries

p.239 GLOSSARY

02 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 03 FOREWORD

WILL GLOBAL Businesses are likely to experience greater GROWTH REACH supply constraints ITS CLIMAX in 2018. IN 2018?

XAVIER DURAND CEO of Coface

2017 saw an accumulation of to maintain corporate margins at a relatively high In other words, the Trump Administration’s risk - especially in the United States - and, above all, pleasant economic surprises. Only level, and strong household consumption. In this stimulus package will partly benefit foreign on the Chinese economy’s resilience. twelve countries were in recession, context, business sectors benefit from the strength companies exporting to the United States as local While, at first glance, the growth of the latter which is almost half as many as in of household consumption and favourable production structures are, to a large extent, unable did not show any signs of weakness in 2017 (as 2016 (23), and the lowest amount financing conditions, such as construction and to meet the resulting additional demand. in 2016), Chinese companies seem increasingly since 2007. In the United States, the automotive sectors, remained on a positive The historically low unemployment levels in many fragile: overcapacity continues to haunt sectors Germany, France, and a number of trend. Growth in business investment gained Central and Eastern European countries point to such as metals, chemistry, and construction. emerging countries (double-digit growth momentum in 2017. Growth levels are increasingly similar problems. Growth was very dynamic in Corporate debt has risen considerably, notably in Turkey!), activity was much stronger less disparate, while insolvency has continued to 2017 but is set to slow in 2018, again due to supply in the form of bank credit but also via shadow decline at a faster rate than we expected a year than expected in the third quarter of the constraints: strong wage pressures and labour banking, which is all the more worrying these ago. This trend is expected to continue at least year. This dynamic is in line with that of the shortages will limit the ability of companies to services are charged at extortionate rates. Labour during the first half of the coming year. However, first half, during which the main political risks produce more. Those who fail to include these costs are increasing sharply, penalising businesses as of the second half of the year, companies are feared in early 2017 did not materialize­­­. higher production costs in their selling prices will in sectors such as textile-clothing. Finally, likely to gradually be subject to ever-increasing suffer from these supply constraints. businesses are facing a much reduced pace of In the United States, the protectionist rhetoric supply constraints, both in Germany (where activity compared to the previous decade. In this of the new American president did not result in a the unemployment rate has been at a 37-year In the rest of the emerging world, recovery is context, the banking risk is increasing significantly. significant number of concrete measures limiting low), and in France, where business owners are expected to continue. In 2017, the gradual rise in Ultimately, only government intervention, notably international trade, although discussions with experiencing increasing recruitment difficulties, oil prices gave a shot of adrenaline to countries through major public investments, allowed these Mexico and Canada over NAFTA continue. In despite the high level of unemployment. dependent on oil-related revenues, particularly structural weaknesses to be temporarily hidden Western Europe, the results of the elections in the in Latin America, Russia, and other CIS countries. This issue of overheating will also be relevant in the in 2016 and 2017. Netherlands and France have not destabilised or However, this slight rise in prices is not a cure-all: United States, where the plan to reduce corporate jeopardised the European project. However, not its scale remains largely insufficient to balance Lastly, note that this recovery in emerging and household tax rates supported by the Trump all political uncertainties have disappeared - far the government budgets in Saudi Arabia, Algeria, countries could, in some cases, be nipped in the Administration was finally voted in late last year by from it. The difficulties of forming a government and Nigeria. bud by the resurgence of political risks. Despite the Senate and the House of Representatives. While in Germany following the elections in September the recent upturn of activity, high social frustration this should delay the end of the USA’s expansion Furthermore, the rise in oil prices, like that of 2017, the separatist desires of part of the Catalan has been created by increased income inequality, cycle (already the third-longest since the beginning other commodities (notably several metals), population, and the upcoming elections in Italy are high unemployment, and corruption. Upcoming of the twentieth century after those of 1960 and had the merit of contributing to the rebound in prime examples of this. elections in several countries (including Brazil and 1990), it will not be enough to accelerate US growth, international trade in 2017. Even if the latter tended Mexico as well as Russia and Egypt) this year will In the end, the political factor did not slow the as an increasing number of business sectors (such to lose some strength at the end of last year, it therefore all be risk factors to monitor. development of European companies, who as automotive) are already experiencing supply encourages strong growth of Asian economies, continue to benefit from a number of favourable constraints. Reaching 4.1% in November 2017, the whose businesses are internationally oriented Many other country and sector risks are discussed factors: a very expansionary monetary policy unemployment rate was effectively the lowest since (e.g. Korea, Taiwan, Singapore, and Hong Kong). in the twenty-second edition of this annual report, resulting in a gradual recovery of credit to the 2001, which is a sign that the US economy is close However, in 2018, the favourable dynamics of Asian published by Coface. I hope you enjoy reading the private sector, continued low oil prices helping to running at full capacity. economies will continue to depend on protectionist 2018 edition and that you find it of interest.

04 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 05 COFACE GLOBAL ASSESSMENTS

DEFINITION TOOLS FOR IDENTIFYING, OF COUNTRY ASSESSMENTS

ASSESSING AND MONITORING Very good macroeconomic and financial outlook. Stable political context. A1 High quality business climate. This environment positively influences companies’ payment behaviour. The average probability of default is very low.

THE RISKS BUSINESSES Good macroeconomic and financial outlook. Generally stable political context. A2 Overall healthy business climate. The average probability of default is low.

ARE FACING Less favourable and/or volatile macroeconomic and financial outlook. Political A3 context remains stable. Business climate may have some shortcomings. The average probability of default is satisfactory. Economic and financial outlook could be marked by some weaknesses. Political A4 context could suffer from tension. Business climate may present significant As a credit insurer, Coface’s added value comes from its ability to deficiencies.The average probability of company default is reasonable. proactively provide its clients with detailed risk analyses, allowing them Uncertain economic and financial outlook. Political context could suffer strong to make the right decisions at the right time and prevent credit risks. Its B tensions. Business climate may present substantial deficiencies. The average probability of company default is fairly high. analyses include country assessments for 160 countries, business climate Very uncertain economic and financial outlook. Political context could assessments, and sector risks assessments for 13 sectors worldwide. C be unstable. Business climate has substantial deficiencies. The average Regular economic publications supplement these assessments probability of company default is high. developed by Coface. Highly uncertain economic and financial outlook. Very unstable political D context. Very difficult institutional and business climate. The average probability of company default is very high. Extremely uncertain economic and financial outlook. Extremely unstable E political context. Extremely difficult institutional and business climate. The average probability of company default is extremely high.

Country Risk * Sector Risk* The country assessment provides an insight into Every quarter, Coface reviews the assessments the average payment incident level presented of 13 sectors throughout 24 countries in 6 major by companies in a country in connection with regions of the world. In order to assess these DEFINITION OF BUSINESS their short-term trading transactions. More risks, Coface relies on its own methodology based specifically, this assessment measures the way in on four cornerstones: an estimate of corporate CLIMATE ASSESSMENT which company payment behaviour is influenced defaults (by country) for the four coming quarters, by a country’s economic, financial, and political payment periods recorded by buyers (aggregated Company reports are generally available and reliable. Effective debt perspectives, as well as by the business climate. It by sector), forecasted financial results for the four A1 collection. High quality institutions. Domestic market is almost perfectly open. is based on three pillars: macroeconomic, financial coming quarters (aggregated by sector), and Very satisfactory business climate. and political analysis, business climate assessment payment experience recorded by Coface for each Company reports, when available, are reliable. Debt collection works reasonably by Coface’s entities across the world, and Coface’s sector. The sector risk assessment is on a 4-step A2 well. Institutions generally perform well. Domestic market is widely open. payment behaviour experience as recorded in its scale: low, medium high, very high, in order of Business climate relatively stable but could be improved. worldwide database. The country risk assessment increasing risk (see p. 15). Company reports are not always available, but when they are, are relatively reliable. covers 160 countries on an 8-step scale: A1, A2, A3, A3 Debt collection and institutions can present some shortcomings. Domestic market is A4, B, C, D, E, in order of increasing risk. Company Default Rate Assessment relatively open. Safe business climate but can present shortcomings. The DRA (Debtor Risk Assessment) measures Company reports are not always available or reliable. Debt collection is not always Business climate assessment * the default rate of companies all over the world. A4 effective and institutions have some inadequacies. Access to domestic market presents some constraints. Business climate is acceptable but has some weaknesses This makes it possible to see whether company It is calculated on the basis of indicators such as accounts are available and reliable, whether the financial soundness, profitability, solvency, as well Reliability and availability of company reports vary significantly. Debt collection legal system ensures fair and effective protection as the company’s environment and management. B is often difficult. Institutions display weaknesses. Domestic market is not very accessible. Business climate is unstable and underperforms. of creditors, whether the country’s institutions The assessment scale ranges from 0 (company in provide a favourable framework for B2B default) to 10 (best possible rating). The DRAs are Company reports are often unavailable and not very reliable. Debt collection is transactions and whether the domestic market made available to Coface clients on a dedicated C somewhat random. Institutions display numerous weaknesses. Difficult access to domestic market. Difficult business climate. is easy to access. The assessments are based on website: Cofanet. data from international organisations, but also, and Company reports are often unavailable and unreliable. Debt collection is random. Institutions display significant weaknesses. Very difficult access to domestic primarily, on the experience of Coface’s entities Economic Publications * D across the world. This assessment, integrated in market. Very difficult business climate. Coface regularly publishes economic publications the country assessment, covers 160 countries on an Company reports are rarely available, and are rarely reliable when they are. The legal that deal with country risk, sector risk, and the risk 8-step scale: A1, A2, A3, A4, B, C, D, E, in order of E system makes debt recovery extremely uncertain. Critical institutional weaknesses. of company insolvency. decreasing business climate quality. Nearly inaccessible domestic market. Extremely difficult business climate.

* Assessments and studies available at http://www.coface.com/Economic-Studies-and-Country-Risks

06 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 07 HOW TO USE THE HANDBOOK

YOUR COFACE COUNTRY & SECTOR RISKS HANDBOOK 2018

This reference guide for the analysis of country risk in the world enables you to refer to 160 country assessments. It contains useful insights 1 COUNTRY AND LOCATION into the complex and changing economic environment we know. A map allows you to locate the country. These assessments constitute a global analysis of corporate behaviour and business practices by country. 2 COUNTRY RISK ASSESSMENT “Country Risk” indicates the average risk presented by firms in a country as part of their short-term commercial transactions.

3 COMMERCIAL CLIMATE ASSESSMENT This assessment, which contributes to 1 the Country Risk assessment, evaluates the quality of business climate in the 9 country: reliability of business accounts, 2 legal system, institutional and regulatory framework. 3 7 4 EXPORTS AND IMPORTS 4 Distribution of exports (or imports) by country of destination (or origin). The sources used are the 2016 IMF and UNCTAD statistics.

5 ANALYSIS OF STRENGTHS / 8 WEAKNESSES A summary of the country’s strengths and weaknesses.

6 SECTOR RISK ASSESSMENT This assessment indicates the level of short-term risk for thirteen sectors of 5 the country’s economy. 7 ECONOMIC INDICATORS At a glance, see the major macroeconomic aggregates essential to understanding the economic environment in a country as well as forecasted changes.

8 RISK ASSESSMENT Here you will find a macro and microeconomic analysis of the country and the most important upcoming matters for the current year.

9 PAYMENT AND COLLECTION PRACTICES 6 This section is a valuable tool for corporate financial officers and credit managers. It provides information on the payment and debt collection practices in 10 use in the country.

10 BUSINESS INSOLVENCIES Total number of business insolvencies and its yearly growth rate.

08 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 09 COFACE COUNTRY RISK ASSESSMENT MAP EUROPE AND CIS COUNTRY BUSINESS COUNTRY BUSINESS COUNTRY BUSINESS RISK CLIMATE RISK CLIMATE RISK CLIMATE Coface assesses the average credit risk of companies in a given Albania C C Greece B A4 Portugal A3 A2 Armenia D C Hungary A3 A3 Romania A4 A3 country. To achieve this, Coface uses macroeconomic, financial Austria A1 A1 Iceland A2 A1 Russia B C and political data. Its originality is to take into account Coface’s Azerbaijan C C Ireland A3 A1 Serbia B B Belarus C C Italy A3 A2 Slovakia A3 A2 payment experience recorded for the country’s businesses, and Belgium A2 A1 Kazakhstan B B Slovenia A3 A2 Bosnia and Herzegovina C B Kyrgyzstan D D Spain A2 A1 its perception of the country’s business climate. Bulgaria A4 A3 Latvia A3 A2 Sweden A1 A1 Croatia B A3 Lithuania A3 A2 Switzerland A1 A1 Download the map (in PDF format): http://www.coface.com/fr/ Cyprus A4 A3 Luxembourg A1 A1 Tajikistan D D Czech Republic A2 A2 Macedonia B B Turkey B A4 Etudes-economiques-et-risque-pays Denmark A2 A1 Malta A2 A2 Turkmenistan D D Estonia A2 A1 Moldova C C Ukraine C C Finland A2 A1 Montenegro C B United Kingdom A3 A1 France A2 A1 Netherlands A1 A1 Uzbekistan C C Georgia B B Norway A1 A1 Germany A1 A1 Poland A3 A2

Business default risk

A1 Very low A2 Low A3 Satisfactory A4 Reasonable B Fairly High C High D Very High E Extreme

Downgrades in 2017 Upgrades in 2017

AMERICAS COUNTRY BUSINESS RISK CLIMATE AFRICA Argentina B B Bolivia C B COUNTRY BUSINESS COUNTRY BUSINESS Brazil B A4 RISK CLIMATE RISK CLIMATE Canada A3 A1 Algeria C C Malawi D D Chile A3 A3 Angola D D Mali D D Colombia A4 A4 Benin B C Mauritania D D Costa Rica A4 A4 Botswana A4 A4 Mauritius A4 A3 Cuba E E Burkina Faso C C Morocco A4 A4 Dominican Republic B C Burundi E E Mozambique E D MIDDLE EAST Ecuador C C Cabo Verde B C Namibia B A4 ASIA El Salvador C B Cameroon C D Niger C C COUNTRY BUSINESS RISK CLIMATE Guatemala C C Central African Republic D E Nigeria D D COUNTRY BUSINESS COUNTRY BUSINESS Guyana D C Chad D D Republic of the Congo C D Bahrain C A4 RISK CLIMATE RISK CLIMATE Haïti D E Dem. Rep. of the Congo D E Rwanda B B Iran E D Afghanistan E E Myanmar D E Honduras C C Djibouti C D Sao Tome-and-Principe C D Iraq E E Australia A2 A1 Nepal D C Jamaica B A4 Egypt B C Senegal B B Israel A2 A2 Bangladesh C C New Zealand A2 A1 Mexico B A4 Eritrea E E Sierra Leone D D Jordan C B Cambodia C C Pakistan C C Nicaragua C C Ethiopia C D South Africa C A4 Kuwait A3 A4 China B B Papua New Guinea B C Panama A4 A4 Gabon C C Sudan E E Lebanon C C Hong Kong A2 A1 Philippines A4 B Paraguay C C Ghana B B Tanzania C C Oman C A4 India A4 B Singapore A2 A1 Peru A4 B Guinea C D Togo C C Palestinian Territories D D Indonesia A4 B South Korea A2 A1 Surinam D D Ivory Coast B B Tunisia B B Qatar A4 A3 Japan A2 A1 Sri Lanka B B Trinidad and Tobago C B Kenya A4 B Uganda C C Saudi Arabia C B Laos D D Taiwan A2 A2 United States A2 A1 Liberia D D Zambia D C Syria E E Malaysia A4 A3 Thailand A4 A3 Uruguay A4 A3 Libya E E Zimbabwe E E United Arab Emirates A4 A2 Maldives D C Timor-Leste E C Venezuela E E Madagascar D D Yemen E E Mongolia C C Vietnam B B

10 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 11 COUNTRY ASSESSMENTS

COUNTRY ASSESSMENT CHANGES OF THE MAIN ECONOMIES

2018 2017 2017 2017 2017 2016 2015 2014 2013 2012 2011 2018 2017 2017 2017 2017 2016 2015 2014 2013 2012 2011 Jan. Sept. June March Jan. Jan. Jan. Jan. Jan. Jan. Jan. Jan. Sept. June March Jan. Jan. Jan. Jan. Jan. Jan. Jan.

A1 B Austria A1 A1 A1 A1 A1 A1 A1 A2 A2 A2 A2 Argentina B B B B B C C C C C C Germany A1 A1 A1 A1 A1 A1 A1 A2 A2 A2 A2 Brazil B C C C C C A4 A3 A3 A3 A3 Netherlands A1 A2 A2 A2 A2 A2 A3 A3 A2 A2 A2 China B B B B B A4 A3 A3 A3 A3 A3 Norway A1 A1 A1 A1 A1 A1 A1 A1 A1 A1 A1 Cote d'Ivoire B B B B B C C C D D D Sweden A1 A1 A1 A1 A1 A1 A1 A1 A1 A1 A1 Croatia B B B B B B B B B B A4 Switzerland A1 A1 A1 A1 A1 A1 A1 A1 A1 A1 A1 Egypt B C C C C C C C C C B Ghana B B B B B C C B B C C A2 Greece B C C C C C C C C C A4 Australia A2 A2 A2 A2 A2 A2 A2 A2 A2 A1 A1 Kazakhstan B C C C C B B B B B B Belgium A2 A2 A2 A2 A2 A2 A3 A3 A2 A2 A2 Mexico B B B B B A4 A4 A4 A4 A4 A4 Czech Republic A2 A2 A2 A2 A3 A3 A4 A4 A3 A2 A2 Russia B B B C C C C B B B B Denmark A2 A2 A2 A2 A2 A2 A2 A2 A2 A2 A2 Senegal B B B B B B B B B B B France A2 A2 A2 A2 A2 A3 A3 A3 A2 A2 A2 Serbia B B B B B C C C C C C Hong Kong A2 A3 A3 A3 A3 A1 A1 A1 A1 A1 A1 Sri Lanka B B B B B B B C C C C Israel A2 A2 A2 A2 A3 A3 A3 A3 A3 A3 A3 Tunisia B B B B B B B B A4 A4 A4 Japan A2 A2 A2 A2 A2 A1 A1 A1 A1 A1 A1 Turkey B B B B B B B A4 A4 A4 A4 New Zealand A2 A2 A2 A2 A2 A2 A2 A2 A2 A1 A1 Vietnam B B B B B B C C C C B Singapore A2 A3 A3 A3 A3 A1 A1 A1 A1 A1 A1 South Korea A2 A3 A3 A3 A3 A2 A2 A2 A2 A2 A2 C Spain A2 A2 A2 A3 A3 A4 A4 B B A4 A3 Algeria C C C C C B A4 A4 A4 A4 A4 Taiwan A2 A3 A3 A3 A3 A1 A1 A1 A1 A1 A1 Bolivia C C C C C C C C C C C United States A2 A2 A2 A2 A2 A1 A1 A2 A2 A2 A2 Cameroon C C C C C C C C C C C Gabon C C C C C C B B B B B A3 Oman C C B B B A3 A3 A3 A3 A3 A3 Canada A3 A3 A3 A3 A3 A2 A1 A1 A1 A1 A1 Pakistan C C C C C D D D D D D Chile A3 A3 A3 A3 A3 A3 A2 A2 A2 A2 A2 Saudi Arabia C B B B B A4 A4 A4 A4 A4 A4 Hungary A3 A3 A4 A4 A4 A4 B B B B A4 South Africa C C C C C B A4 A4 A3 A3 A3 Ireland A3 A3 A3 A3 A3 A3 A3 A3 A4 A4 A4 Tanzanie C C C C C C B B B B B Italy A3 A3 A3 A3 A3 B B B B A4 A3 Ukraine C D D D D D D D D D D Kuwait A3 A3 A3 A3 A3 A2 A2 A2 A2 A2 A2 Uzbekistan C C C D D D D D D D D Poland A3 A3 A3 A3 A3 A3 A3 A3 A3 A3 A3 Portugal A3 A3 A3 A4 A4 A4 B B B A4 A3 D Slovakia A3 A3 A3 A3 A3 A3 A3 A3 A3 A3 A3 Angola D D D D D C C C C C C United Kingdom A3 A3 A3 A3 A3 A2 A2 A3 A3 A3 A3 Armenia D D D D E C C C C C C Haiti D D D D D D D D D D D A4 Madagascar D D D D D D C C C C C Botswana A4 A4 A4 A4 A4 A4 A4 A4 A4 A4 A4 Nigeria D D D D D C C D D D D Bulgaria A4 A4 A4 A4 A4 B B B B B B Colombia A4 A4 A4 A4 A4 A4 A4 A4 A4 A4 A4 E India A4 A4 A4 A4 A4 A4 A4 A4 A4 A3 A3 Iran E E E E E D D D D D D Indonesia A4 A4 A4 A4 A4 A4 A4 A4 A4 B B Iraq E E E E E D D D D D D Malaysia A4 A4 A4 A4 A4 A2 A2 A2 A2 A2 A2 Libya E E E E E D D D D D C Morocco A4 A4 A4 A4 A4 A4 A4 A4 A4 A4 A4 Mozambique E E E E D C C C C B B Peru A4 A4 A4 A4 A4 A4 A4 A4 A4 A4 A4 Syria E E E E E D D D D D C Philippines A4 A4 A4 A4 A4 A4 A4 A4 B B B Venezuela E E E E E D D C C C C Qatar A4 A4 A4 A3 A3 A2 A2 A2 A2 A2 A2 Zimbabwe E E E E E D D D D D D Romania A4 A4 A4 A4 A4 B B B B B B Thailand A4 A4 A4 A4 A4 A4 A4 A3 A3 A3 A3 The “E” rating was introduced into the Coface assessment scale in June 2016. United Arab Emirates A4 A4 A4 A4 A4 A3 A3 A3 A3 A3 A3 Downgrade Uruguay A4 A4 A4 A4 A4 A4 A4 A4 A4 A4 A4 Upgrade

12 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 13 SECTORS

COFACE SECTOR RISK ASSESSMENTS

Every quarter, Coface reviews the assessments of 13 sectors throughout 24 countries in 6 major regions in the world (representing approximately 75% of global GDP). In order to better assess these, Coface has implemented its own methodology relying on four key cornerstones: • corporate defaults (by country) for the four coming quarters, • observed payment periods (aggregated by sector and country), • projected financial results for the coming four quarters (aggregated by sector and country), • payment experience recorded by Coface by sector and country. Coface also reviews sectors risks of six geographical regions in the world. This assessment scales on four levels: low, medium, high or very high, in order of increasing risk.

North Latin Emerging Central Western M. East America America Asia Europe Europe & Turkey Sectors

AGROFOOD

AUTOMOTIVE

CHEMICAL

CONSTRUCTION

ENERGY

ICT*

METALS

PAPER

PHARMACEUTICALS

RETAIL

TEXTILE-CLOTHING

TRANSPORT

WOOD

* Information and Communication Technology

Low Medium High Very High

14 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 15 AGROFOOD

COFACE REGIONAL RISK ASSESSMENT SECTOR RISK ASSESSMENT The United Nations Food and Agriculture Organisation (FAO) agricultural commodities price index rose North America sharply through to December 2016 (up 14%), after reaching a record low level in December 2015. Prices generally stabilised in 2017, rising only 0.7%. Cereal stocks totalled 704 million tonnes in 2017 – over 25% medium of production worldwide. In 2018, Coface expects a probable slowdown in the increase in cereal crop yields, Latin America which has been exceptionally high in recent years.

high Sugar prices registered the steepest annual fall in 2017 (down 26%), demonstrating their high volatility once again. This was mainly due to the depreciation of the Brazilian real (Brazil is the world’s leading producer) Emerging Asia against the US dollar in May, and the end of sugar quotas in the European Union. Meat prices rose by 9% in medium 2017, due to two factors: a rising demand for pork from the European Union and China at the beginning of the year, and a reduction in beef production from Oceania at the end of the year. Central Europe medium In 2018 Western Europe DEMAND SUPPLY

medium The demand for agricultural commodities should Production for all agricultural commodities is likely remain firm in 2017-2018 (up 1.2% according to to rise slightly in 2018 (up 0.6%), sustained by the M. East & Turkey FAO), given the population growth in the emerging emerging and developing countries (up 4.1%), high countries. according to the FAO. In contrast, it should fall in In Asia, the sector should experience an upturn the developed countries, affected by unfavourable thanks to more favourable economic conditions in weather conditions, especially the La Niña + STRENGTHS China, which will boost household consumption, phenomenon in the United States. With regard especially for soybeans (up 7.8% according to the to businesses, seed and fertiliser producers and • Upward trend in prices which is expected to equipment manufacturers should benefit from the last in the long-term United States Department of Agriculture, USDA). Changing culinary practices should boost the increase in tractor orders and the rise in fertiliser • High demand worldwide from emerging prices. The upward trend in retail prices will benefit countries (especially India and China) consumption of wheat in place of rice. China and India, which account for 50% of world demand, the agrofood giants (Nestlé, Danone, Unilever, should see their rice consumption increase slightly Coca-Cola, PepsiCo). - WEAKNESSES by 0.6% and 1.3% respectively in 2018. For cereals, In South-East Asia, the main rice producing region, the rise in China’s demand for corn (up 3.4% in 2018, the prospects for the 2018 harvest are positive in • Sector subject to climatic fluctuations 22% of demand worldwide) will again be buoyant. Myanmar and the Philippines. Globally, they should • High cereal stocks In India, the policy of increasing taxes on imported offset the fall in rice harvest yields in Madagascar vegetable oils (from 7.5% to 15% for crude palm oil, and Bangladesh, hit by adverse weather conditions. and from 15 to 25% for processed palm oil) will have In China, following the 19th Communist Party TRENDS IN COMMODITY PRICES a big impact on the market. Thus, households in the Congress, reforms in the sector should intensify IN 2017 (2002-2004 = 100)* main consumer countries will see their purchasing and be marked by the disengagement of the State, Food Price Index Meat Price Index power fall, as prices rise. Lastly, businesses in reflected by a reduction in subsidies. Ultimately, this Dairy Price Index Cereals Price Index the sector that have exposure to the market in may have a negative impact on production. Supply Oils Price Index Sugar Price Index emerging Asian countries will benefit from the in the sub-region’s cereal sector will be affected sustained growth in these countries’ demand for by the Chinese government’s elimination of the 200 260 dairy products. Minimum Support Price for corn. Chinese farmers 190 250 In North America, the demand for corn (the cereal might then increasingly turn to the more profitable 180 240 with the highest consumption worldwide) will be soybean. The return of the rains, after two years 170 230 mainly driven by industrial ethanol processing. The marked by drought, will boost sugar production 160 220 demand for animal feed should remain stable. in India (second largest producer worldwide). According to Bloomberg, the country’s farmers will 150 210 South America is one of the areas where the increase the area farmed by 4.8% in 2018. 140 200 demand for soybeans should continue to rise, In North America, the United States, the world’s 130 190 according to the USDA (up 3.4% on average) in largest producer of corn, should see a 3.8% 120 180 2018, especially in Brazil and Argentina. Together, these two countries consume almost as much drop in supply in 2018, reflecting the reduction 110 170 as China, 28% of demand worldwide, mainly for in the planted surface and the adverse weather 100 160 animal feed. conditions, even though farm yields have risen. J F M A M J J A S O N American farmers should benefit from the Source: FAO / *: Average of the three years In Western Europe, consumption in the European increase in foreign demand (especially European). Union (the leading consumer of wheat, with 17.3%), In addition, rising transport costs in the Black Sea should remain buoyant, especially household and a poor harvest have weakened the competition consumption, which should increase 1.8% in from Ukraine. 2018. The entire agrofood sector should remain weakened by the Russian embargo on food In Brazil, farmers should allocate a larger proportion products (fruits, vegetables, meat, poultry, fish, of their harvest to ethanol production. 2017’s milk and dairy products) from the United States and exceptional crop yields (soybeans, corn) are European Union, which Vladimir Putin has extended unlikely to be repeated in 2018, due to the La Niña to the end of 2018. phenomenon that might affect the region. In the EU, the sugar market was liberalised in October 2017, and the end of quotas means sugar prices can be indexed to global prices. However, the EU, the world’s leading producer of sugar beet (50% of global production), will keep the sector’s high import duties, which should minimise the policy’s impact on producers. Production should rise, but will be subject to high price volatility.

16 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 17 AUTOMOTIVE CHEMICAL

COFACE REGIONAL RISK ASSESSMENT COFACE REGIONAL RISK ASSESSMENT SECTOR RISK ASSESSMENT SECTOR RISK ASSESSMENT The global car market is heterogeneous, with the contrasts between the dynamic European markets and The prices of the main inputs for chemical production (Brent, natural gas, naphtha) increased throughout 2017, North America the constantly slowing US market. There is also the Chinese market which differs again as it is widely North America although remaining at historically low levels. subsidised by the State. medium low The relative weakness of prices for the principal raw materials, in particular for naphtha, offered some respite for The growth in car sales is slowing in China. The reasons behind this include notably the impact of the European producers. Activity is however still below the sector’s potential and has not reached the levels seen in Latin America reduction in taxation on engines smaller than 1.6 litres, which enabled an upturn in the market. Competition Latin America 2006, a record for both output and consumption. medium between carmakers is also more intense, which has benefited the domestic ones, as well as the German high US petrochemical producers continue to benefit from access to cheap and plentiful natural gas. The fall in crude groups thanks to their solid local presence. Emerging Asia Emerging Asia oil prices has however allowed European producers to make use of naphtha to restore their position, but without In the United States, vehicle sales continue to slow. The light trucks segment which is holding up, allows the managing to reduce the competitive advantage of US producers. high high manufacturers to continue selling their production. There is a fall in the residual values of leased vehicles, A low naphtha price also helps Chinese producers. Nevertheless, the development of olefins via coal, which is Central Europe which could have negative repercussions combined with the worsening credit risk. Central Europe abundant and cheaper, is very capital intensive and puts significant pressure on the environment, in a context of low In Western Europe, all the leading markets have been experiencing annual growth, with the exception of the medium overcapacity in some chemical industry segments, such as PVC (polyvinyl chloride). United Kingdom, where the “success-story” could be facing challenges, mainly linked with the uncertainties Western Europe surrounding Brexit. Western Europe In 2018 low medium In 2018 DEMAND SUPPLY M. East & Turkey M. East & Turkey Global demand for chemical products is expected to Crude oil prices which are at historic lows, have helped DEMAND SUPPLY high high increase in 2018, thanks to the economic recovery improving the margins for those chemical producers Demand around the world varies, with a slowdown Sales in Western Europe would seem to heading in most of the regions we monitor. using naphtha, but without actually eliminating the in the United States and more positive outlooks in towards a peak, whilst the Chinese market is In Western Europe, activity in the chemical industry comparative advantage of chemicals from natural gas. + STRENGTHS China and Europe. expected to experience a number of wobbles. + STRENGTHS has been expanding as a result of strong growth In Europe in 2018, the recovery in economic growth, In China, doubts are growing concerning sales Coface expects an increase in vehicle sales in and improvements in the margins of companies the historically low price of oil, in spite of a slight rise, • Unprecedented period of innovation expansion. The tax reduction on small engine is mainland China of between 4% and 5% in 2018. • Fall in prices of the main inputs in the sector. However, the political fallout from could continue to have a positive effect on chemical in the sector not expected to last into 2018. We are therefore The country is becoming a key player in terms • Robust of US demand the ongoing negotiations on Great Britain’s exit production. In addition, prices for naphtha, the raw • Recovery in demand in Europe expecting a slowdown or a fall in sales. Finally, of the production and sales of electric and/or • Specialty chemicals less dependent on the from the European Union could have negative materials derived from crude oil and widely used in • Car manufacturers are among the largest electric and hybrid vehicles are likely to continue hybrid vehicles. The central government is in effect economic situation repercussions for this trend. 75% of the industrial the European petrochemical industry, is likely to follow investors in R&D worldwide to benefit from the enthusiasm for these being strongly encouraging these technologies through output of European chemical producers goes to the same trend as for crude oil. In 2017, the output of shown by Chinese consumers. The government is tax rebates. Thus explaining the announcement by its domestic markets. We expect that most of the chemical products was up 3.7% at the end of August promoting these vehicles with the aim of limiting the Volkswagen group of the introduction of 25 new - WEAKNESSES chemical industry sub-sectors will experience and over eight months, benefiting in particular from an - WEAKNESSES electric models in the country between 2020 and 8.5% growth in exports, together with an increase in the levels of pollution endemic across China, as • Strong dependence of base chemicals on positive growth, thanks to the recovery in two of its • Slowdown in China and the United States well as creating national champions. This promotion 2025, and its plans to invest USD 12 billion through the economic situation key sectors, which use industrial chemical products: sales of chemical products of just over 8%. European its joint-ventures. The country is well prepared naphtha prices picked up in 2017 (473 USD/t in 2017 • Situation in China with overcapacity and the even takes the form of quantitative objectives • Overcapacity in China the automotive sector and the construction sector. ongoing rebalancing of its economy to be achieved: in 2019, between 4% and 5% of to hold on to its pole position in this field, via a The automotive sector seems to be doing well, against 386 in 2016). We are not expecting naphtha committed policy of mobility, as well as through the • Increase in ethylene production capacity prices to climb further; as a result, the cost of this • Increasingly restrictive anti-pollution each maker sales carmaker will consist of electric with rising new vehicle sales (approximately 4% standards requiring heavy investments or hybrid vehicles. This plan has however been acquisition of lithium producers in Latin America and at the end of October 2017 over one year). The input should not have a negative impact on profit received with only lukewarm enthusiasm by the in Australia. construction sector was also resilient, with the margins for chemical industry companies in 2018 (the • Deteriorated credit risk in the United States PRICES OF NAPHTHA building permits indices in the European Union (EU) net margin for companies in the sector was estimated and United Kingdom leading players in the sector who highlight the In the United States, sales of new vehicles are likely AND ETHANE difficulty on implementing it. to continue contracting in 2018. With the arrival countries reaching 110.3 in Q2 2017, against 100.6 at 7.6% in Q3 2017 compared with 6.4% the previous of millions of ex-leased vehicles on the used car Naphtha Europe CIF U$/MT the previous year. year). In addition, “ex-factory” output prices were up In the United States, the raising of interest rates 5.3% in the first eight months of 2017. SALES OF NEW VEHICLES, in June 2017 pushed up the cost of borrowing: the market, residual values are expected to fall 3% in Ethane Mix FOB Mont Belvieu USc/ The demand for chemical products in North America (YEAR-ON-YEAR) rate has risen from 4.9% in December 2016 to 5.6% 2018, according to the LMC Automotive economic GAL - DS MID PRICE is expected to continue growing in 2018. Coface In the United States in 2018, domestic demand is intelligence consultancy, compared with 6% in likely to provide opportunities for US producers. The Light vehicles Europe (left axis) at the end of June 2017. The credit quality (90% of 1 200 50 expects US GDP growth of 1.8% in 2018, with new vehicles are financed this way) is declining 2017. On top of this there is increasing competition 45 continued strong growth in retail sales. Automotive price of ethane, ex-pipeline in Mont Belvieu in Texas, Light vehicles United States (left axis) 1 000 in part because the maturities are reaching up to between carmakers, which is likely to shrink 40 sales as well as construction activity in the US will was 24.75 cents/gallon in mid-November 2017, Auto China (right axis) margins. Finally, the details of the NAFTA are the versus 23.38 cents/gallon in mid-January 2017, seven years (84 months), taking these borrowers 35 have an impact on demand. Sales of new vehicles subject of intense renegotiations between Canada, 800 a 6% increase. This means that US petrochemical 18.8 out of the market, and exacerbating the loss of 30 in 2018 will continue to decline, as a result of higher 23 the United States and Mexico. The proposals from producers are competitive and especially in olefins. residual value of the vehicles. In addition, despite 600 25 interest rates, and in a saturated market. Private the historically low level of unemployment, the rate the United States concerning the determination of housing starts were down approximately 3% in The ratio of crude oil (Brent) to Henry Hub natural gas 16.8 20 began to recover as of January 2017 and was at 20.5 of participation in the labour market at the end of the proportion of local production in each vehicle 400 a year to the end of October 2017. Home builders 15 18 October 2017 was 4 percentage points below that presents problems for the other two countries. It is are however optimistic, despite the difficulties of at the end of November 2017, still to the advantage 10 14.8 of January 2007. Median wages however were up calling for a higher level of equipment produced in 200 increasing access to land in the country. The US of US petrochemical producers, and is expected 3.1% between 2016 and 2017. the United States to be included, to the detriment 5 property index relating to future constructions, to increase in 2018. Nevertheless, the segment is 13 of its partners. 0 0 the NAHB HMI, reached 70 points, its highest since performing well in the United States, as the American 12.8 According to Eurostat, the eurozone’s unemployment 2013 2014 2015 2016 2017 Chemistry Council’s activity index continues to rise, rate was 8.8% at the end of October 2017, a decrease Registrations in Western Europe are likely to March 2017. increase in 2018. According to our calculations, the but at a slower pace. 8 of 1 percentage point compared with October 2016. Source: Datastream Demand in China for chemical products is likely to 10.8 China is suffering from overcapacity in petrochemicals, Whilst it is still at high levels in Southern Europe, total sales of the leading carmakers and equipment be restrained in 2018. We are expecting the Chinese manufacturers increased by almost 8% in the third even though year-on-year production in this country vehicle registrations remain dynamic there, driven GDP growth rate to be lower in 2018 (+6.2%) than quarter of 2017 year-on-year. However, the exiting was up 3.3% at the end of September. This was the 8.8 3 by car hire operators and companies renewing in 2017 (6.5%) partly thanks to slowing housing by the United Kingdom from the EU, scheduled for case for polyethylene, PVC (where the capacity their fleets, to take advantage of models with sales in October 2017, dropping 3.4% on a year. utilisation rate is around 60%), and methanol. In the 2010 March 2019, is likely to not only present risks for lower maintenance costs. In 2017, interest rates are Private sector debt in China sector is at a very high the UK car industry, but also lead to adjustments medium term, the increase in production capacity in Source: ACEA, Autodata, NBS expected to remain low and thus encourage vehicle level; local property developers are no exception; in the organisation of European production. olefins, produced via coal, may dent the profitability with debt of as much as 30 billion dollars in 2018. 2007 2009 2011 2012 2013 2014 2015 2016 2017 credit as well as more recent financing schemes Nevertheless, European carmakers and equipment of producers. Moreover, this technology requires such as lease purchase (LP). However, demand is In a context of restrictive monetary policy imposed manufacturers are at the forefront in the fields significant consumption of water and capital and, not likely to remain as strong as seen up to now, even by the authorities with the aim of bringing the of driving assistance, as well as the reduction of above all, has serious environmental impacts, a though confidence levels in European households property bubble under control; demand for chemical particle emissions, thanks to the impetus given sensitive issue in China. In 2017, close to three- are expected to continue positive. products within the Chinese construction sector is by public policy. In this latter field, the existence quarters of the ethylene produced in China came likely to remain limited. Vehicle sales however are of a dense dealer network is likely to also help the from naphtha. The fall in crude oil prices has in turn holding up strongly and are likely to remain strong European carmakers in resisting competition from been passed on to it, giving a boost to margins for in 2018. At the end of October 2017, these were the US carmaker Tesla. companies in the sector. In 2018, the Chinese chemical growing at an annual rate of around 6%, but were industry will continue to suffer from overcapacity, less dynamic than the average during the first resulting in poor profitability. These difficulties in the half of 2017 (+13%). Industrial production was also local market should drive producers to export, copying down, by 0.4 points at the end of October 2017 what has been done in the steel industry since 2015. against September.

18 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 19 CONSTRUCTION ENERGY

COFACE REGIONAL RISK ASSESSMENT COFACE REGIONAL RISK ASSESSMENT SECTOR RISK ASSESSMENT SECTOR RISK ASSESSMENT In 2017, the real estate market in advanced countries benefited from rising household incomes helped The Organisation of Petroleum Exporting Countries (OPEC) and its partners - including Russia, the world’s North America by relatively low inflation. Low interest rates played a catalytic role with outstanding real estate loans North America leading producer - extended the agreement to cap production for nine months through to December rising sharply. 2018. The declared goal is to reduce stocks to their five-year average, reducing production by 1.8 million medium medium In Europe, companies appear solid as shown by the decline in insolvency. This trend is expected to continue barrels a day, or about 2% of production worldwide. This time, the agreement will include Libya and Nigeria, Latin America in 2018 with the exception of the United Kingdom which is expected to continue to suffer from uncertainties Latin America who should limit production to the highest 2017 level. As a result, Brent and “West Texas Intermediate” (WTI, the North American index also used as a benchmark for determining oil prices) reached high prices of high related to ongoing Brexit negotiations. The major decline in confidence of UK households, foreign investors, high and the depreciation of the pound over most of 2017 has effectively increased the cost of imports which USD 67 and USD 61 respectively in January 2018. The introduction of new-generation American pipelines, Emerging Asia the sector depends on. Emerging Asia with improved capacity, should help close the USD 4 gap between Brent and WTI prices during the second half of 2018. very high The ongoing tightening of the US monetary policy, with a further rate increase announced by the FED in high After reaching a record high in 2016, oil stocks remain very high (140 million barrels above the five- Central Europe December (+25 basis points) and uncertainties related to construction costs (timber, land prices), has had Central Europe little effect on this sector in the United States so far. year average), but they are falling and should reach the five-year average during the second half of high medium 2018. In addition, demand has been rising semester after semester, and bridged the gap with supply in The risks are higher in emerging countries. The sector is in difficulty in China. The authorities are trying to Western Europe Western Europe the markets during 2017. Capital expenditure should rise slightly among the sector leaders (Chevron, address the current real estate bubble and household debt is beginning to increase (47% of GDP in 2017). ExxonMobil, Shell, Total, BP) operating over the entire value chain (exploration, production, refining, medium In Latin America, activity has been penalised by unemployment and inflation which is tending to improve, high distribution), as they take advantage of their increased margins in 2017. particularly in Brazil. In the Middle East, income losses related to low oil prices and security risks are M. East & Turkey M. East & Turkey penalising the sector. In 2018 very high high In 2018 DEMAND SUPPLY DEMAND SUPPLY According to the International Energy Agency Despite the agreement, which is expected to freeze + STRENGTHS + STRENGTHS (IEA), global demand for oil should reach about production levels in OPEC countries and Russia, The situation of households seems resilient and In Europe, construction companies will benefit 98.9 million barrels per day in 2018, a slight rise of supply should rise by 1% in 2018 to reach 100 million • Global population growth and urbanisation prices will rise again in developed countries in from well-directed demand to consolidate their • Resilience to price fluctuations by leading 1.3% compared to 2017 but well below the global barrels/day, due to favourable prices for American are driving housing demand 2017. However, this recovery comes at a time cash position in 2018 after a long period of sluggish diversified companies economic growth of 3.7%. This trend highlights the shale oil producers. Capital expenditure forecasts (up • Low interest rates in most major economies when real estate price over-valuations continue growth. In addition, the presence of multinationals • Expected high demand in 2018, linked to increasingly efficient use of fossil fuels by the main 4.3% in 2018) in the sector are still insufficient and are facilitating borrowing (New Zealand, United Kingdom, France, Canada, in emerging countries will be less disabling than high growth worldwide consumer countries. the oil & gas services companies will keep struggling. Sweden, and Belgium) and households remain in 2018 because growth is expected to rebound • Efforts by oil companies to streamline their highly indebted (United States, United Kingdom). (+5.9% in 2018). production Demand in Europe is likely to be stagnant in 2018, According to the US Energy Information - WEAKNESSES Regarding emerging countries, Asian demand at almost 15 million barrels/day. Consumption Administration (EIA), crude oil production in the USA As such, the LarfargeHolcim Group, a world leader forecasts may be revised upwards if winter is should reach a record high of 10 million barrels/day in for housing remains strong as falling commodity in sales of building materials, recorded a turnover • Real estate prices remain overvalued in - WEAKNESSES harsher than the last two years, a scenario that 2018. Shale oil players have managed to significantly several OECD countries prices have destabilised South American and lower than that of the first three quarters of 2016 Middle Eastern household incomes. By the end of seems probable. Refineries have taken advantage lower their break-even point, as well as increasing • High household debt (-4,7%) at the end of the third quarter of 2017. • High debt levels, especially among shale oil of the steep fall in oil prices since June 2014 to productivity and reducing costs. The number of 2018, average selling prices could return to their Although the Group recorded a drop in its turnover companies • Overcapacity in China and high debt in real pre‑financial crisis level in 2008. improve their margins (calculated using the NWE drill rigs in operation has doubled since mid-2016, estate in all regions, Latin America was the most resilient • High volatility in crude oil prices Brent cracking spread). However, crude prices still reaching 915 (91% of which are horizontal drills). In 2018, inflation will increase significantly in (+6%). It highlights the robustness of Mexico, • Overcapacity of some oil & gas services account for a significant proportion of their overall US production has been boosted by the increased advanced countries (1.7%). As a result, key interest Ecuador, and Argentina. However, the Group points companies refining cost, up to 50%. In contrast, energy costs productivity of the wells, although this remains SECTOR PROFITABILITY rates of some major central banks could continue out the stagnation of its business in Europe (-0.5%) represent 28% of total expenditure for American well below levels reached in recent years. Another (EBITDA/TO, in %) to rise, particularly in the United Kingdom and related to the difficulties of the construction sector refineries. The main effect of this will be to increase encouraging aspect is the decrease in bankruptcies the United States. The US economy is growing in the United Kingdom in particular. The latter is China TRENDS IN PETROL & GAS the vulnerability of European demand, which will in the exploration sector. According to international with historically low levels of unemployment suffering from high household debt and a drop in SECTOR INVESTMENTS be harder hit by price volatility. While recent years law firm Haynes and Boones, there were 64 in the US which is likely to maintain demand for the sector. real incomes. France is more resilient with growth in EU Investment have been marked by a decline in European refinery first ten months of 2016 and just 20 in the same Infrastructure work could be supported by public cement sales after years of difficulties in the sector. capacity, the most recent investments (Total at period of 2017. However, this has to be set against 11% Brent barrel prices works if President Donald Trump manages to find In the United States, production costs will need to Anvers, for example) show greater confidence in the fact that companies still have limited cash flow common ground on this subject with his majority be closely monitored in 2018, excluding cement 100 = Q1 2010 USD/barrel the future for the sector, especially for natural gas. with total debt maturities in 2018 much higher than and the Democrats in Congress. During his electoral and aggregates, which could slow the sector’s 170 130 US demand for oil products should remain firm, the previous year (115.8 billion, 172% higher). This 10% campaign, one of President Trump’s priorities activity in the medium-term. Lumber prices have could presage more bankruptcies in 2018. Prospects 120 with a 1% rise expected in 2018. Refinery margins was the modernisation of the country’s ageing effectively trended upward this year, which could 160 for shale oil investments will be limited by companies’ infrastructure, including transport. should continue to stabilise, after reaching a peak be exacerbated by the imposition of tariffs on 150 110 of 29 dollars/barrel, following the hurricanes, financing requirements. 9% In Europe, the sector is generally doing well despite Canadian lumber. In addition, the shortage of skilled 100 which reduced supply due to the interruptions they Western Europe has seen an upturn in the financial 140 a contrasting situation. In France, the sector labour in construction is putting upward pressure caused. President D. Trump’s tax reforms aimed at results of the leading companies, after a dismal 2016. recorded a clear recovery as a result of the demand on wages and, therefore, on prices. Nevertheless, 90 130 reducing corporate taxes will help the refineries. In The E&P segment has benefited from the higher for housing construction supported by public aid, the National Association of Home Builders (NAHB), 80 8% addition, production capacity utilisation rates rose Brent prices. The companies’ slightly improved the recovery in household confidence, and interest seems optimistic about the sector’s development 120 by 4 points in 2017 compared to 2016. This trend is financial situation has helped boost prospects for rates that remain low in the Euro zone. In Germany, in 2018. Buoyant building permit levels (+4%) in late 70 110 explained by the combined effects of rising margins European oil & gas services companies in 2018, the sector is also supported by demand for private October 2017 bode well for these professionals. 60 and an upturn in Brent oil prices, compared to WTI. which are dependent on investments. According to 7% housing and public orders which have been issued In China, the costs of materials increased 100 JPMorgan Chase & Co., in 2017 the average sectoral since 2015 to house the 1.2 million refugees. The 50 The rebalancing of the Chinese economy currently significantly in 2017 (+7.4% at the end of November underway should lead to its growth slowing down in profit rose by 9% in Europe, vs. 6% in North America. Iberian Peninsula has also been rebuilding rapidly 2017 according to the Chinese National Statistical 90 40 with a 24% increase in permits in Spain and 13% in coming years. Coface is expecting real GDP growth Chinese production should continue the downturn 6% Office) but should slow in 2018, in particular, due 80 30 Portugal in 2017. In addition, activity in Southern in the Chinese economy of 6.5%, compared to 6.7% begun in 2016 and 2017, declining by 2.6% in Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 to the Chinese government’s policy to contain Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Europe (expected GDP growth of 2.2% in Spain, in 2017. As a result, Chinese energy consumption 2018. This is due to a government industrial policy real estate prices in major cities. In addition, debts should grow slowly, by 2.7% according to the IEA. favouring natural gas. The government is thus

2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 1.3% in Italy, and 1.8% in France) will also boost accumulated by real estate companies (of which the sector. 2010 2011 2012 2013 2014 2015 2016 2017 It is likely to import less oil and improve oil use seeking a gradual disengagement by privatising Source: Datastream, Worldscope 38 billion will mature in 2018) will weigh on efficiency. India will again be one of the main oil companies in the sector. We expect growth in the Chinese real estate construction activity if insolvencies occur. Source: Datastream, Coface consumer countries in 2018, with a steep rise in In Latin America, prospects for the sector were sector to slow in coming years after a period of demand (up 6.7% in 2018) . rapid development as the sector is in overcapacity. bolstered in 2017 by Brazil’s return to growth, This should also be explained by the authorities production from the Lula offshore field, and efforts to address the real-estate bubble. A wider investments in the Libra field. adjustment of the sector also seems increasingly likely. Coface’s study on payment terms in China (March 2017) shows a very large number of late payments in the sector.

20 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 21 ICT METALS

COFACE REGIONAL RISK ASSESSMENT COFACE REGIONAL RISK ASSESSMENT SECTOR RISK ASSESSMENT SECTOR RISK ASSESSMENT According to the European IT Observatory (EITO), the sector represented USD 3.5 trillion in 2017, with Prices for major metals were still geared towards an increase in 2017, mainly due to growth in the North America growth of 2.5%; the United States and the European Union account respectively for 30.7% and 19.9% of North America construction industry and infrastructures in China, and also to the closure of several mines throughout the the total market. As the sector matures, the credit risk increases. This context increases the competitive world. Nevertheless, slowdown is looming in the sector, especially in steelmaking. Half of the world’s steel medium pressures on actors in the sector leading to consolidation and the erosion of the various actors’ margins. high is produced and consumed by China. Latin America The growth in Internet traffic is supported by the democratization of access (lower prices, infrastructure Latin America Chinese steel production increased slightly by 5.4% at the end of October 2017. Consequently, the monthly medium development) as well as by the increase in online services (voice, video, payment). According to CISCO, high average for the SteelHome SHGSI main steel products index rose by 17% between January and November the leading company in IT and network, the volume of data exchanged should triple by 2020, when one in 2017. In addition to steel, prices for other metals have also risen. Aluminium saw its monthly average LME Emerging Asia two people in the world will be an internet user. Emerging Asia spot price per tonne increase by 17.4% year-on-year between January and November 2017, due to strong medium In 2017, the sector has continued to reshape the economy and raise macroeconomic level performance high performance from the automobile sector in Europe and China, and also to the closure of some plants in China. The monthly average LME spot prices for nickel, zinc and copper followed the same trend, with sharp Central Europe standards through the expansion of the Internet of things, robotics, IT security, virtual reality, and 3D Central Europe printers. These fields are the sector’s growth prospects with innovative products such as 3D printers, virtual rises of 20%, 19% and 19% respectively. medium reality, and autonomous vehicles. medium Chinese steel exports continued to shrink, with a 29% year-on-year drop in exports of finished steel Western Europe Western Europe products at the end of October 2017. Increased customs tariffs in Europe and the United States, and the In 2018 rise in domestic consumption, have spurred Chinese steelmakers to turn towards their domestic market. low high DEMAND SUPPLY M. East & Turkey M. East & Turkey In 2018 According to the International Data Corporation The sector is consolidating around giants: Google, high (IDC), global consumption should increase by 4.5% Facebook, Apple, Amazon, Microsoft, Tencent high DEMAND SUPPLY in 2017. This is a clear improvement over the 2.5% in and Alibaba represented a USD 4 trillion market Global consumption of steel products should Global production should grow by 2% in 2018. Some 2016. This growth should hold steady at 4% in 2018. in 2016. The sector’s maturity has slowed sales grow by 0.7% in 2018. The widespread adoption highly polluting Chinese steelworks will be closed + STRENGTHS In addition, the demand for digital services should growth and eroded margins for producers and + STRENGTHS of measures, mainly by Europe and the United by the authorities to combat air pollution. • Globalization of internet access and show growth of about 3% in 2017, then a little bit distributors in 2017 – which is not yet the case on • Dynamic worldwide vehicle sales States, to impose duties on Chinese products risks Chinese production should grow by 2-3% in 2018, less than 3% in 2018. the Indian market. Given the competitive pressures, disadvantaging the client sectors (construction and market penetration opportunities in • Growing use of electrical batteries after a 1% drop in 2017. The country is at the developing countries Given the saturation of the advanced markets- investment in innovation is expected to increase (transport, connected devices) real estate, manufacturing, etc.) that benefitted centre of controversy, accused of dumping several by 18% in 2018, especially in Asia Pacific and the from low-price steel imports. • Reduction in the cost of electronic tablet and computer sales fell 8% and 4% • Restructuring of industries (nickel, rare steel products. Chinese steelmaking is mainly equipment respectively in the United States in 2017, for a United States. earths, aluminium) and lower production China may experience a 1.6% fall in consumption oriented toward low added value products for the • Dynamic deployment of 4G market of USD 19.5 billion - the Chinese and Indian The slowdown in phone sales is weakening costs in 2018, after the expected rise of 6.8% in 2016, construction sector (almost 60% of opportunities • Strong growth in the African market markets will drive sales up with consumption manufacturers. Samsung confirmed its global according to the Australian Ministry of Industry. for the steelmaking industry). In addition, it is • Exponential growth of digital goods and increasing 10% in 2017. The Chinese market will leading position in 2017 with a fifth of sales, but This would be due to poor economic conditions largely decentralized and local provinces have services markets represent a quarter of smartphone users in 2018. recorded a 5% decrease in its telephony profits - WEAKNESSES in the construction and public works industries in little incentive to reduce this relatively major tax In addition, global spending for smartphones grew in comparison with 2016. In contrast, Apple • Production capacity rates below pre-crisis 2018, and to the high level of debt (USD 30 billion resource. Further, rising steel prices encourage by 7% in 2017, an excellent performance compared recorded slight growth in profit, capturing some of levels coming due during the year). A slowdown in real local producers in producing more, while local - WEAKNESSES to 1% in 2016, resulting from product innovation, Samsung’s market share, thanks to new products • Increased pressure from the Chinese estate investment in the country’s largest cities consumption is likely to decline. Production in India value-added growth and the penetration of new and good performances in emerging countries. has led to a deterioration in the corporate financial should grow by 7% in 2018, well below the growth • Saturation of some hardware markets authorities to reorganise the industry (tablets, smartphones, PCs) in advanced markets. According to the IDC, despite the growing The number of Chinese players has significantly situation, as shown in the March 2017 Coface Asian targets set by the government of 13% per year economies importance of innovative technologies, mobile increased: eight of the twelve world leaders are payments survey. Although we predict an increase between 2015 and 2025. Prime Minister Modi’s phone and cloud sales continue to be the mainstays Chinese and have cost-cutting strategies and in automobile sales in 2018, this will not be sufficient government hopes that, by this date, the country • Increased competitive pressures TRENDS IN CHINESE STEEL of ICT demand. Smartphone sales are estimated to innovative distribution channels that lower prices. to counterbalance the ongoing reform effects on will be able to produce roughly 300 million tonnes • Long-term challenges in relation to rare PRODUCTION AND STEEL PRICES mineral reserves have grown by 2% in 2017, reaching USD 55.6 billion The fifth leader, Huawei, plans to make an initial the country’s construction and public works sector. of steel per year. Lastly, to continue protecting their according to the EITO and a third of the world’s public offering (IPO1) in 2018 that could amount to Chinese steel production India’s consumption of steel products should grow steelmakers from foreign competition, the Modi population. Cloud services consumption is still very USD 50 billion. Monthly steel prices average by 5% in 2018. Public support for infrastructure government will continue to keep customs tariffs

GLOBAL INFORMATION TECHNOLOGY well set with an annual growth of 12% up to 2020 Android, Google’s mobile operating system, 850,000 107 projects and the manufacturing sector should high for some products. SPENDING FORECASTS TO 2021 according to supplier forecasts and the IDC. has continued to maintain its global leadership continue to bolster domestic consumption. Steelmaking in Western Europe should grow by 3% IN TRILLION US DOLLARS Over half the population worldwide will use the on operating systems (80% market share in 840,000 97 Western Europe should experience a 1% growth in 2018, driven by France and Italy. The relatively internet in 2019, with approximately a 6% increase 2017) since 2010. Semiconductor competition is in consumption in 2018. Therefore, the strong robust performance of consumption has bolstered 4.0 PROJECTIONS in 2017 and a downward trend in the growth of exacerbated by Chinese players. The turnover of performance of the European automobile market will European production, and some high value added 830,000 87 3.9 internet users. This democratization is a result of the American leader Qualcomm is down since 2015. benefit domestic producers, better positioned with steelmakers have been able to benefit from niche wireless internet access, and therefore 3G and This group is also engaged in lawsuits against Apple high added value steel. Registrations of new vehicles markets, such as Voestalpine. European production 3.8 4G network infrastructure investment, which for the use of its patents. In addition, in late 2017 820,000 77 should rise, while favourable borrowing conditions has suffered in part from Chinese competition. supports mobile demand. Connection costs its American competitor, Broadcom, began taking and the improvement of household finances will However, the European steel sector should 3.7 are falling in advanced economies with market steps for a hostile takeover. The group aims at continue to fuel an upturn in the construction sector benefit from the measures taken by the European 810,000 67 3.6 concentration. In addition, embedded payment diversifying its offer with computer and automobile in 2018. This sector should be strong, with the index Commission in August 2017 after imposing systems are speeding up demand. The number equipment and is focusing on technology (power of building permits in European Union countries customs tariffs on some products. In addition, the 3.5 of Near Field Communication (NFC) technologies and augmented reality). 800,000 57 reaching 110.3 points in the second quarter of 2017 United Kingdom’s exit from the European Union installed to facilitate mobile payments is expected vs. 100.6 one year before. might, in the medium term, leave the field open for 3.4 Telecommunications are being jostled by the to triple between 2015 and 2018 according to internet services provided by Google and Facebook 790,000 47 Steel consumption in the United States should grow some countries to increase protectionist measures 3.2 IDATE, a European institute specialized in the that make their original business (voice and by 1.2% in 2018. Players in the construction sector, for European steel on Chinese products. digital economy. messaging) obsolete. Journalism is also struggling the primary customer for the steelmaking industry, In the United States, steel production should grow 3.1 to reinvent its model: readers are less inclined to 01/2014 07/2014 01/2015 07/2015 01/2016 07/2016 01/2017 07/2017 appear optimistic. This was shown by the rise in by 2% in 2018, boosted by resilient economic pay for information and advertising revenues are Source: WSA, SteelHome the NAHB (construction companies) index, which growth. Domestic steelmakers are also benefitting not only insufficient but also captured by 84% reached 70 points in December 2017, its highest from the federal government’s decisions to Sources: Statista by Google and Facebook. Music streaming is level since 2017. Moreover, the metals sector as continue imposing customs duties of 266% on steel

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 expanding: the leader Spotify is expected to go a whole should benefit from President Donald from China (as well as Brazil, Russia, Japan, etc.). public at USD 20 billion. Trump’s plan aimed at infrastructure improvements, US steel may be widely used if President Trump’s if this is carried out. Many civil engineering projects proposed large-scale infrastructure development may require substantial construction work, which plan is implemented. should boost the consumption of steel products.

1 IPO: Initial Public Offering. The first sale of stock by a company to the public, via the capital market

22 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 23 PAPER PHARMACEUTICALS

COFACE REGIONAL RISK ASSESSMENT COFACE REGIONAL RISK ASSESSMENT SECTOR RISK ASSESSMENT SECTOR RISK ASSESSMENT According to the Committee of Forests and the Forest Industry (COFFI), global paper and cardboard Agencies in charge of health care provision (particularly the reimbursement of drug prices) face the North America production could rise 0.8% in 2017 before falling 0.4% in 2018 in UNECE countries (the United Nations North America approvals of high-cost treatments, while having to manage deficits arising from demographic changes. Economic Commission for Europe, regrouping Europe, North America and the Commonwealth of medium low In Western Europe (France, Italy, Spain, Germany and the UK) spending on prescription drugs is constantly Independent States (CIS)). This increase in production is mainly due to a rise in household consumption. growing. Accordingly, the deficits are increasing, e.g. those of the NHS in England and Wales. In France, the Latin America Paper and cardboard consumption trends vary worldwide, continuing to fall in North America since 2012 Latin America French health insurance deficit has narrowed slightly but nevertheless remains substantial (EUR 4.1 billion). while rising slightly in Europe and Asia. The world market is also affected by tariff barriers: in 2016, 16% medium medium of paper and cardboard consumption in North America came from imports vs. 62% in Europe, thanks to In the United States, drugs prices are on a regular upwards trajectory, in particular those linked with Emerging Asia the single market. This effect is confirmed by the 106% and 85% growth in paper and cardboard exports Emerging Asia specialty medicines. Pharma groups saw their profits rise by 2.9% according to the Census Bureau. The to Canada and Mexico, respectively, following the signing of the NAFTA agreement. South-East Asia authorities made numerous proposals to help curb this inflationary spiral ahead of the presidential election. high low continues to be the main market for American exports (27%). The introduction of the Affordable Care Act (ACA, otherwise known as Obamacare) has led to increased Central Europe Central Europe healthcare spending, with the number of uninsured adults constantly falling since the enacting of this law. The sector has undergone significant structural changes as digital technology becomes widespread, The process of rebalancing the economy, now giving priority to domestic consumption, places an increased medium resulting in a stagnation in consumption (0.2% between 2015 and 2016) and in the production of coated and medium focus on meeting households’ healthcare needs. The extension of the coverage for healthcare costs Western Europe plain paper (down 0.1%) in Europe and in the CIS. In addition, the inclusion of ecological issues in production Western Europe and consumption standards is reflected by a dynamic increase in the market share of recycled paper and (although still partial) means the authorities need to keep a lid on costs, particularly those linked to drugs. high by the need for innovation in production methods. Paper was the most recycled product worldwide in 2017: medium In 2018 M. East & Turkey over 70% in Europe according to the Confederation of European Paper Industries (CEPI). This trend should M. East & Turkey benefit the sector in the long term, since paper can be used as an alternative to other materials, such as DEMAND SUPPLY medium plastic. Cardboard packaging is considered more ecological and lighter, and enjoys tremendous innovation. medium The cost of new therapies forces payers to keep a Research & Development spending is expected Cardboard packaging also benefits from a dynamic e-commerce sector and the increasing packaging lid on spending. In 2018, the price control measures to pick up in 2018 (2,5%) according to Evaluate demand as a so-called “convenient” food supply. + STRENGTHS + STRENGTHS in force in Western Europe will still apply, despite Pharma. Sales of drugs are expected to increase In 2018 growing demand linked to population ageing by 4.8% in 2018. This increase, which applies to • Positive outlook linked to the strong • Development of health insurance systems and lifestyle changes. For example in France, the all major world economies, will be a reflection demand for cardboard packaging and DEMAND SUPPLY • Robustness of US demand measures taken to reduce spending (+2.3% for of the expanding market in drugs treating e-commerce booming activity 2018) should continue to affect pharmaceutical orphan diseases. Overall, the falling demand for paper’s traditional In Europe, paper and cardboard production rose • Demographic and lifestyle changes • Demand driven by Asia (despite China companies, via price cuts, and favour the emphasis uses is offset by the growth in paper demand 1.0% in 2017 and should increase by 0.5% in 2018. • Pressure for access to innovation In 2018, Coface estimates that spending on economy on- going rebalancing process). placed on the use of generics. The approval of for cardboard packaging and for household and In the CIS, the growth in production should remain prescription drugs is set to grow by 4% for the top • Paper is long-lasting and recyclable - an expensive specialty drugs for smaller populations, sanitary use. In 2017, average consumption in the at 0.5% for these two years. However, in North five EU countries (Germany, France, the UK, Italy advantage during the energy transition mean regulators need to make difficult decisions in progress in the world’s leading UNECE regions still rose, in step with the growth in America paper production, after rising by 0.5% in - WEAKNESSES and Spain), to reach almost 126 million EUR. This is on reimbursement levels and conditions (oncology, economies consumption worldwide. Germany will be the main 2017, should fall by 1.6% in 2018. This is mainly due explained by the increasing presence of specialty • Quality problems with certain active orphan diseases, etc.). For instance, in the European market in 2018 thanks to the strength to a continuing trend of the sector’s companies drugs (more than a third of total sales), even though ingredients in India and China United Kingdom, the nivolumab (opdivo) therapy of the demand for industrial packaging. In North rationalising production capacity to adapt to the payers are reluctant to pay the pharmaceutical • Payers increasingly demanding in terms of developed by BMS Pharmaceuticals: the NICE - WEAKNESSES America, where digital technology has had the competition and changes in demand. In general, the companies’ list prices. costs and the real efficacy of new therapies (National Institute for Care Excellence) managed to greatest impact, paper consumption has continued worst performing pulp, paper and cardboard mills • Upheaval in the traditional paper market get an undisclosed price reduction to allow this drug In the US, the Federal Drug Agency (FDA, in charge to fall (down 1.1% in 2017 vs 1% in 2016). The United are closing their doors, whereas the production due to technology to be prescribed on the NHS through the Cancer of approving new drug registrations) is thought to States is still, however, the main consumer of of low-cost pulp, with chemical processes, and of • Great elasticity in household demand for WORLD SALES OF DRUGS Drug Fund (CDF). have approved almost 35 new molecular entities cardboard paper and cardboard (71 metric tonnes in 2015), paper tissues and packaging is growing. IN BILLIONS OF DOLLARS (NME) at end-October 2017 compared with 20 in In the US, sharp increases in insurance premiums mainly from national and Canadian production. Pulp production in UNECE countries should also the preceding year. The majority of these entities for 2018 (expected to be between 16% and 18% Overall, growth is largely buoyed by the demand for rise, so as to meet the growing demand for 850 belong to the fields of oncology and orphan depending on the plan) highlight the need to make cardboard packaging, in step with the enormous sanitary paper and cardboard, and especially diseases, not forgetting treatment of cardiovascular APPARENT CONSUMPTION OF PAPER 800 drugs available at affordable prices. Indeed, after AND PAPERBOARD growth in online sales. in response to China’s growth. In Europe, the diseases. Coface estimates that sales of drugs, the numerous drugs related scandals that marked (in thousands of metric tonnes) sector is largely driven by external demand; as 750 whether associated with these new entities 2015 (e.g. Daraprim), the ramp-up of Obamacare, a result, European countries have a 20% trade or not, should rise by 6% compared with 2017. 700 combined with the need to control healthcare Europe surplus for paper products. In France, turnover for In addition, the launch in the market of biosimilars spending (close to 17% of GDP, versus 9-11% in North America paper and cardboard manufacturers was stable (the “generics” of biological drugs) should also 650 Western Europe), provides the background to the CIS* in 2016 and should rise 3% in 2017 according to help slow the increase in drugs expenditure. Finally, attempts aimed at regulating drug prices. According Eurostat. In the United States, paper and cardboard 600 there is the uncertainty surrounding the future of 100,000 to the Milliman consulting firm, the average annual production continued to fall in 2016 (down 0.3%) Obamacare, which could impact on the growth in 550 cost of healthcare spending for a US household was 90,000 and this downward trend is likely to continue in healthcare spending. USD 26,944 dollars in 2017, up 4.32%. Our projection 2017 according to UNECE (down 1%). In the United 500 80,000 for 2018 is USD 28,020, an increase of 4%. Close to In relation to the size of its population, Chinese States and Canada, evolutions in paper production 42% of this amount is covered by the household, spending on drugs as measured by IMS Health, 70,000 and recycling should be matched by a growth in with only 58% by the “sponsor” (whether a private which produces many analyses relating the market. 60,000 Sources: IQVIA, formerly Quintiles IMS Health company, the federal state, or a local authority). to healthcare and drugs, stood at around

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 USD 119 billion in 2016. Coface estimates that 50,000 The approval of a number of specialty drugs over many years has driven this cost up. Again according sales should grow by 4% in 2017 and 2018 to reach 40,000 to Milliman, the cost of drugs in 2017 increased by USD 128 billion. There are however two major risks to note: the lack of transparency during public 30,000 8%. Whilst this rise was slower than the preceding two years, it is still high and in particular the middle tenders and measures to control health spending 20,000 classes as the subsidies linked with the ACA are in China. The health authorities would in fact like to removed by President Trump. limit prices of imported drugs (which are generally 10,000 the most innovative), especially in oncology. 0 In China, since the end of the first half of 2015, Although 96% of the population has public health 2015 2016 2017 2018 drug prices are no longer determined by public insurance, this regime does fully cover the most authorities, leaving it up to “market forces”. Source: UNECE 2017 expensive treatments. In addition, public authorities *CIS = Commonwealth of Independent States Nevertheless, this opening masks a public have heightened their vigilance concerning the determination (enshrined in law) to force practices of pharmaceuticals companies, especially the providers to offer reasonable prices, via foreign ones. negotiations with the regulators. However, it is worth pointing out that public insurance does not cover the most serious and costly illnesses.

24 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 25 RETAIL TEXTILE-CLOTHING

COFACE REGIONAL RISK ASSESSMENT COFACE REGIONAL RISK ASSESSMENT SECTOR RISK ASSESSMENT SECTOR RISK ASSESSMENT Driving the retail sector, household consumption is expected to benefit from the continued recovery in the World demand for cotton in 2017/2018 will remain marked by China’s cotton import restriction policy North America global economy, mainly in Europe but also in the major emerging economies such as Brazil. Global retail North America implemented to reduce its domestic stocks. However, the low quality of Chinese cotton is likely to push sales, including online sales, are expected to continue to grow in 2018, reaching just over USD 28 trillion local textile producers to rely on imports for high quality cotton, pushing up Chinese demand for cotton. high high compared to around USD 26.8 trillion in 2017 (see graph). This growth is likely to be boosted by the rise in The textile sector will continue to be characterised by an ever-smaller share of cotton in the face of the Latin America e-commerce, whose share of total global retail sales is steadily expanding. Latin America increasing use of synthetic fibres in industry. Cotton accounted for only 43% of textile imports in the medium The mass retailed products (Including fresh dairy products and self-service) online sales market share is high United States in 2016/2017 compared to 47% in 2011/2012 (USDA). Cheaper, easy to mix with other fibres, expected to double over the next ten years in the most advanced markets. These should represent 30% of and having a limited impact on the environment compared to cotton, synthetic fibres concentrate the Emerging Asia the market in South Korea, 15% in China and 10% in France. In 2025, this type of sale will represent 9% of the Emerging Asia sector’s technical advances. The sharp increase in cotton prices in 2016 (+42% in January and December) low retail market, i.e. a turnover of USD 150 billion. The emergence of this new source of competition is putting high accentuated the greater competitiveness of synthetic fibres compared to cotton. pressure on the traditional players of the sector. Central Europe Central Europe Global textile demand will be marked by improved growth prospects in the largest consumer markets (1.9% To cope with these challenges, traditional players are being forced to rethink their strategies, with in growth in the EU-15 zone in 2018 and 2.4% in the United States according to Coface estimates), pulling up medium including greater segmentation of supply and a move towards concept stores to maximize the customer medium household consumption. Finally, world textile supply will be characterised by the dynamism of South-East Western Europe experience offer. Another underlying trend is the convergence (partly through buy-back operations) of Western Europe Asian economies (Bangladesh, Vietnam, Sri Lanka). online retailers and traditional sales groups. medium high In 2018 M. East & Turkey In 2018 M. East & Turkey DEMAND SUPPLY high DEMAND SUPPLY high World cotton consumption is expected to increase After two consecutive years of contraction, land The continued recovery in the global economy, The sector continues to be dominated by US world by 4% in 2017/2018 (season beginning August 1st under cotton is expected to rebound in 2017/2018 which according to Coface projections is expected leaders; according to the 2017 ranking (based on 2015 2017) to 25 million tonnes/year. The continuance (11% growth to reach 32.5 million hectares) + STRENGTHS to grow 3.2% in 2018, should prop up the sector. revenue) in the Deloitte Global Powers of Retailing + STRENGTHS of China’s cotton import quota policy implemented according to the International Cotton Advisory • Sustained retail sales growth since 2010 Household consumption patterns are undergoing report on the retail sector. Wal-Mart Stores Inc., • Growth of the middle class in emerging to liquidate its domestic stocks is weighing on Committee. This increase in land under cotton • Growth in the Chinese middle class major changes. In the advanced economies, these Costco Wholesale Corporation and Kroger Co (with countries world demand for cotton. However, the low quality in key producing countries is favoured by record are showing a greater appetite for online purchases. revenues in USD millions of approximately 482, 116 of Chinese cotton is expected to lead local textile prices (69.75 US cents/lb in May 2017), especially • Significant urbanisation in Asia and Africa, • Improving global growth prospects driving the sector In addition, the “customer experience” aspect is and 110 respectively) were indeed the three biggest producers to use higher quality imported cotton at the time of sowing. World cotton production increasingly central to why consumers visit stores. ones. Overall, companies are making significant thereby increasing Chinese demand. The cotton should therefore experience a strong increase in In emerging economies, the growth of the middle changes to offerings in advanced economies in - WEAKNESSES trade is expected to be particularly dynamic while 2017/2018 (+12% to 25.7 million tonnes) if good - WEAKNESSES classes, especially in China, is supporting demand order to respond to changing consumer preferences, the countries with the strongest demand are weather conditions continue. This dynamism in the sector. with in particular the development of “concept / • Substantial cotton stocks in China the non-producing countries (Bangladesh, Vietnam). in production, with more growth than demand, • Fierce competition in the sector clearance of which constrained demand In fact, despite the ongoing process of rebalancing experience stores” where there is an alliance on the world market US exports, for which Vietnam is the leading coupled with the clearance of Chinese cotton • Exponential growth of online shopping between online retail players and traditional stores. destination, should increase by 3.9% in 2017/2018 . stocks, should put downward pressure on the its economy, Coface estimates that Chinese • Product with high elasticity of demand • Vulnerable to economic downturns growth should reach 6.5% in 2018 against 6.7% in In addition, we are seeing the development of a World textile consumption is expected to increase price per pound of cotton. Prices should therefore 2017. Demand in the sector should remain strong move towards product premiumization and a global in a context of global macroeconomic recovery. decrease in 2018. increase in sales in specific segments such as animal and feed a rapidly expanding middle class. Retail TRENDS IN OIL AND COTTON PRICES After several years of more than disappointing Textile supply will be characterised by the GROWTH IN GLOBAL RETAIL SALES products. sales increased 10.3% year-on-year between (100= December 2015) growth, the EU and the United States have returned dynamism of South-East Asian countries in the (IN TRILLIONS OF $US September 2016 and September 2017. However, In the United States, the sound financial health of the to greater growth path with respectively 1.9% face of a relative slowdown in Chinese exports the increase in household debt, which was market leader Wal-Mart (which has acquired five Oil Price and 2.4% growth in 2018 (Coface estimates). In (4.6% growth in 2018 compared to 5.4% in 2017). 30 estimated at 45% of GDP for 2016, is still a factor online retailers since 2016) masks a sector in great Cotton Price particular, this recovery is reflected by a declining The relative rise in labour costs in China as well as to watch. difficulty. Macy’s, Nordstrom, Kohl’s, JC Penny and 180 unemployment rate in Europe which previously the sustainable development policies implemented 25 slowed textile consumption with 8.8% of In Latin America, we note the improvement of the Sears, which are among the country’s leading brands, 160 have prompted many global textile manufacturers economic situation of the Brazilian giant, with reported poor financial results in early 2017. unemployment in October 2017 against 9.8% a to move their production centres to other countries 20 140 Coface projecting growth at 2.3% in 2018 against According to the 2017 Deloitte report, the German year earlier. In particular, the unemployment rate in the region; in particular Bangladesh, Vietnam, 0.7% in 2017. A catch-up effect in household group Schwarz Unternehmenstreuhand KG and 120 among young people, who allocate more resources and Cambodia. Second largest supplier on the 15 to textiles, is also decreasing, although still high, European market, Bangladesh experienced very consumption has been observed after two years the French group Carrefour are the two European 100 of recession, plus a recovery in the job market and leaders, with revenues estimated at around and was 16.5% for the under 25s in October 2017 strong growth in its textile and clothing exports in 10 a return to low inflation. This translates into sales USD 94 million and USD 85 million, respectively. 80 against 18.3% in 2016. 2016/2017 (+14% in July-August 2017 compared increasing approximately 1.3% over the first nine Competition from online sales is fierce throughout 60 Demand for textiles is also marked by a craze for to 2016 ) and is likely to overtake China on the 5 months of 2017 year-on-year. the region, but the situation remains very mixed. In “fast fashion” (phenomenon of production and European market by 2020. Similarly, Vietnam, 40 which is the USA’s second largest supplier, has In North America, growth in the US economy, Italy, the retail trade volume index had increased sales of constantly renewed and generally cheap 0 2.7% year-on-year comparing December 2017 to 20 collections) on the Asian market. Responding to the experienced a strong growth in its textile exports to expected by Coface to be 2.3% in both 2017 2016 2017 the US (+6.5% over the first nine months of 2017) and 2018, should benefit from the resilience in December 2016. Business insolvencies in France 0 demand of a growing middle class, key fast fashion in the sector had decreased 4% year-on-year in D JFMAMJJASONDJFMAMJJASOND brands (such as Uniqlo, Zara, and H&M) are entering while total US textile and clothing imports fell over

2017 (e) household consumption, in a context of high (e): estimate *: forecast the same period (-1.4%). Cambodia’s exports (fifth consumer confidence. Household consumption September 2017. In Germany, the sector continues Sources: EIA, Thomson Reuters these markets on the mid-range segment. The 2013 2014 2015 2016 2008* largest supplier to the European Union) continue Source: Statista to face structural difficulties linked to low operator sector is expected to grow strongly, at around 9.5%

however is expected to slow in 2018, despite profitability and intense competition. It is likely that average growth per year, over the next five years. to grow but are subject to the risk of a possible a historically low unemployment rate (4.1% in revocation of its preferential status by the European November 2017). In fact, the consequent increase industry players will be reviewing their plans for Population growth in the region should reinforce expansion in the UK given the Brexit. this trend over the longer term. Union after a European Parliament resolution in in the cost of credit will mainly affect the poorest December in response to the political events of households and will impact their consumption. In Latin America, businesses in the sector should the fall. In addition, households’ room for manoeuvre benefit from the better economic conditions in Brazil is particularly limited because of their level of and Argentina. Carrefour, which has been operating Finally, recovery in demand is enabling textile indebtedness, which is still high despite having in Brazil for 40 years, continues to benefit from companies positioned on the mid-range segment fallen since the subprime crisis (136% of Total positive financial results with an increase in revenue to relax a little after some particularly difficult Disposable Income, TDI in Q2 2017), and the fall of 10% in Q1 2017. The other leading groups in the years. An example of this is the company Vivarte in their savings rate in the last two years. This country are the Brazilian Via Viajero and the French (la Halle, Naf Naf, Kookaï, etc.) which, after several slowdown is likely to affect the traditional retail group Casino. restructurings, finally seems to be afloat again around a smaller base of brands. sector, which also suffers of overcapacity. China’s retail sector landscape is very dynamic with The economic context in the euro zone is some major local players alongside international encouraging household consumption and therefore leaders. Online sales are also very dynamic with solid demand in the retail sector, with 1.9% growth Chinese and international giants like Alibaba. The expected in 2018. This is combined with low interest high level of indebtedness in Chinese enterprises, rates and a high level of household and business which reached 145% of GDP in 2016, should however confidence. continue to be monitored.

26 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 27 TRANSPORT WOOD

COFACE REGIONAL RISK ASSESSMENT COFACE REGIONAL RISK ASSESSMENT SECTOR RISK ASSESSMENT SECTOR RISK ASSESSMENT Just like Rickmers which declared bankruptcy on 1 June 2017 following the halving of Baltic Panama Production of wood products in UNECE countries (countries in Europe, North America and the CIS), will be North America Index (BPI) prices between December 2016 and June 2017, small players have similarly suffered from the North America 1.7% higher in 2017, then 0.8% in 2018, a reflection of the slowdown in consumption in 2018. Demand varies sustained drop in prices this year. The Baltic Dry Index (BALTICF) reached historically low levels in February depending on the construction and housing sector. Round wood will continue to dominate the market in low 2016 thereby drastically reducing vessel hire costs. In addition, continuing low oil prices for most of 2017 has medium 2018, for industrial applications, as well as increasingly as an energy source. Latin America turned out to be a pitfall for shipping companies, which having made savings maintained shipping lines for a Latin America Unprocessed wood prices have been on a downwards trend since 2014. Prices of lumber however, most longer period of time and consequently boosted the transport offering. Major players have benefited from high high notably that from conifers, have been rising since 2016, thanks to the strength of demand, in particular for alliances and the consolidation of their offerings. Although the BALTICF index was still very volatile in 2017, furniture. Emerging Asia it has seen an upward trend since early 2017 (see chart), in particular because of the rise in oil prices. In 2018, Emerging Asia oil prices should remain at levels similar to those reached at the end of 2017 (according to Coface between The appreciation of the dollar and the changing market are challenging for US producers as their medium high USD 55 and USD 60 in 2018), which could help maintain overcapacity. competitiveness declines. In this regard the United States and Canada have been, as of the end of 2017, Central Europe Central Europe engaged in a trade dispute concerning unprocessed wood which has led to the imposition of import taxes by Global air traffic continued to increase in 2017, up 6% on 2016, which was already a record year. It reached the former, challenged by the latter. In the countries of the CIS, a weakened rouble has helped drive exports high 4.1 billion passengers. The strong demand for air transport contributes positively to global growth. medium to record levels for all the main product categories. Western Europe Western Europe In 2018 Change is taking place throughout the market because of the emergence of new producers (emerging medium medium economies are winning markets that have historically been the reserve of UNECE countries) and DEMAND SUPPLY developments in terms of outlets and demand. M. East & Turkey M. East & Turkey The continued growth in global activity in 2018 Overcapacity in the maritime transport sector, which medium (3% according to Coface projections) should boost carries 80% of world trade, could continue to have high In 2018 demand in the maritime, rail and road transport a negative impact on small players in the sector in DEMAND SUPPLY sectors. After doubling over the last twelve years, 2018. Airlines will continue to benefit from still low Consumption in UNECE countries was up +1.4% Worldwide production in 2017 will exceed its pre- + STRENGTHS the number of air passengers should again double oil prices (even though these rose in late 2017). After + STRENGTHS in 2017, according to the Committee on Forests crisis levels. Thanks to the construction sector, by 2036 according to IATA . The sector continues to generating record profits over the past three years, • The increasing use of air transport in Asia, • Favourable economic environment and the Forestry Industry (COFFI). This growth will output of fibreboards will be 0.9% higher in 2017 benefit from lower ticket costs, which have halved airlines will be more exposed to increases in labour thanks to the emergence of middle classes in Europe for the construction sector, continue in 2018, driven by the strength of demand and 1.3% in 2018 in UNECE countries. The United in 20 years (in real terms). and maintenance costs in 2018. • The continued global economic recovery, in favouring wood used for housing for wood pellets for biomass and for construction. States has a large trade deficit for this product with generating business Western European road transport companies European airlines are benefiting from a sharp • Positive outlook in demand for wood The decline in demand for fibreboard in the CIS half its imports coming from China. Russia, which benefited from a rebound in traffic volumes in 2017 rebound in economic conditions on domestic associated with increasing interest in countries (-0.6% in 2017), will be offset in a positive has a quarter of all forestry resources, is continuing biomass energy thanks to 2% growth in the euro zone. In France markets, including in Russia. Added to this is a economic context stimulating the housing market its investment plans to increase its added value - WEAKNESSES economic growth in 2018, which Coface expects recovery in traffic after a slowdown in 2016 following • Tax benefits in Europe (France, Germany, in a number of Western European countries. In supply in this sector. It is worth noting that Russian to be 1.8% (vs. 1.6% in 2017), will be pushed up by the series of terrorist attacks and continued etc.) on investments in the sector • Road sector: unequal demand addition, increasing concern in Europe and North production of fibreboard is 3 to 4 times below that household consumption and investment growth. restructuring. The region has the highest passenger America for environmental factors, is leading to of North America and Europe; UNECE predicts a rate • Maritime cargo sector: overcapacity of The road transport activities should benefit numbers in the world, in 2017 estimated at 84%. Net changes in the legal framework and buying habits of growth in production in Russia of 20% in 2016, the actors - WEAKNESSES from this rebound. In Latin America, growth income is expected to reach USD 11.5 billion, up from which are encouraging the use of wood products and 14% in 2017. • Air sector: highly competitive should double (2% vs. 1% in 2017) and help road 9.8 in 2017. • Dependant on state of housing and for construction and as an energy source. In 2017 The production of wood pellets, in UNECE countries, transport. However, transport infrastructure construction markets In 2018, North American airlines are expected to keep wood accounted for one third of all renewable will be 9.8% higher in 2017 and 4.7% in 2018. is still underdeveloped in this region, greatly the title of world net-after-tax profits champions, • Constraints linked to compliance with energy. This is split between two sub-markets, Whilst the Europeans are the leading producers CHANGES IN OIL PRICES, increasing the cost of freight and mechanically environmental standards AND CHANGES OF PRICE INDEXES projected at USD 15.6 billion in 2018 - generating with the European Union being the main driving (more than 60% of world output in 2017) and will reducing demand. (BOTH BULK AND CONTAINER) more than half of the industry’s global profits. This is • Sector highly exposed to weather force for demand: industrial scale production of remain so in 2018, supply will not meet demand conditions (storms, forest fires, etc.) (BDI and SCFI indexes – Basis 100 11/2016) With regard to air transport, UK airlines could due to market conditions that should continue to be bioenergy and, at a household or commercial level, for biomass use in this zone. Europe will import experience a sharp decline in the number of very good with capacities up 3.4%. the production of electricity and/or heating. 15 million cubic meters of pellets in 2017, covering Changes in Brent prices passengers ahead of the current uncertainties Asian airlines should benefit from airport In Europe, COFFI forecast a 1.6% growth in 63% of its consumption, according to COFFI. In BALTICF GLOBAL DEMAND FOR PELLETS in the Brexit negotiations, according to a Reuters infrastructure investments, which between 2016 consumption for 2017, underpinned by the demand North America on the other hand, supply will largely SCFI (In millions of metric tonnes) study. Post-Brexit, the study mentions an 11.5% and 2020 will probably be the highest in the world. for pellets for insulation (+4.8% in 2016), for exceed supply, despite being 62% lower.

150 decline in numbers in the long-term in the United 130 2016 2017 The aforementioned investments average levels are Japan & South Korea fibreboard for construction (+3.9% in 2016), and Kingdom. In the United States, growth in the US expected to be four times higher than in Europe. North America policies for implementing the energy transition. 120 140 economy, which Coface expects to be 2.3% in both According to IATA, profits are expected to be Europe Demand in terms of housing construction will be 2017 and 2018, should benefit from the resilience in 1.4% higher in 2017. This is mainly being driven by 110 USD 9 billion in 2018, supported in particular by an 130 household consumption, even if the latter is likely increase in cargo activity. 60 the sector in Eastern Europe where the potential to slow in 2018. In fact the consequent higher cost per head growth in consumption is substantial, 100 In 2018 road transport sector companies in Western 120 of credit will mainly affect the poorest households as it is still considerably below that in the mature Europe are expected to benefit from relatively weak 50 38 90 and will impact their consumption. However, the markets (North America and Northern Europe). fuel costs in relation to historic levels. In France, 35 110 country’s geography and air travel patterns are At the same time, whilst Spain and Italy continue 80 the introduction of a derogation in the agreement not expected to negatively impact the demand for 40 to produce at levels below those before the crisis, between the government and sector professionals 100 air travel. this is not the case in France, German and the 70 in October 2017 (in line with the government’s United Kingdom. Latin American airlines are expected to continue labour market reforms) aims to make the sector 30 25 60 90 to recover in 2018. They should see a net profit of more competitive. According to the agreement, In North America, despite the uncertainties USD 0.9 billion next year according to IATA, with 50 80 remuneration for night work, public holidays and 20 surrounding the reform agenda, Coface forecasts a N D J F M A M J J A S O N passenger demand expected to increase by 8%. Sundays will be an integral part of the hierarchical 15 rate of growth that will sustain demand in the wood Sources: EIA , Thomas Reuteurs/ SCFI: Shangai They should benefit from the continued economic minimum wages, which cannot be negotiated 12 5 5 sector, stimulated by construction (7% increase in Shipping Freight Index recovery in Brazil. In Asia, the emergence of the through company agreements. 10 starts during 2017) and the strength of demand for middle classes is favourable for the aeronautical 5 9 9 4 wood furniture. sector. In China for example, the number of The shipping company Maersk Line and its partner 4 3 0 1 Japan, China and India are key markets for European households earning over USD 35,000 a year is Damco operated their first train between China and 2010 2012 2015 2020 2025 and North American wood exporters. In India, new expected to triple by 2022 and drive growth in the Europe in November 2017. The journey through prudential regulations and the downward revision in sector. In Asia-Pacific, airline performance is very seven countries was 20 days faster than by sea and Sources: Pöyry growth forecasts for 2017 have resulted in stricter mixed. The average profit per passenger in 2017 reduced carbon dioxide emissions by 36% compared conditions for access to credit and an overall dip in is estimated at USD 4.96, with higher fuel costs to a container ship. demand in the extremely dynamic housing sector. partly offset by improved freight markets, which is particularly important in this manufacturing region.

28 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 29 COUNTRIES

ECONOMIC ASSESSMENT AND 2018 OUTLOOK FOR 160 COUNTRIES

30 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 31 AFGHANISTAN

COFACE ASSESSMENTS E COUNTRY RISK E BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 1.3 2.3 2.5 3.0 Exports of goods, as a % of total 33.4 Inflation (yearly average, %) -0.6 4.4 6.0 6.0 POPULATION Pakistan (millions of persons - 2016) 46% Budget balance (% GDP) -1.4 0.1 0.4 -0.2 582 India Current account balance (% GDP) 2.9 7.0 4.7 1.6 38% GDP PER CAPITA Public debt (% GDP) 9.2 8.0 7.6 6.9 (US dollars - 2016) Iran 3% (f): forecast Turkey 2% RISK ASSESSMENT Iraq 2% Security situation still a cause for concern Industry and services are also likely to see The security situation deteriorated in 2017 and modest growth. Remittances from expatriate Imports of goods, as a % of total is set to remain a cause for concern in 2018. The workers will sustain household consumption, the main contributor to growth, as will the return Iran number of victims of the war in Afghanistan grew 19% significantly over the year, especially among of some of the Afghan refugees from Pakistan and Iran (1 million in 2017). Greater political Pakistan civilians. Attacks on the population are no longer 18% limited to the areas of confrontation between uncertainty, together with increased violence, China government forces and anti-government will hamper investment by limiting inflows of 17% militias (Islamic State, Al Qaeda, and the Taliban). foreign capital, especially in the mining sector, Kazakhstan The country’s big cities were hit by several which nonetheless offers considerable economic 9% deadly attacks, with the central government opportunities in a largely dollarised economy. Turkmenistan controlling only 60% of the Afghan territory. Inflation, which sharpened in 2017, in part due to 5% Although recognised by the international higher food prices, will remain high in 2018. The community, President Ashraf Ghani, elected in deteriorating security situation is disrupting + STRENGTHS September 2014, continues to suffer from a lack food supplies, while the mass influx of refugees of legitimacy following the political crisis after his is heightening inflationary tensions. However, • Financial and military support from the election, which is further weakening the central international aid helps keep foreign exchange international community, particularly government. The parliament, whose term expired reserves at a comfortable level, which will help the US in June 2015, will probably be renewed in July 2018 stabilise the currency in the short term. • Prospects for extraction of raw materials with new parliamentary elections. However, (gas, oil, minerals, etc.) a worsening conflict could compromise the Large twin deficits financed by political agenda. The increasing frequency of the international aid confrontations led to a reinforcement of NATO - WEAKNESSES troops in May 2017, and likewise to the sending The public finances are still highly reliant on international aid, which keeps the public account • Unstable security and geopolitical of more US troops by the Trump administration situation in August 2017. in balance. This is because 70% of the budget depends on international aid, and the public deficit • Poverty In addition to the worsening domestic security excluding grants amounts to about 10% of GDP. • Corruption and weak governance situation, relations with Pakistan are expected With the IMF’s help, the Afghan authorities have • Reliance on international aid to continue to be marked by tensions. In 2017, embarked on an action plan aimed at improving • Fragile banking system and low border incidents led to the displacement of basic infrastructure and strengthening the distribution of credit 111,000 Afghan refugees from Pakistan. Data from economy with the support of foreign donors. • Heavy reliance on the agricultural sector the Office for the Coordination of Humanitarian However, the plan’s implementation could be Affairs counted over 168,000 displaced persons compromised because of the worsening conflict over the first six months of 2017. Attempts at with the Taliban. The authorities have managed mediation by the US administration led to a to improve tax collection since 2016, despite bilateral summit in September 2017 between weak activity, but these efforts are not sufficient President Ghani and General Qamar Javed Bajwa, to reduce the dependence on international aid. Pakistan’s military chief, aiming to open talks Budget spending is also expected to increase between the two parties. slightly. This increase largely reflects the fact that previous security spending defrayed An economy still heavily dependent by international partners will gradually be on the agricultural sector transferred to the budget. Despite a difficult security situation, economic The current account balance is expected to activity is expected to continue to grow in 2018 remain in surplus in 2018 thanks to continued – albeit weakly, and without reaching the heights flows of foreign aid. The trade deficit will still seen during the previous decade (average be substantial and close to 33% of GDP in 2018. annual rate of 11.5% from 2007 to 2012). Growth This will be funded by foreign aid. will still depend to a considerable extent on the agricultural sector, which employs over 80% of workforce. Agricultural yields are likely to remain limited by climate conditions (drought), as well as by the lack of water supply infrastructure. Although illegal, opium cultivation is on an upward trend, gradually replacing agricultural land intended for cereal and market-gardening crops: twelve out of the 34 Afghan provinces have observed a rise in opium cultivation.

32 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 33 ALBANIA ALGERIA

COFACE ASSESSMENTS COFACE ASSESSMENTS C C COUNTRY RISK COUNTRY RISK C C BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 2.2 3.4 3.8 3.9 GDP growth (%) 3,7 3,3 2,2 1,5 Exports of goods, as a % of total 2.9 Exports of goods, as a % of total 40.8 Inflation (yearly average, %) 1.9 1.3 2.3 2.8 POPULATION Inflation (yearly average, %) 4,8 6,4 5,5 6,0 POPULATION Euro Area (millions of persons - 2016) Euro Area (millions of persons - 2016) 72% Budget balance (% GDP) -4.1 -1.8 -2.2 -1.6 56% Budget balance (% GDP) -15,7 -13,7 -11,5 -9 4,126 3,902 Kosovo Current account balance (% GDP) -8.6 -7.6 -8.0 -8.0 United States Current account balance (% GDP) -16.5 -15,6 -13,0 -10,3 7% GDP PER CAPITA 11% GDP PER CAPITA Public debt (% GDP) 73.1 72.4 70.5 68.5 (US dollars - 2016) Public debt (% GDP) 8,8 20,6 17,9 17,7 (US dollars - 2016) Malta Brazil 3% (f): forecast 6% (f): forecast China Canada 3% RISK ASSESSMENT 4% RISK ASSESSMENT Macedonia Turkey 3% Growth sustained by investment given that the proportion of debt, although 4% A further decline in growth in 2018 amount paid for fuel costs, which is expected and consumption quickly decreasing, remains high: the proportion State support for the economy has helped limit to push up the price of gas and of petrol at the Imports of goods, as a % of total Growth is expected to remain high in 2018. It of domestic debt (53% of the total) is 37% in the Imports of goods, as a % of total the impact of lower oil prices on the Algerian pump. While the slight increase in the barrel short term and is held at 60% by commercial price to above USD 50 per barrel and the rise in Euro Area will continue to benefit from continued foreign Euro Area economy since 2014. However, Algerian growth 55% investment in infrastructure, especially in banks, accounting for 25% of their assets. 41% slowed in 2017 due to the state’s dwindling exports are expected to boost revenues, they will not cover the government’s expansionary China energy, with the ongoing construction of the China financial resources and public spending cuts. 9% Trans Adriatic Pipeline (TAP) transporting gas Substantial trade deficit financed by FDI 18% Although the oil sector posted strong growth policies. The public deficit is likely to be financed directly by borrowing contracted with the Turkey from Azerbaijan to Italy, and of the second There is a very high trade deficit, which stood United States during the year, it did not offset the slowdown in 8% plant (Moglice) of the Devoll river hydroelectric 5% non-oil activity. central bank. The public debt looks set to rise as at 24% of GDP in 2016. This reflects the narrow a consequence, but the main risk of this policy is Tonga complex. The electrical network should, productive base (textiles, shoes, oil, minerals, Turkey The economy is expected to continue to slow in 8% 4% that of higher inflation. For the moment the public logically, be developed to ensure internal and electricity, construction materials), which means 2018. The reintroduction of quotas in line with the United States external distribution of the expected additional Argentina authorities have ruled out external borrowing. 2% the country has to import many of its consumer 3% OPEC agreement is expected to limit the growth production. These installations will take over and capital goods. Over half of its exports go of the oil sector, already adversely affected by a External accounts have continued to run a large from local oil production, which peaked in 2014. to Italy. In addition, the balance is sensitive to lack of investment and the maturity of some oil deficit since 2015. Algerian exports, chiefly + STRENGTHS Local investment, particularly regarding the rainfall, which can cause hydroelectric power + STRENGTHS fields. A new law aimed at enhancing the sector’s comprising oil, rose slightly in 2017 and this construction or modernisation of roads and sales to fluctuate. There is a trade surplus in attractiveness for foreign investors by limiting increase, although weak, is set to continue in • Candidate for membership of the EU railways (Tirana-Durres line) will remain limited services of 7% of GDP thanks to tourism and • Significant oil and gas reserves especially the restrictions on foreign companies is due to 2018. However, the gap between exports and in shale gas • Youthful profile of the population by fiscal consolidation and the wariness of outward processing arrangements in the be implemented in 2018, although its effects are the country’s import needs remains. Foreign • Mineral (oil, chromium, copper, iron-nickel, clothing sector. Remittances from emigrants • Potential in the fields of renewable energy exchange reserves continue to decline and banks. The banks, mostly subsidiaries of Italian, and tourism unlikely to be visible in the short term. Non‑oil silicates, coal) and hydroelectric potential Austrian, and Greek banking groups, will continue could grow, in line with the Italian economy, activity is expected to show signs of cooling. are expected to fall below the USD 100 billion • Low energy deficit to reduce the proportion of their non-performing but represent around 8% of GDP. The current • Solid external financial position (very low The authorities want to continue to support threshold in 2018. The steps taken to reduce the external indebtedness, significant foreign import bill went some way to reducing imports • Coastline with several ports loans (15% in July 2017 versus 21% one year account deficit is primarily financed by FDI, which exchange reserves) consumption by increasing social spending, but in 2017 and new steps intended to limit the • Strength of the currency, the lek, earlier) and the proportion of the euro (around means that imports related to infrastructure this will be to the detriment of public investment. against the euro half) in their deposits and loans. Under these are self-financing. Despite the importance of The impact of this measure on household decline in foreign exchange reserves are due to be implemented in 2018. FDIs into Algeria are circumstances, the recovery of corporate credit the non-debt-creating financing, external debt - WEAKNESSES purchasing power is likely to be limited by the should be modest, and the average interest rate represented 71.5% of GDP at the end of March rise in inflation. This is because, to finance the nonetheless expected to grow. The government - WEAKNESSES on loans in lek and euro (respectively 6.6% and 2017. The fact that 80% of the debt is long- • Highly dependent on hydrocarbons and deficit, the Algerian government passed a new is promoting a new investment law in a bid to 4.7% in the second quarter of 2017) should remain term and 56% corresponds to private sector problems using this income framework law in September 2017 allowing the increase the attractiveness of the oil sector. • Size of the grey economy (30 to 40%) high, despite a key rate of 1.25% since May 2016. loans, particularly linked with FDI, puts this into • Dividing lines between those in power and state to borrow directly from the Bank of Algeria • Poverty (per capita GDP = 30% of Household consumption is expected to continue perspective. the general population for five years. This financing method will lead to Risk of social unrest the European average), low priority given • High youth unemployment to education (3% of GDP) to recover due to the increase in transfers of greater domestic inflationary pressures while The May 2017 parliamentary elections, which expatriates from Italy, the increase in labour • Excessive weight of the public sector import barriers will tend to increase prices for • Dependence on rainfall: agriculture (23% of Reforms are expected to continue took place amid the lowest voter turnout ever market participation linked to a shrinking of the • Bureaucratic red tape, weaknesses in the foreign products. GDP and 45% of jobs) and hydroelectricity Prime Minister Edi Rama and the socialist party recorded, did not affect the country’s political informal economy and related employment, financial sector and problematic business (95% of electricity production) obtained an absolute majority in the June 2017 status quo and returned the governing coalition even if unemployment remains high (14%, 26% of climate • Weak public investment and lack elections. Structural reforms will continue with Sizeable twin deficits made up of the National Liberation Front and the young people). Construction, agriculture (23% of of infrastructure a view to obtaining EU membership. In addition National Rally for Democracy to power. However, added value), and industry, with their exports The fiscal position will continue to suffer the • Ineffective and politicised court system to the electricity market, the pension system government reshuffles have succeeded one benefiting from the Italian upturn, should post consequences of lower oil prices. The public and administration has been reformed, notably to introduce better another over the past year, the most recent good performance figures. deficit fell slightly in 2017 but remained in double • Corruption and organised crime proportionality between contributions and digits. The slight rise in the barrel price during one being the sacking of Abdelmadjid Tebboune benefits. The transcription into law of the 2016 2017 helped boost tax receipts but spending only in favour of Ahmed Ouyahia, brought back Fiscal consolidation required to reduce constitutional reform aimed at increasing the fell weakly. Although slightly lower, the public by President Bouteflika Prime Minister for a the debt burden independence and efficiency of courts will deficit is expected to remain significant in 2018. fourth term as prime minister. Algeria’s deep After a short pause due to the June 2017 require the support of the former government The finance law is a sign that the government is economic downturn is starting to have impact elections, fiscal consolidation will resume. partner, the Socialist Movement, for integration. changing its fiscal policy following successive socially, which will prompt the government to Reserves have been set aside to cover the This is crucial as much for accession to the changes of prime minister over the previous continue its generous policy of social transfers compensation claims for property expropriated European Union as for encouraging foreign year. The fiscal consolidation plan adopted in to the detriment of fiscal consolidation. However, during the Communist era. The cost of the investment. Much remains to be done to improve 2016 to allow the public deficit to be brought Sonatrach’s recent declarations regarding electricity sector to the state is expected administrative efficiency, make local agencies down over three years based on a cut in the exploitation of shale gas fields in parts of to disappear with the installation of meters, accountable, and combat corruption, organised investment spending has been put to one side. southern Algeria could trigger renewed pockets infrastructure modernisation, and the gradual crime, and smuggling between Albania and Italy. The fiscal envelope allocated to investment has of protest. end to subsidised tariffs. Pension and territorial been increased by over 50% and is expected administration reforms should also contribute. to help finance projects which have to date Tax collection is benefiting from a reduction in been frozen in the education and healthcare undeclared work and from computerisation, sectors and in land use planning. The amounts while improved management of investments allocated to operating costs have been cut by has enabled the elimination of payment arrears half. Subsidies and social spending are unlikely to suppliers. This issue is all the more important to be cut, apart from a small reduction in the

34 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 35 ANGOLA ARGENTINA

COFACE ASSESSMENTS COFACE ASSESSMENTS D B COUNTRY RISK COUNTRY RISK D B BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 3.0 -3.6 1.1 1.9 GDP growth (%) 2.6 -2.3 2.7 3.1 Exports of goods, as a % of total 27.4 Exports of goods, as a % of total 43.6 Inflation (yearly average, %) 10.2 32.1 32.0 20.3 POPULATION Inflation (yearly average, %) 28.4 41 26.9 17.8 POPULATION China (millions of persons - 2016) Brazil (millions of persons - 2016) 54% Budget balance (% GDP) -3.3 -6.0 -6.1 -5.5 16% Budget balance (% GDP) -3.9 -5.9 -6.2 -5.6 3,485 12,494 Euro Area Current account balance (% GDP) -10.0 -6.4 -5.2 -4.5 Euro Area Current account balance (% GDP) -2.7 -2.7 - 4.2 - 3.5 15% GDP PER CAPITA 12% GDP PER CAPITA Public debt (% GDP) 44.3 59.2 61.0 62.0 (US dollars - 2016) Public debt (% GDP) 56.4 56.8 61.6 65.4 (US dollars - 2016) India United States 8% (f): forecast 8% (f): forecast United States China 6% RISK ASSESSMENT 8% RISK ASSESSMENT South Africa Vietnam 5% Increased oil production supports a of local debt (mainly in kwanza) to finance 4% Economy has resurged from economic weak (roughly 1% of GDP). Hence, the rising constrained rebound the deficit. recession external vulnerability together with the still high Imports of goods, as a % of total Dependent on oil activity, growth rebounded The current deficit is expected to continue to Imports of goods, as a % of total After contracting in 2016, the Argentinian inflation may cause a further weakening of the Argentinean Peso. A sharp rise of the US dollar Euro Area weakly in 2017 thanks to the recovery of oil prices decline in 2018, in line with oil prices. However, Brazil economy rebounded in 2017. Both household 32% and the dynamism of the volumes exported, the surplus in the balance of goods will still be 25% consumption and gross fixed investments would certainly take a toll on climbing foreign currency debt. United States particularly to China. In 2018, the rebound should too small to compensate for deficits in services China increased strongly. On the supply side, growth 12% continue thanks to the commissioning of the and income. Also, the external situation will 19% has affected all sectors. The construction China Kaombo oil field (Total). Oil sales, which account remain extremely fragile, as FDI or portfolio Euro Area sector has been the largest contributor, up 9.7% A strong showing for Cambienos in midterm 12% for more than 90% of export earnings, could investment will still remain weak and could push 15% year-over-year (GA), essentially supported elections, though a majority in Congress South Africa benefit from higher oil prices. However, the the country to finance itself through external United States by increasing public investment. Agriculture, was not reached 7% 13% dynamics of Chinese demand, in a context of debt. The intervention of the National Bank of transport, and communication and financial Argentina held midterm elections in October Brazil a slowing economy is a source of risk. Outside Angola (BNA) to defend the kwanza peg to the Mexico intermediation have also recorded strong results, 5% 3% 2017, with the dispute that renewed one third of the oil sector, growth prospects remain weak. dollar led to a deterioration of foreign exchange reaching respective peaks of 4.9%, 4% and 4.4% the Senate and half of the Lower House being The budgetary imbalance should restrict public reserves in 2017. In the absence of devaluation in during the same period. seen as a preview of the 2019 presidential race. + STRENGTHS investment, particularly in the construction 2018, reserves could continue to be depleted as + STRENGTHS The success of the ruling coalition (centre-right President Mauricio Macri of the centre-right sector, despite the infrastructure development the difference between the official exchange rate Cambiemos) in the midterm elections of October Cambiemos coalition assured an impressive • Significant oil production goals that will be presented in the 2018-2022 and the parallel rate still indicates a lack of foreign • Natural agricultural, energy and mineral 2017 is expected to further boost business showing at the elections (including the five most resources • Launch of liquefied natural gas production National Development Plan currently being currency liquidity. confidence in 2018, improving prospects for populous cities). The ruling coalition raised its facilities drafted. Investment in expensive offshore • Improvement in the business environment private investments, with GDP growth expected nationwide vote share from the 2015 presidential • Significant economic potential: diamond, projects is expected to stagnate as oil operators Changing faces in the leadership of Angola • Education level higher than the regional to pick up over the next year. It is worth noting, elections and obtained over 40% of the national iron, gold, leather, agriculture, fishing, limit their spending on the development of new average vote in both legislative houses. In the Senate, it hydropower Unsurprisingly, the People’s Liberation however, that inflation remains a concern: while ones since the fall of prices in 2014. Excluding • Return of the country onto business it slowed, the target range of 12-17% established gained an additional nine seats, taking its total to • International financial support Movement of Angola (MPLA) won the August market oil, the difficult business climate and corruption for 2017 by monetary authorities has not been 24 (out of 72), and in the Lower House it gained remain obstacles to increased foreign 2017 general election. However, after serving as leader of the country for 38 years, José Eduardo reached. In response, the central bank has an additional 21 seats, taking its total to 107 (out investment flows. An increase in the minimum implemented a tightening monetary cycle to of 257). - WEAKNESSES wage decided in mid-2017, the first such dos Santos (73), who remains president of the - WEAKNESSES MPLA, gave up his seat to his former defence try to accelerate the disinflation process. The Although an absolute majority was not achieved, • Vulnerability to the reversal of oil prices increase since 2014, will not support household • Weakened current account unemployment rate eased from a peak of 9.3% consumption in 2018. In fact, while its decline is minister João Lourenço. Anxious to assert his the outcome left the fragmented opposition in • High unemployment (26%), strong social authority, the new president made a name • Dependency on agricultural commodity in the first quarter of 2016 to 8.7% in the second disarray and without any strong leader (former inequalities and regional disparities expected to continue in 2018, inflation will remain prices quarter of 2017. The recovery of the job market high and thus continue to undermine household for himself by making several changes to the President Cristina Kirchner came in second • Infrastructure deficiency head of the state media, the BNA, and some • Sticky inflation should gain further strength this year, supported only in the race for a Senate seat in Buenos income. Moreover, while the Angolan external by the further consolidation of activity growth. • Fragile banking sector position remains precarious, price developments of the national diamond companies (Endiama, • Bottlenecks in infrastructure Aires). The result has strengthened President • Control of politics and economy will remain vulnerable to a further devaluation of Sodiam). One of the most notable changes is Macri’s governability, which is critical to moving by a small elite the local currency (kwanza) in 2018. the ousting of Isabel dos Santos, daughter of Twin deficits still a point of concern forward with his reform agenda, which consists • Conflict with the separatists of the former president, as the head of the state- SECTOR RISK ASSESSMENT The government attained the primary fiscal of three pillars: reducing fiscal deficit, inflation the Cabinda enclave owned oil company (Sonangol). Nevertheless, target of 4.2% of GDP in 2017. However, this fiscal and tax burden; reinvigorating job market and Budgetary and external imbalances still despite these changes, the president’s ability assuring a sustainable social security system; a threat outcome was highly supported by resources to implement economic and social reforms will obtained from tax amnesty – a one-time source and institutional reforms (such as the electoral In 2018, fiscal consolidation efforts are expected be scrutinized. Indeed, the discontent of the of funds. This scenario is unlikely to repeat itself and judicial institutions). Despite the need to to be stepped up. Progress in mobilizing non- population persists in the face of inequality in 2018, especially given that the following target reach consensus with the opposition to pass the oil revenue will be a priority. In particular, the and poverty, exacerbated by slow economic requires a tighter fiscal discipline (3.2% of GDP). reforms, the government should benefit from a increase of several consumption taxes and a activity and inflation. The new president’s focus Following its strong victory in the midterm proposed schedule of gradual implementation, review of tax exemptions are planned. However, on fighting corruption, improving governance elections, the government is now set to reduce its increased political capital and a fragmented the improvement in revenues should remain and the business climate will need to be followed the fiscal support that has contributed to the opposition. Indeed, the government has so dependent on oil revenues (70% of revenues). by reforms to unblock private investment. rebound in activity. Policymakers will now focus far moved quickly, and sent its tax and labour Expected to increase in 2018 thanks to higher Although progress in electricity supply and the on fiscal reforms to narrow the budget deficit reforms to Congress a few weeks after the prices and increased production, these revenues obtaining of building permits has allowed Angola (containing social and pension spending growth). legislative elections. would allow the government to regain a little to move up seven spots in the latest Doing The government has defended the establishment more breathing room. Nevertheless, the fiscal Business 2018 ranking, the country remains at of a cap to the real growth of provincial and space, still restricted, will force a significant the bottom at both the regional and global level federal primary expenditures to zero. increase in capital investment spending. The (175th out of 190); proof of a business climate that deteriorating financial situation of some public remains poor. During the same period, the current account deficit has widened, driven by the increase in entities and the banking system will continue Relations with Congo (Kinshasa) may be tense to weigh on the budget, while debt service is domestic demand. While imports grew by 12% after violence in the Kasai region has led to the year-on-year during the first ten months of becoming increasingly important. The debt is influx of more than 30,000 refugees into Angola. related to the rapid rise in the debt burden. This 2017, exports rose by 0.7% in the same period. increase, which is often on non-concessional The larger trade and current deficits have been terms, is 78% denominated in foreign currencies. so far predominantly financed by debt issuance The government intends to increase the share abroad, as foreign direct investment remains

36 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 37 ARGENTINA ARMENIA

PAYMENT AND COLLECTION PRACTICES IN ARGENTINA COFACE ASSESSMENTS Payment The National Civil and Commercial Code of (ii) Reorganization proceeding (concurso Procedure classifies proceedings into two preventivo): D The most common payment instruments in local COUNTRY RISK commercial transactions are: types depending on their purpose: ordinary A reorganization proceeding can be initiated · Cash (for low-value retail transactions) proceedings (juicio ordinario) and executory voluntarily by an individual or entity, who or fast-track (juicio ejecutivo). Other types of C · Bank transfers must submit proof of their inability to pay their BUSINESS CLIMATE · Cheques (ordinary cheques, deferred payment proceedings apply only to particular cases. Each debts. Debtors must file a petition to the court cheques or other types). province has its own code of procedure. requesting relief under bankruptcy law. The - In case of default, these cheques represent an Ordinary proceedings usually last between one court will appoint a trustee. All creditors must file executable legal document which facilitates a and four years. If applicable, an appeal may be evidence of their proof of claim with the trustee TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) fast track legal proceeding. filled for the Court of Appeals to hear the case. (verification de creditor). Debtors must submit GDP growth (%) 3.2 0.2 3.3 3.3 3.0 a proposal for reorganization and must obtain Exports of goods, as a % of total For international commercial transactions, the Executory processes are simplified and prompt Inflation (yearly average, %) 3.7 -1.4 1.7 3.5 POPULATION most common payment instrument is Bank proceedings that mainly consist of claimants’ creditors’ approval during an “exclusive period” Russia (millions of persons - 2016) of 90 days, with the possibility of an extension 21% Budget balance (% GDP) -4.8 -5.6 -3.3 -2.7 transfer via SWIFT. Since December 2015, request for the execution of debtors’ assets 3,533 restrictions on foreign exchange controls and to obtain payment of a debt. They apply when of 30 days based on the number of creditors. Euro Area Current account balance (% GDP) -2.6 -2.3 -3.8 -3.2 15% GDP PER CAPITA fund transfers from Argentina have gradually creditor has documents known as executor If the proposal is approved by the majority, the Public debt (% GDP) 48.7 55.1 56.1 57.0 (US dollars - 2016) judge reviews the terms of the plan prior to Bulgaria been removed. At the time of writing, importers titles (titulos ejecutivos), such as public 9% (f): forecast no longer require the approval of the Argentine instruments, private instruments signed by the approving it. Upon homologation by the court, the reorganization plan becomes effective to Georgia Federal Tax Authority (AFIP) to make payments concerned party (debtor or guarantor)and legally 8% RISK ASSESSMENT broad. acknowledged, bills of exchange, checks or credit all unsecured creditors (even those who have not agreed to it). A special payment offer can Iraq invoices. Contrary to ordinary proceedings, it is 8% Recovery dependent on external factors – a victim of cuts to infrastructure spending in only be proposed and approved for secured not necessary to provide proof of the debt. The recent years. Although the consolidation effort Debt collection creditors. If the proposal is not approved by the After a technical recession at the end of 2016, judgment is delivered between approximately should be carried out at a more moderate pace Amicable phase and out-of-court settlement: required majority (51%), debtor bankruptcy may Imports of goods, as a % of total growth rebounded in 2017, supported by the six months and two years. in 2018, the government should nevertheless Both of these options are always preferable to follow. The process generally takes between one recovery of activity in Russia and the slight rise Russia continue to introduce major structural reforms, legal action. Negotiations are focused on the Costs: court tax (3% of the amount in dispute and two years, depending on the volume and 32% in the price of commodities. In 2018, the pace of both in terms of social protection and public payment of the principal, plus any contractual to be paid by claimants upon commencing the nature of debt being renegotiated and the size of Euro Area activity should be determined and constrained enterprises: the pension reform adopted in 2014 default interest that may be added and accepted proceeding), lawyers’ fees. The prevailing party is the debtor. 17% by these same factors, given the dependence entitled to recover its costs, including attorneys’ on the economic health of Russia neighbour should finally be implemented on a large scale, by the buyer. Argentinian regulations provide (iii) Bankruptcy proceeding (quiebra): China alternative dispute resolution methods, such fees (subject to court approval). 12% and world metal prices, and the weakness of with the introduction of mandatory contribution as mediation, which is mandatory prior to the Documents: All documents (original or notarised This is initiated when a reorganization proceeding Iran domestic growth drivers. In effect, even a very for all employees in July 2018, while the reforms commencement of any judicial process aiming copies) submitted to the court must be (i) fails, either voluntarily (by the debtor) or 5% slight growth recovery n Russia would favour initiated in the utility sector (electricity and to reach an out-of-court agreement. The apostilled (for members of the 1961 Hague involuntarily (by the debtor’s creditors’ request). Turkey exports (almost one quarter of Armenian water) should reduce the losses associated with 4% instrument to execute the agreement in this convention), and (ii) authenticated by the The petitioner must show that the company is exports are destined for Russia). It would also certain public enterprises. stage is a notarized acknowledgement of debt Argentine consulate with jurisdiction over the insolvent or that it has entered into a “suspension encourage household consumption through Despite a slight improvement, the current of payments” status. In case of an involuntary or a payment plan agreement. Such documents issuing country. All non-Spanish documents + STRENGTHS expatriate transfers (more than 15% of GDP, 70% account balance is likely to remain in deficit in have to be signed by both the creditor and debtor, must be translated by a certified translator bankruptcy, after the petition has been filed with of which are from Russia), which are set to return 2018. After widening in 2017 – as a result of a and must be notarized. At this stage, costs and registered in Argentina. the relevant court and all necessary evidence • Significant mining resources to 2007 levels after their fall in 2016. Industrial recovery in domestic demand that ended a period fees incurred are borne by each respective party. is presented, the court will summon the debtor (molybdenum, copper, gold) production, which is highly dependent on the of sharply reduced imports –, the deterioration is to provide an explanation of the reasons why • Significant support from international metals sector (50% of exports and almost 10% of expected to only be partially reversed in 2018. In Legal proceedings: Enforcement of a legal decision payments of the obligations in favour of the organisations and the diaspora Argentina is a federal republic (23 provinces and GDP, half of which is for copper), should continue fact, the growth in export earnings and transfers For local judgments, final decisions are initially petitioning creditor have not been made and to • Member of the Eurasian Economic Union the Autonomous City of Buenos Aires (Federal to benefit from the moderate rise in world prices, would remain moderate. acquiesced to be enforceable. However, if a prove that the debtor is solvent. If the debtor is (EAEU) even if the low prices compared to their pre-2014 District)), with two parallel judicial systems: decision has been appealed, it can be partially unable to do so, the court will declare the debtor levels would still constrain investment. The start Institutions change, but the pressures federal courts (organised by the federal enforceable in relation to the part of the bankrupt. Unlike reorganization, bankrupt government) and provincial courts (organised of production of the Amulsar gold mine planned remain judgment that is final. In principle, any of the debtors lose control of the administration of - WEAKNESSES for 2018 could, however, promote industrial by each province or federal district). The highest debtor’s assets can be seized (including but not their assets. A trustee is appointed in order to The presidential elections will take place in • Geographically isolated, aggravated by activity beyond its current growth rate. court in the country is the National Supreme limited to property, trademarks, and accounts preserve and administer the debtor’s property. April 2018. However, 2018 will be marked by a lack of infrastructure For domestic determining factors, the degraded Court of Justice. These courts have jurisdiction if: receivable from third parties and shares). As a result, all payments to creditors and debtor the transition to a parliamentary system, in • Strong dependence on Russia (trade: 20% business environment, poor infrastructure and I. The defendant resides in Argentina must be made through court. All claims and accordance with the constitutional amendments of exports and 30% of imports, FDI, loans, the competitive deficit will continue to weigh proceedings against the debtor are automatically adopted at the end of 2015 via referendum. While II. The place of performance of any of the Insolvency proceedings transfers of migrants) negatively on potential growth. Moreover, unlike stayed as from the date of the order that President Serzh Sargsyan cannot run for a third obligations is located in Argentina, or There are three insolvency proceedings: • Persistently high level of unemployment other countries in the region, Armenia maintains determines debtor’s bankruptcy. All creditors presidential term, he could, however, occupy III. Argentinian courts have been chosen as • High level of corruption an unemployment rate close to the level reached (i) Out-of court reorganization procedure (acuerdo must submit their proof of claims for payment. the office of prime minister given that his party the applicable forum (subject to certain during the 2009 crisis (18.5%), despite a period preventivo): a proceeding in which the debtor Once the assets available and the amounts • Conflict with Azerbaijan regarding (Republican Party of Armenia, PRA) won the restrictions). Nagorno-Karabakh of high emigration in 2011-2013. Low labour and a majority of unsecured creditors enter into a owned to each creditor are determined, the parliamentary elections of April 2017 (58 seats market pressures are holding back underlying Regarding debtors abroad, Argentinian courts restructuring agreement. This agreement must be trustee liquidates the assets and proceeds with won out of 105 in the Assembly). At the same inflation, which has been negative since 2016. only have jurisdiction when debtors have assets submitted by the debtor to an Argentinian court the distribution of repayment to creditors. time, pressures for social change are mounting, in Argentina (in which case the insolvency for it to become enforceable. In practice, out-of- Total inflation, however, should increase, driven with unemployment concentrated in cities (four proceedings will only involve such assets) court agreements provide a series of conditions by rising food and commodity prices, as well as times higher than in rural areas) and among or when their principal place of business is in that must be complied with, including a minimum continued monetary easing (interest rate cut young people (twice as high as for the rest of the Argentina. threshold of consenting creditors. from 8.75% to 6.0% between January 2016 and population), in addition to widespread corruption February 2017). and regional inequalities. At the geopolitical level, the dispute with Continued budget consolidation and slight Azerbaijan over the territory of Nagorno- decrease in the current account deficit Karabakh, officially Azeri but populated mostly The government should continue to reduce the by Armenians, has given rise to regular shootings budget deficit through the consolidation efforts since the Four Day War in April 2016. While undertaken since 2016 with the support of the the Russian military base in Gyumri seems to IMF. The implementation of the new Tax Code in maintain and preserve the rest of the Armenian 2017 has already led to an increase in tax revenue territory from overflowing conflict, security in of around 0.7 percentage point of the GDP, for the Nagorno-Karabakh region remains under an estimated potential of 2 percentage points of threat in the medium term. the GDP over the medium term. Submitted to the National Assembly in October 2017, the revision of the fiscal rule adopted in 2008 should make it possible to make the adjustment at a pace more adapted to the position of the economy in the cycle, and at the lowest cost for potential growth

38 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 39 AUSTRALIA AUSTRALIA

COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN AUSTRALIA Payments entered against the debtor. It is worth nothing that Enforcement of a legal decision A2 Payment methods include: there are different time frames for different states. If COUNTRY RISK A judgment is enforceable as soon as it is rendered by a) Cash: widespread payment method used by the debtor does not pay the debt and files a defence, the court. The plaintiff has up to fifteen years following consumers for low-value transactions (37% orders will be made by the court to prepare the matter the entry of judgment to pursue enforcement of an A1 of all transactions in 2016). Entities providing for hearing. This will ordinarily involve activities such BUSINESS CLIMATE Australian judgment through Examination Notices, a designated service under the Anti-Money as discovery and the preparation and exchange of Garnishee Orders or Writs of Execution. Examination Laundering and Counter-Terrorism Financing Act evidence that will be relied upon at the hearing. Notices force the debtor to provide information on its must report cash transactions over AUD 10,000 to During the preliminary phase, the parties may financial situation and assets, helping to establish a TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) AUSTRAC. request and exchange particulars of the claim or recovery strategy. It must be requested from the court b) Personal cheques and bank cheques: used for GDP growth (%) 2.4 2.5 2.5 2.9 24.4 defence made by the other party. This may involve after judgment has been entered. The Garnishee Exports of goods, as a % of total domestic and international transactions. Cheque the exchange of documents referred to in the claim Order allows the creditor to recover its debt directly Inflation (yearly average, %) 1.5 1.3 2.0 2.2 POPULATION use has declined (-20% in 2016). In commercial China (millions of persons - 2016) or defence, including copies of the relevant unpaid from the debtor’s bank account or salary as well 31% Budget balance (% GDP) -2.8 -2.6 -2.0 -1.6 transactions, they are generally bank cheques. invoices and statements of account. If discovery is as from the debtor’s debtors, until the principal and 51,737 Japan Current account balance (% GDP) -4.7 -2.6 -1.9 -2.5 c) Credit cards: have replaced cash as a payment ordered, the parties will be required to exchange all interest are paid off. Finally, the Writ of Execution 12% GDP PER CAPITA method – increasing by 57% between 2010 Public debt (% GDP) 36.0 39.0 42.0 42.0 (US dollars - 2016) documents that are relevant to their case. Otherwise, orders a sheriff to seize and sell the debtor’s property United States and 2015. all documents which the parties wish to rely upon at to the benefit of the creditor in payment of the * 2018 fiscal year: from July 2017 to June 2018 (f): forecast 6% d) Electronic transactions: on its way to becoming the the hearing must be included in the evidence of the debt (together with interest and costs) owing to Euro Area dominant payment process. This includes point-of- parties. Before handing down its judgment, the court the creditor. As for foreign awards, enforcement in 6% RISK ASSESSMENT sale (POS) electronic transactions, as well as mobile will examine the case and hold an adversarial hearing Australia is governed predominantly by statutory South Korea apps, electronic funds transfer (EFR) and internet in which the witnesses of each party may be cross- regimes (Pt 6 of the Service and Execution of Process 6% Growth close to long-term average The current account balance traditionally shows transactions. examined by the other parties’ lawyers. In most cases, Act 1992 (Cth) for judgments given in Australia and a moderate deficit, which, despite growing Activity is expected to pick up in 2018 with e) EFT electronic funds and SWIFT bank transfers: straightforward claims are likely to be settled within Foreign Judgments Act 1992 (Cth) for judgments diversification, varies primarily in line with Imports of goods, as a % of total growth set proving steady and close to its long- the most commonly used payment method for two to four months but more disputed claims may last given outside Australia) and common law principles, sales of commodities, namely with the volumes international transactions. The majority of banks are China term average. The decline in mining investment more than a year. such as the exequatur procedure. Furthermore, 23% should bottom, while investment in other sectors and prices, which depend above all on Chinese connected to the SWIFT electronic network. If a party is not satisfied with the judgment awarded recognition depends on whether a reciprocal (tourism, education, research and development) demand. As with goods, trade in services also f) The Australian dollar is now also part of the Euro Area by the court, it may appeal the decision. In general, recognition and enforcement agreement exists 14% will rise and the construction of public shows a slight deficit. Tourism income and Continuous Linked Settlement System (CLS), appeals lodged against Supreme Court decisions are between Australia and the issuing country. infrastructure, both at Commonwealth and State registration fees paid by foreign university a highly automated interbank transfer system United States heard by the Court of Appeal in that state/territory. 11% level, will continue to advance. This should offset students, especially from Asia, will not match for processing both legs of foreign exchange Any further appeal thereafter is heard by the High Insolvency procedures Japan the sharp slowdown in house building, with house spending by Australian tourists or ocean freight transactions simultaneously. Court of Australia, the party seeking to appeal must 8% prices clearly stabilising in some cities against a rates paid to foreign companies. The income Administration: A debtor company can be placed Debt collection seek leave and persuade the court in a preliminary Thailand background of tougher prudential rules on credit balance also shows a deficit, more significantly into administration by its directors, or by creditors hearing that there is a special basis for the appeal, 6% imposed by the Australian Prudential Regulation because of dividend repatriation by mining Amicable phase that are owed money. The administrator will take full as the High Court will only re-examine cases of clear Authority and a slowdown in immigration. 50% companies and interest payments on external Parties are encouraged to negotiate and take control of the company, and investigate and report debt, mostly private (mining companies, banks, “genuine steps” to settle commercial disputes prior to legal merit. to creditors as to the company’s business, property, + STRENGTHS of bank credit is linked to residential property. Despite continued employment growth, property sector) and denominated in Australian commencing certain legal proceedings in the Federal Local Courts or Magistrates Courts (depending on affairs, and financial circumstances. There are three • Firm resistance to the financial crisis as well household consumption is expected to rise dollars, accounting for 128% of GDP (63% net of Court and Federal Circuit Court. Examples of such the state/territory) hear minor disputes involving options available to creditors: end the administration as to the collapse in commodity prices and more moderately than before with little wage foreign assets). steps include notifying the debtor of the issues and amounts ranging up to a maximum of AUD 100,000 and return the company to the director(s); approve mining investment improvement and debt levels remaining very high offering discussions in view of resolving the dispute, (NSW, Victoria, South Australia, Northern Territory, a deed of company arrangement through which the • Reactivity of economic policy and exchange - a quarter of households owe the equivalent of A weak government and providing relevant information and documents to Western Australia, and Tasmania), AUD 150,000 company will pay all or part of its debts; or wind up the rate flexibility the other person in order to solve the dispute. These (Queensland) or AUD 250,000 (Australian Capital company. three or four years of earnings. Retail trade is, Having won 76 out of 150 seats in the Chamber • Geographic proximity to emerging Asia steps are largely dependent on the amount of the Territory). Beyond these various thresholds, disputes moreover, one of the rare sectors to lag behind, of Representatives, i.e. a loss of 15 seats Receivership: A receiver is appointed by a secured claim, with greater success seen in disputes where involving financial claims up to AUD 750,000 in NSW, • Attractive quality of life with immigration posting the highest level of bankruptcies ahead compared with the previous term, the centre- creditor who holds security or a charge over some contributing to population growth the value is less than about AUD 50,000. With larger Western Australia, South Australia or Queensland of construction. However, monetary policy will right coalition led by Prime Minister Malcolm or all of the company’s assets. His primary role is to matters involving debtor companies with more than are heard either by the County Court or District • Mineral resources remain highly accommodative (central bank Bligh Turnbull and made up of liberals and collect and the company’s assets to repay the debt one director, attempts by the creditor to enter into Court. There is no County Court or District Court in • Moderate level of public debt key rate at 1.5% in November 2017, unchanged nationalists was victorious but weakened after owed to the secured creditor. If the process fails, a settlement negotiations are ultimately unsuccessful. Tasmania, Northern Territory or Australian Capital • Tourism potential since August 2016), at least if inflation remains early elections in July 2016. Its tiny majority was liquidation procedure may be initiated. Territory.Claims greater than AUD 750,000 in NSW, below target (2-3%). Exports, 50% of which then lost following the ruling that MPs with dual Legal proceedings Liquidation: Creditors or a court may wind up a Queensland, Southern Australia, and Western comprise gas, coal and iron ore, are expected to nationality were ineligible to sit in Parliament. Australian law does not provide for fast track legal company, and appoint a liquidator who collects, Australia are heard by the Supreme Court of each - WEAKNESSES grow with the completion of several liquefied Nor has the government majority in the Senate proceedings as such. If the amicable phase fails, protects, and realises the company’s assets State. The Victorian County Court and Supreme Court natural gas terminals. Since, at the same time, and the Liberal Party is riven by splits, further ordinary proceedings will take place. However, the into cash, keep the creditors informed about the • Trade dependent on commodities have an unlimited jurisdiction. In the other states the moderation in household consumption and damaging the adoption of legislation. In these New South Wales (NSW) Supreme Court has a special company’s affairs and distribute any proceeds of (specifically iron ore, coal) and Chinese and territories, the Supreme Court hears claims demand house building will put pressure on imports, circumstances, government instability, which list for commercial disputes: once a matter is identified sale of company assets. Upon completion of the greater than: AUD 100,000 in the Northern Territory; trade’s contribution to growth is expected to has prevailed since 2010 (five prime ministers in as being appropriate for that list, it will be proactively liquidation, the company is then deregistered. • Substantial household debt (185% of gross AUD 250,000 in Australian Capital Territory; and disposable income) increase. This assumes that commodity prices seven years), is therefore expected to last. There managed by the court to try and ensure an efficient will not collapse should there be a slowdown in AUD 50,000 in Tasmania. • Shortage of skilled labour is little likelihood of this government holding resolution. Similar lists also operate for commercial the Chinese economy. disputes in the Supreme Courts of Victoria, Western • Shortage of infrastructure able to respond on until the normal election date of November to vast territory 2019, which could lead to a change in majority Australia and Queensland. NUMBER OF CORPORATE FAILURES • Highly exposed to climate risks Reasonable budget and external position from 2018. However, this is unlikely to have much If a corporate debt remains unpaid and the creditor’s Total Estimate (e) / Forecast (f) Yearly growth The authorities are aiming for fiscal equilibrium impact on the economy, given the convergence claim is due for payment, uncontested, and over • Disparity between the federal states 20% for the whole Commonwealth, States and local towards diversification. AUD 2,000, the creditor may issue a creditor’s 12,000 10,164 10,632 10,821 authorities by 2020-2021. Equilibrium is also Externally, Australia’s policy is to align itself statutory demand for payment of debt demanding 10,481 15.6% 15% payment within 21 days. Unless the debtor settles the the aim for the structural balance, i.e. smoothed economically more closely with the Asia-Pacific 10,000 9,601 9.2% out for cyclical effects. They expect to achieve region (especially China) and Europe, with which claim within the required timeframe to the creditor’s 8,794 10% 8,505 this, while developing infrastructure, education it has signed trade agreements while maintaining satisfaction, or applies to the Court to have the 8,000 1.8% 5% and training (especially for the indigenous preferential relations with the United States. statutory demand set aside, the creditor may lodge a 7,059 7,038 communities) and encouraging SMEs to invest The authorities are paying greater attention to petition for winding-up of the debtor’s company, The 0% in order to transition the economy from one Chinese investments in the country, given the latter is presumed insolvent three months following 6,000 1.7% 1.4% -0.3% focused on commodities to one that is diversified sectors concerned, as well as to immigration, the company’s failure to comply with the statutory -5% and to increase labour market participation and which is not considered to sufficiently benefit demand. For individuals, the process is similar , but 4,000 -10% boost productivity. Moreover, the government the economy. ,proceedings are required to be commenced in the Fed plans to invest USD 30 billion in defence over the Circuit Court. -15% next ten years. Despite the fall in revenues due to In NSW, under ordinary debt recovery proceedings, 2,000 -16.3% -17.0% -20% to falling commodity prices, the deficit has only a statement of claim must be personally delivered -18.7% widened a little and the debt burden has grown and served to the debtor, who must then pay the 0 only moderately, accounting for only 20% of GDP -25% debt, or file a defence on the creditor within 28 days. 2010 2011 2012 2013 2014 2015 2016 2017(e) 2018(f) in June 2017, net of receivables. Failure to do so may result in a default judgment being Source: Australian Securities and Investment Commission, Coface

40 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 41 AUSTRIA AUSTRIA

COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN AUSTRIA Payment A special procedure (Wechselmandatsverfahren) For foreign awards, circumstances may vary A1 exists for unpaid bills of exchange under which depending on the issuing country. For EU COUNTRY RISK SWIFT and SEPA (within the European Union, EU) transfers are widely used for domestic and the court immediately serves a writ ordering the countries, the two main methods of enforcing A1 international transactions and offer a cost- debtor to settle within two weeks. Should the an EU judgment are the European Enforcement effective, rapid, and secure means of payment. debtor contest the claim however, the case will Order or under the provisions of the ‘Brussels I’ BUSINESS CLIMATE be tried through the normal channels of court regulations. For non-EU countries, judgments Bills of exchange and cheques are neither widely proceedings. are recognized and enforced provided that used nor recommended, as they are not always If the debtor has assets in other EU countries, the issuing country is party to an international the most effective means of payment. To be valid, agreement with Austria. TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) bills of exchange must meet relatively restrictive the creditor may request the Vienna Commercial GDP growth (%) 1.1 1.5 2.7 2.4 8.7 mandatory criteria. This deters business people Court to issue a European Payment Order for Exports of goods, as a % of total undisputed debts, enforceable in all EU countries Insolvency proceedings Inflation (yearly average, %) 0.8 1.0 2.0 1.8 POPULATION from using them. Germany (millions of persons - 2016) (except Denmark) Out-of Court proceedings 30% Budget balance (% GDP) -1.0 -1.6 -1.0 -0.9 Cheques need not be backed by funds at the 44,233 date of issue, but must be covered at the date Ordinary proceedings Out-of court restructuring efforts and negotiations United States Current account balance (% GDP) 2.1 2.3 2.2 2.9 Where no settlement can be reached, or where a are usually antecedent to insolvency proceedings. 6% GDP PER CAPITA of presentation. Banks generally return bad Public debt (% GDP) 84.3 83.6 78.6 76.2 (US dollars - 2016) claim is contested, the last remaining alternative They constitute a means to obtain recapitalization Italy cheques to their issuers, who may also stop 6% (f): forecast payment on their own without fear of criminal is to file an ordinary action (Klage) before the loans in exchange for a secured creditor status. district court (Bezirksgericht) or the regional Switzerland proceedings for misuse of this facility. Restructuring proceedings 6% RISK ASSESSMENT court (Landesgericht) depending on the claim A pre-requisite for a restructuring proceeding Nevertheless, bills of exchange and, to a lesser amount or type of dispute. Defendants have four Slovakia degree, cheques are more commonly used as a is that the debtor files for the opening and at 4% weeks to file their own arguments. Continued strong growth in 2018 was significant until 2015, will continue at a low level. means of financing or payment guarantee. the same time submits a restructuring plan. Strong household consumption, as well as external Following the banking rescue operation completed With regards to the regional courts, defendants This proceeding is either self-administrated or Imports of goods, as a % of total demand, will once again drive growth in 2018. in October 2016, with the restructuring of the debt are expected to put forward their own arguments administrated by an administration. For self- held by HETA, the banking sector continued its Debt collection in response to the summons, and are allowed four administrated restructuring, the debtor must file an Germany Household confidence will be boosted by the 42% falling unemployment rate, in particular among weak recovery in 2017, reflecting increasingly strict As a rule, the collection process begins with the weeks to do so. application of self-administration complemented by requirements in terms of capital reserves and asset debtor being sent a demand for payment by Italy women and older workers, and rising real wages. A separate commercial court (Handelsgericht) qualified documents and a restructuring plan that 6% Job creation, most notably in the digital field, will quality. Bank profitability is expected to improve registered mail, reminding him of his obligation exists in the district of Vienna alone to hear provides a minimum quota of 30%. Switzerland be rapid in order to meet the needs of companies in 2018, benefiting from the growth in demand for to pay the outstanding sum plus any default commercial cases (commercial disputes, unfair Liquidation proceedings 6% in terms of production and technological progress. finance from companies and mortgage credit from interest stipulated in the sales agreement or competition lawsuits, insolvency petitions, etc.). Liquidation proceedings aim to equitably realise Czech Republic The construction and real estate sectors will benefit households. terms of sale. the various creditors’ rights. The proceedings 4% During the preliminary stage of proceedings, from the increasing demand due to immigration and The current account surplus arises thanks to the Where there is no interest rate clause in the the parties must make written submissions are led by a trustee in bankruptcy which takes Netherlands refugees. At the same time, sustained foreign trade surplus earned by services (3% of GDP in 2016), agreement, the rate of interest applicable semi- control of the business, sells the assets, and 4% st of evidence and file their respective claims. will add 0.8 point to overall growth. Manufacturing in particular those relating to tourism (31% of all annually from the 1 August 2002 is the Bank of The court then decides on the facts of the case divides the proceeds among the creditors. industry (20.8% of GDP), highly export-oriented services). The trade balance, slightly in the black Austria’s base rate, calculated by reference to presented to it, but does not investigate cases Retention of title and integrated into the German value creation in recent years, could shift into the red under the the European Central Bank’s refinancing rate, + STRENGTHS on its own initiative. At the main hearing, the Similar to Germany, Retention of Title is a written chain, will be boosted by the growth in demand in pressure of strong domestic demand. Exports marked up by eight percentage points. judge examines the written evidence submitted clause in a contract which states that the supplier • Central location in Europe and attractive the Central European and emerging countries. This and imports are concentrated in the same sectors Fast-track proceedings will retain the ownership over the delivered quality of life and hears the parties’ arguments as well as momentum is expected to continue stimulating (machines, transport equipment, chemical products For claims that are certain, liquid and uncontested, witnesses’ testimonies. An enforcement order goods until the buyer made full payment of the • Industrial and tertiary diversification, investment (23.1% of GDP in 2016) by Austrian and manufactured goods). The deficit (2.2%) in the creditors may seek a fast-track court injunction price. This usually takes one of three forms: high added value can usually be obtained in the first instance companies in capital equipment, which achieved income balance will remain because of immigrant (Mahnverfahren) from the district court via a pre- within about ten to twelve months. The civil • Solid current account surplus and low • Simple Retention: the supplier will retain the a utilisation rate of 86.9% at the end of 2017. The workers’ remittances and the repatriation of printed form. The competent district court for this procedure code provides that the winning party public deficit services sector will also grow, with the hotel, dividends by foreign owned companies. ownership over the goods supplied until full type of fast-tract procedure expedites the requisite at issue of the lawsuit is entitled to receive payment is made by the buyer. • Low level of household and company debt, catering and retail sectors benefiting from the Payment behaviour remains good. The number of action for ordinary claims up to EUR 75,000 below the European average full compensation from the losing party of all economic situation in German, from where almost insolvencies, already low, continued to fall in 2017 (previously EUR 30,000). necessary legal fees previously incurred. • Expanded Retention: the retention is expanded • High level of employment and low youth 50% of foreign tourists come. (-6.6% in the first three quarters) and company to further sale of the subsequent goods; the unemployment (use of apprenticeships With this procedure, the judge will issue an buyer will assign the claims issued from the and flexicurity) Inflation will remain above the European average liabilities were down 54% over the same period. The injunction to pay the amount claimed plus the Enforcement of a legal decision because of the price levels in the services sectors with greatest exposure are construction, resale to a third party to the initial supplier. • 30% of energy sourced from renewable legal costs incurred. If the debtor does not appeal (particularly tourism), industrial goods, and agri- machines and metallurgy. A judgement becomes enforceable when it • Extended Retention: the retention is extended supplies the injunction (Einspruch) within four weeks of becomes final. If the debtor does not respect th food sectors. to the goods processed into a new product, and • Major tourist destination (11 in world) service of the ruling, the order is enforceable the court’s judgement, the court can issue A coalition of the right and far-right relatively quickly. the initial supplier remains the owner or the • High level of public R&D investment an attachment order or a garnishment order. co‑owner up to the value of its delivery. (3% of GDP) Gradual reduction of public debt and The ÖVP, Christian-Democrat and conservative, Alternatively, the court can seize and sell the structural current account surplus won the 15th October 2017 parliamentary elections, debtor’s assets. - WEAKNESSES The public finances will benefit from the favourable for which there was a high turnout (80%). The economic situation and the deficit will be held ÖVP won 62 of the 182 seats in the Nationalrat, • Reliance on state of German and Central and at the government’s target level (around 1% ahead of both the social-democrats of the SPÖ East European economies of GDP). The high levels of employment mean and the far-right FPÖ party (respectively 52 and • Banking sector with high exposure to Central and Eastern and South-east strong tax revenues, in particular income taxes 51 seats). Sebastian Kurz, 31, the leader of the ÖVP European countries and social security contributions. Revenues and Foreign Minister since 2013, was appointed • Multiple layers of power and administration raised by VAT are also likely to increase, boosted Chancellor by the President, Alexander Van der (federal, Länder, communes) by household consumption. On the other hand, Bellen, with the aim of forming a government. • Lack of competitiveness of public services receipts from tax on production will decline as a The next coalition will apparently be formed by and numbers of regulated professions result of cuts in employers’ contributions to the the ÖVP and the FPÖ. This means the end of the Familienlastenausgleichsfond (family allowance ten-year long rule by the ÖVP-SPÖ coalition. SECTOR RISK ASSESSMENT fund). The increase in public spending will continue The government’s position with regard to the to held in check. The measures approved in 2017, EU remains to be seen, bearing in mind the pro- include increases in certain subsidies such as the European commitment of the ÖVP, which is the reimbursement of 50% of employer social security majority coalition partner, and the nationalist contributions over the first three years following stance of the FPÖ. The terms obtained by this the hiring of a new employee. The cutting of latter in joining the government include securing financial support for refugees, the fall in the already the borders, direct democracy and more restrictive very low cost of State debt and the reduction in policies relating to refugees. The modernisation spending linked with unemployment will help, of the civil service, investments in R&D and partly, offset this increase. The debt will continue digitalisation will be among the government’s to shrink in 2018 with the sights set on achieving priorities. convergence with the European rate of 60%, which should be completed in ten years. The cost of the measures to support the banking sector, which

42 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 43 AZERBAIJAN BAHRAIN

COFACE ASSESSMENTS COFACE ASSESSMENTS C C COUNTRY RISK COUNTRY RISK C A4 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 1.1 -3.1 -1.0 1.5 GDP growth (%) 2.9 3.0 2.5 2.0 Exports of goods, as a % of total 9.5 Exports of goods, as a % of total 1.3 Inflation (yearly average, %) 4.0 12.4 13.0 5.0 POPULATION Inflation (yearly average, %) 1.8 2.8 1.4 2.5 POPULATION Euro Area (millions of persons - 2016) Saudi Arabia (millions of persons - 2016) 37% Budget balance (% GDP)* -4.8 -1.1 -1.5 -0.5 18% Budget balance (% GDP) -13.5 -13.8 -10.2 -8.2 3,956 24,146 Turkey Current account balance (% GDP) -0.3 -3.6 3.0 0.0 United Arab Emirates Current account balance (% GDP) -2.5 -4.6 -4.3 -3.3 12% GDP PER CAPITA 17% GDP PER CAPITA Public debt (% GDP) 28.3 40.0 50.0 50.0 (US dollars - 2016) Public debt (% GDP) 65.0 75.0 83.5 92.0 (US dollars - 2016) Taiwan United States 9% * With transfers from the oil fund (SOFAZ) (f): forecast 11% (f): forecast Israel Japan 7% RISK ASSESSMENT 9% RISK ASSESSMENT India Qatar 5% Timid recovery after two years of recession gas potential and the pipelines to ensure the relay 5% Renewed slump in growth in 2018 The challenge for the Kingdom is to rebalance The economy’s adaptation to lower oil prices and of oil. In addition, IBA’s difficulties are not unique in In 2017, Bahrain’s economy was resilient to the its finances while preserving growth, which is Imports of goods, as a % of total the increase in gas exports to Turkey should favour the banking sector, which has seen the closure of Imports of goods, as a % of total oil market apathy thanks to a counter-cyclical largely stimulated by public spending. To enable numerous institutions and an increase in its non- the State to finance its deficit and relieve the Russia a timid exit from recession in 2018. Household Euro Area expansionary fiscal policy. The GCC’s commitment, 19% consumption (58% of GDP), down for three years, performing assets: officially 13% in June 2017, but 11% given in 2011, to pay USD 10 billion in development downward pressure on its foreign exchange undoubtedly much more in reality. This weakness reserves, the Kingdom issued USD 3 million Euro Area should start up again against a backdrop of rising China aid over ten years, has enabled the government 15% incomes and falling inflation, as long as there are is accompanied by a decline in credit: banks, with 10% to limit spending while maintaining substantial in sovereign bonds in September 2017 and Turkey no further episodes of depreciation of the manat. 80% of their deposits in dollars, are only willing United States investment, specifically, in the extension of requested financial support from Saudi Arabia, 14% While public investment in infrastructure and to lend in dollars in order to protect themselves 9% Manama airport and the construction of a pipeline the United Arab Emirates and Kuwait. While the China public building is expected to remain sluggish due against currency risk. Under such circumstances, United Arab Emirates with Saudi Arabia, which should be operational in sovereign bond is categorised as speculative, the 8% to budgetary constraints, investments related to borrowers prefer to resort to informal credit, even if 7% early 2018. But in 2018, demand will be dampened success of the issue relies on investor confidence United Kingdom developing the Shah Deniz gas field in the Caspian the rates are usurious. Japan by new austerity measures. The drop in household in the other GCC members intervening to 6% Sea and the extension of the Trans-Anatolian Despite the deficit in services and revenues, in 6% and business confidence, due to the economic make the peg to the dollar and the public Natural Gas Pipeline (TANAP) to the Greek/ return for the presence of foreign companies in the and political environment, will limit expansion of debt sustainable, with the public debt burden increasing in 2018. + STRENGTHS Turkish border, with the eventual goal of carrying hydrocarbon sector, the current account balance + STRENGTHS the private sector. However, significant private gas from Azerbaijan to Europe, should accelerate was traditionally positive due to the impressive investment will continue to be attracted by the • Well-endowed sovereign wealth fund in partnership with foreign partners. Private trade surplus generated by hydrocarbon sales. • Relatively diversified and open economy advantageous tax regime and will help modernise Slight decline in the current account deficit thanks to oil production investment will continue to be affected by the high Volume erosion and falling prices have caused this (oil, gas, aluminium, petrochemicals, the aluminium industry (second leading export financial services, tourism) The current account deficit will fall in 2018 • Significant gas potential in the Caspian Sea level of interest rates, intended to curb inflation surplus to vanish. In order to make sparing use of item after oil) and the tourism offer and stimulate following the expected rise in oil prices, as, • Prospect of gas exports to Turkey, and support the national currency, and the decline the reserves, which have fallen to the equivalent • Presence of the main US naval base in the the construction sector. The banking sector will region (5th Fleet of the US Navy) despite efforts to diversify, oil represents half then Europe in credit associated with the weakness of the of four months of imports, the SOFAZ provides maintain its vitality, contributing 16% of GDP. of export income. The deepening of the current • Link in the connection between China banking system. The contribution of foreign trade to the central bank with sufficient funds to service Adequate regulation and supervision of the account deficit, begun in 2014, has resulted in and Europe growth should once again be slightly negative. The the external debt of the company in charge of the sector have made it possible to ensure levels - WEAKNESSES the loss of foreign exchange reserves, which additional gas exports will only partially make up for TANAP and the State Oil Company of Azerbaijan of capitalisation and liquidity. While Bahrain is represented 1.2 months of imports in late 2017. the decrease in oil exports, which will still remain the Republic (SOCAR). • Diminishing hydrocarbon reserves and particularly vulnerable to low bauxite and oil prices At a time when the Kingdom has the lowest - WEAKNESSES main export (85%). Imports will grow more quickly exposed to fluctuations in hydrocarbon (price per barrel needed to balance the budget foreign exchange reserves among the oil prices • Strong dependence on hydrocarbons and due to increased consumption and investment. A well-established power will be above USD 100), and while production is exporters, higher US key rates are, moreover, limited non-oil sector Apart from the hydrocarbon sector (43% of GDP), • Acute socio-political tensions between down because of the OPEC agreements, the non- expected to increase speculative pressure on President Ilham Aliyev was re-elected for a third the ruling Sunni minority and the majority • Decreased oil production (1/4 over the last the rest of the economy should continue its 2017 oil economy is ensuring growth of 2%. Although the US dollar peg. The peg will be maintained momentum. term in 2013. In 2017, he named his wife vice Shiite population, fuelled by tense regional weak demand and a strong dollar slowed inflation in six years) president. In the next election scheduled for 2018, context between Iran and the embargo in 2018, given the government’s affirmation • Weak banking system on Qatar. 2017, the introduction of VAT at 5% across the GCC and expected financial support from the GCC he is expected to be re-elected, this time for a countries, scheduled for early 2018, and pressure • Risk of aggravation of the armed conflict Balanced public and external accounts seven-year term thanks to the 2016 referendum. • Dependence on foreign labour members. In addition, the country maintains an with Armenia despite decreased oil revenues from food and property prices will drive it upwards external debt/GDP ratio which is still very high The Parliament, dominated by the president’s party, • Very high public debt in 2018. • Governance problems and high level In response to the decrease in budgetary revenues The New Azerbaijan Party (YAP), plays a secondary and which will be about 130% of GDP in 2018. of corruption derived from hydrocarbons (50% of the total), the role with regard to the executive. Despite low State has had to resort to the sovereign wealth fund growth and widening inequalities caused by Public finances in a critical position Persistent socio-political tensions and reduce its spending, particularly in investment, decreased oil resources, social and political stability With oil revenues, representing almost 80% in a changing regional environment in order to limit the deterioration of the government should continue. Political opposition is weak, and of state income, the economic situation is The tensions, which pit the Shiite population balance. Given the unlikely rebound in oil revenues, the authorities do not hesitate to use repression. weakening Bahrain’s public accounts, which against the governing Sunni elite, were it will be forced to rely on improved tax collection Despite some progress, the country’s governance unlike the other Gulf countries, have shown sharpened following the suspension of two and a reduced non-oil deficit (27% of non-oil (World Bank ranking) is still not as good as in a deficit since 2009. In 2018, the deficit will opposition societies, Al-Wefaq and then Wa’ad. GDP) to regain room for manoeuvre. Despite this the other two Caucasian States, but it is better remain substantial despite efforts at budget Against a background of allegations of Iranian restrictive policy, the State has been unable to than in most countries of Central Asia. A decline discipline. The State has begun a programme support for the Shiite majority, executions avoid increasing its debt burden. As a result of falling in freedoms can even be seen, which does not of privatising some public services (water and resumed in 2017 for the first time since 2010. oil prices and the sharp depreciation of the manat, facilitate relations with the EU. However, despite electricity) and of selling its shares in some large The lack of a strong organised opposition means it has had to support public enterprises, particularly shortcomings in handling insolvency and cross- corporations. In 2018, it will raise taxes and duties that the King can be expected to win the election the country’s leading bank: the International Bank border trade, the country ranks 65th out of 190 on for public service users. Despite cuts, subsidies of representatives for the lower chamber of Azerbaijan (IBA). The State has offloaded its the ease of doing business index. will continue to represent 20% of the budget. scheduled for November 2018. Weak public non-performing assets (USD 5 billion) by entrusting The unstable socio-political context limits resources and austerity measures raise fears of them to a public entity created for this circumstance Finally, the risk of a surged in the armed options for a more structural fiscal adjustment confrontation with Armenia regarding Nagorno- political protests on top of the social protests. with its guarantee, before taking over its external like that observed in other GCC countries. This situation adversely impacts the business debt (USD 2.45 billion after restructuring) on which Karabakh and other occupied Azerbaijani territories The government is attempting to get foreign by Armenia is limited by the strong joint influence climate, considered fairly favourable hitherto, it defaulted. Despite the surge in its indebtedness, residents to bear the brunt of the austerity because of the drive to improve local skills levels, the State continues to have a largely creditor exerted on the region by Russia, Turkey, and Iran. measures. Civil service wages, a large proportion The situation in Nakhchivan, an Azerbaijani exclave stimulate the private sector, and attract more position thanks to assets held by the SOFAZ of public spending, are, therefore, unlikely to be foreign investment. sovereign wealth fund (USD 35 billion in June between Armenia and Iran, is calm. cut significantly and investment in the building of 2017, or 83% of GDP). Debt is likely to increase social housing will be maintained. further, because the State wishes to develop the

44 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 45 BANGLADESH BELARUS

COFACE ASSESSMENTS COFACE ASSESSMENTS C C COUNTRY RISK COUNTRY RISK C C BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 6.6 7.1 7.2 6.4 GDP growth (%) -3.8 -2.6 1.5 2.0 Exports of goods, as a % of total 161.5 Exports of goods, as a % of total 9.5 Inflation (yearly average, %) 6.4 5.6 5.7 5.7 POPULATION Inflation (yearly average, %) 13.6 11.8 9.0 7.0 POPULATION Euro Area (millions of persons - 2016) Russia (millions of persons - 2016) 33% Budget balance* (% GDP) -3.9 -3.4 -4.4 -4.9 47% Budget balance (% GDP) 1.9 -1.9 -1.8 -1.5 1,414 4,989 United States Current account balance (% GDP) 1.5 0.6 -0.7 -1.2 Euro Area Current account balance (% GDP) -3.4 -3.6 -3.2 -3.6 13% GDP PER CAPITA 15% GDP PER CAPITA Public debt (% GDP) 33.9 33.0 33.7 34.7 (US dollars - 2016) Public debt* (% GDP) 53.7 52.5 56.0 57.0 (US dollars - 2016) United Kingdom Ukraine 9% * including grants Fiscal year runs from July to June (f): forecast 12% *Including guarantee of debts of public companies (f): forecast Canada United Kingdom 3% RISK ASSESSMENT 5% RISK ASSESSMENT China Poland 2% Growth momentum is expected to remain ongoing investments in infrastructure – such as 3% Growth remains weak External accounts influenced by Russia firm despite a slight slowdown in 2018 the Rooppur nuclear plant and the Padma railway Growth is expected to remain modest in 2018. After Belarus’s refusal to recognise the Imports of goods, as a % of total Activity remained steady in 2017, buoyed by project. Imports of goods, as a % of total Despite the persistence of a restrictive fiscal annexation of Crimea and accept a Russian China higher public and private investment, while The slight downturn in activity is likely to limit the Russia policy, including public tariff increases and aid military base, Russia used the pretext of the 24% consumption was hit by a fall in remittances increase in government income expected by the 55% reductions, household consumption (55% of GDP) establishment of the Eurasian Economic Union India from expatriate workers. On the supply side, authorities, who are expecting higher revenues Euro Area is expected to improve. It would benefit, unless in 2015 to raise gas prices, and then reduce its 13% and despite reduced activity in the textile sector, from mandatory deductions. Income from both 13% the local rouble depreciates significantly, from oil deliveries. An agreement was finally reached Euro Area industry was still the main driver of activity VAT, introduced in 2017, and import taxes will China better control of inflationary pressures related to in early 2017, putting an end to the costly fall- 5% with growth below 9% - lower than the rate of benefit from strong consumption. The public 8% the establishment of monetary objectives by the out for Belarus’s economy. Russia granted an Singapore 2016. Agriculture, which benefited from higher debt burden will remain moderate. The current Poland central bank. In addition, the minimum wage and increase in oil deliveries authorised for re-export, 5% 4% agricultural commodity prices and an increase account balance will continue to deteriorate but remuneration overall could grow more quickly. a refinancing of gas arrears for USD 700 million, Japan the deficit will remain low. Export growth is not Ukraine Exports (63% of GDP) should benefit from the permitted the release of USD 600 million by the 4% in farmed land, grew by over 4%. Activity is 4% expected to dip slightly in 2018, but should expected to offset the rise in imports, resulting in recovery in Russia (by far the main trading Eurasian Fund for Stabilization and Development become more robust. a widening trade balance. This is because, despite partner), other CIS countries, and Ukraine, as (EFSD), and promised a loan of USD 1 billion and expected oil price stability in 2018, the import well as the eurozone. The increase in Russian oil an additional USD 600 million from the EFSD for + STRENGTHS Household demand is expected to increase, + STRENGTHS bill is likely to rise significantly due to increased deliveries, a large share of which is re-exported 2018. The country was then able to issue euro despite higher inflation and lower agricultural • Competitive clothing sector, thanks imports of capital goods and foodstuffs. Exports • Strategic location between Russia and after refining, will contribute greatly as the main bonds worth USD 1.4 billion, allowing reserves to to relatively cheap labour incomes. These will be offset by more stable European Union and well-developed will remain vigorous, bolstered by dynamism in export (30%). The manufacturing industry (25% be replenished and foreign debt to be serviced remittances from expatriate workers, who will transport system • Substantial remittances from expatriate the ready-to-wear sector. However, the sector of GDP), particularly with chemicals (potash (75% of GDP, 30% for solely its public share in workers, mainly living in the Gulf States benefit from recovery in the Gulf Cooperation • Relatively well-trained and skilled labour could be hit by stronger protectionist barriers on fertilisers, plastic), food processing (dairy and April 2017). This debt is the counterpart of a • International aid helping to cover financing Council (GCC) States, as well as from increased • Large industrial sector meat products), trucks, construction and farming recurring current deficit resulting from a trade needs the US market, the leading ready-to-wear trade credit. The sums coming from the Gulf States destination, and by consumer slowdown within • Little inequality and rare poverty machinery, as well as the steel industry, will also deficit not offset by the surplus of services linked • Moderate level of national debt represented about 57% of total transfers the UK market. At the same time, competition benefit, just like agriculture (8% of GDP with to the transit activity, as well as the modesty of • Favourable demographics: 45% of in 2017. Public investment will also boost from other low-cost production sites is rising. livestock and cereals, which had a good harvest foreign direct investments, mainly Russian. Bangladeshis are less than 15 years old growth, while private investment (especially - WEAKNESSES in 2017). Conversely, fiscal policy should continue foreign investment) will continue to be hit by The flow of remittances from expatriate workers to weigh on the investment of numerous state- should stabilise after contracting in 2017 (down • High energy, economic and financial A president playing the confrontation an unconducive business climate and a tense dependence on Russia owned companies as well as on building and between Russia and the West - WEAKNESSES political climate. from 8.5% to 6% of GDP) due to the downturn in public works. construction activity in the GCC countries, the • Sensitivity to prices of oil and its President Alexandr Lukashenko, in power since • Economy vulnerable to changes in The National Development Plan (NDP) for the leading employer of the country’s diaspora. The derivatives 1994, was re-elected for the fifth time in 2015. global competition in the textile sector; 2018 tax year should effectively lead to the • Omnipresent control by State over A massive, inefficient public sector Political opposition is anaemic. On the other to developments in the GCC States foreign exchange reserves, although slightly lower, implementation of almost 90 new projects in the will remain at levels deemed satisfactory (almost the economy (56% of added value, Public debt has increased steadily, accounting hand, the social context, calm up to now, has • Very low per capita income 70% of GDP) transport, water supply, and education sectors, seven months of imports), thus substantially for more than half of GDP. 89% of the total is in grown more tense since the economic crisis of • Recurring and growing political and social as well as several projects that are currently being • Weak governance (high level of corruption, foreign currencies. The guarantees provided to 2015, brought about by the quarrel with Russia tensions improving the country’s ability to resist sudden legal system provides little protection) finalised. The agricultural sector, which employs half capital flight. The banking system will remain public companies (source of one third of GDP) and falling oil prices. Redistribution and increases • Business climate shortcomings, especially the workforce, is likely to stall due to an expected • Shrinking working population and public banks (66% of banking assets) by in income were curbed, while unemployment regarding infrastructure weakened by high ratios of non-performing loans fall in rice production during 2018. The pace of and the need to recapitalise the publicly-owned • Geographic enclavement (isolation) the central government or its local levels alone grew. The reconciliation with Russia, satisfied to • Recurring natural disasters (cyclones, demand on the domestic market will continue between NATO and Russia represent 10% of GDP, reflecting the confusion see Belarus maintain a certain distance with the severe floods) resulting in significant banks (30% of the banking sector). damage; loss of harvests to sustain both the local industrial and services between the State and public companies. The West, allows the economic situation to recover commercial public sector must make do with a to a certain extent, while reducing the social cost networks. This will also lead to a significant rise in The political situation has stabilised, imports, reducing trade’s contribution to growth. lack of efficiency and instructions from the State of reforms. However, the improvement remains but the country remains vulnerable ahead that are far from always being relevant. Cleaning fragile. The sharing with Russia of revenues Inflation is set to increase, thanks to rising prices of the parliamentary elections in 2019 for agricultural products, but will remain close to the up the public sector will be laborious because of from exports of oil products processed from oil 6% target fixed by the central bank, who will stick Despite a stable political system, Bangladesh budgetary constraints, especially since the State sold below market price is regularly the subject to an accommodative monetary policy that will help is still vulnerable to spikes in tension between does not seem to have given up on influencing it. of disputes, while the deterioration of relations support the lively pace of activity and help control the Awami League, the ruling conservative Privatisation and reorganisation projects, between Russia and the West may complicate the taka’s exchange rate against the US dollar. Muslim party, and the Bangladesh Nationalist potentially costly in terms of employment and Belarus’s balancing. China’s increasing use of the Party (BNP). Following the victory of the Awami popularity, have been set aside, postponing the country as a production and export base, as part League in the 2014 parliamentary elections, conclusion of a financial programme with the IMF. of its “One Belt One Road” initiative, is a way to A widening public deficit, but sound the country experienced waves of violent This attitude is facilitated by the limited recovery diversify the partners. external accounts protests and major blockades. The situation has of growth and its cooperation with Russia, which The public deficit is expected to fall slightly, but since stabilised, but there are fears of renewed has allowed financial resources to be obtained. will remain above the 3% observed in 2014. The tensions in the run-up to the parliamentary 2018 budget foresees a significant rise in public elections scheduled for early 2019. Although it spending, and especially investment spending, boycotted the 2014 parliamentary elections, the which is set to rise by 1.3 GDP points. Under the BNP is expected to mobilise massively in 2018 so National Development Plan, expenditure will as not to be marginalised politically. Finally, the be allocated to strengthening trade policies, to country is set to suffer from a particularly difficult recapitalising the publicly-owned banks, and to business climate.

46 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 47 BELGIUM BELGIUM

COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN BELGIUM Payment Summon on the merits Insolvency proceedings A2 Summon by bailiff, court date for the introduction COUNTRY RISK Bank transfers (SEPA & SWIFT) and electronic Bankruptcy proceedings payments are the most commonly used methods of the case. If discussions do not take place, Debtors can file for bankruptcy when they have of payment for businesses. judgement will follow within four to six weeks. ceased making payments for some time, or A1 If there are discussions pending, parties need to BUSINESS CLIMATE Cheques are rarely used and only in certain when the creditor’s confidence has been lost. If put their intentions in written conclusions. After bankruptcy is granted, creditors must register sectors (such as transport and in the wholesale judgement, there is a possibility to appeal – if no of fruit and vegetables). As cheques no longer their claims within the time prescribed in the appeal is filed, the execution will follow through court’s insolvency declaration. Failure to do so on benefit from a guarantee from the issuing bank, the bailiff. TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) the cheque issuer’s account needs to contain the part of a creditor will result in the cancellation GDP growth (%) 1.5 1.2 1.7 1.8 11.3 sufficient funds in order to be for the cheque to be Attachment procedure of their priority rights. The Court then appoints a Exports of goods, as a % of total This judicial proceeding is conducted for the trustee, or official receiver, to verify the claims. Inflation (yearly average, %) 0.6 1.8 2.2 1.4 POPULATION cashed. Issuing a cheque with insufficient funds is Germany (millions of persons - 2016) a criminal offence. benefit of only one party (ex parte). There are The retention of title clause can be cited by the 17% Budget balance (% GDP) -2.5 -3.0 -1.5 -1.4 three essential conditions to proceed with an creditor, in order to claim his property. 41,248 France Current account balance (% GDP) 0.4 -0.4 -0.4 -0.1 Bills of exchange are no longer used for payment attachment: 15% GDP PER CAPITA in Belgium, except in certain sectors and in Since 2017, submissions of claims where Public debt (% GDP) 105.8 105.7 103.8 102.5 (US dollars - 2016) 1. Urgency of the measure bankruptcy procedures are involved must be Netherlands international transactions. 11% (f): forecast 2. Prior authorisation of the judge is required to made electronically, via the www.regsol.be Payment defaults are no longer recorded in the website. This site is also a central register which United Kingdom lay a conservatory attachment Moniteur Belge (MB, Belgian Official Journal), but records all bankruptcies over the last 30 years. 9% RISK ASSESSMENT they can be consulted on the National Chamber 3. The debt must be certain, collectable and liquid United States Judicial restructuring process (reorganisation of Bailiffs’ website, where data is available to A debtor may request the cancellation of the 6% Consolidation of growth in 2018 which would eventually allow it to bring the judiciaire) banks and professional organisations attachment if it has been unjustly imposed. public debt closer to 100% of the GDP threshold. The judicial restructuring process is designed to Growth accelerated in 2017. The components of However once an attachment has been imposed, The weight of the latter remains substantial and reorganise a company’s debts with its creditors. Imports of goods, as a % of total demand, with the exception of the investment it remains valid for a period of three years. translates into an interest charge equivalent Debt collection It can be granted by the court upon request Netherlands in housing, generally posted more dynamic Subsequently, a conservatory attachment may 16% growth than in 2016. Net exports, however, to more than 2% of the GDP. However, debt Amicable phase of any debtor facing financial difficulties that service would continue to contract as maturing There are no special provisions for out-of-court be transformed into an execution order. Germany contributed only slightly to this recovery. While threaten its continued business in the short or 14% exports, which account for 85% of the GDP, government bonds will be refinanced at more debt recoveries between businesses. Creditors medium term. The debtor makes a reasoned France benefited from strong growth in the Eurozone, favourable rates for the government. The resale should attempt to gain payment from debtors by Enforcement of a legal decision application to the Registry of the Commercial 9% imports rose, driven by rising energy costs of part of the state’s stake in BNP Paribas will not, sending written reminders. Before commencing A judgment becomes enforceable once all appeal Court in order to be granted an extended period United States and domestic demand. The recovery in growth however, compensate for the progress of loans legal action against a debtor company, it is venues have been exhausted. If the debtor to pay the debt. This extended period is normally 8% should be consolidated in 2018. Household granted under the social housing policy. often worthwhile asking a lawyer to check the refuses to execute payment, a bailiff can attach set at six months, a period during which the United Kingdom consumption will remain the main driving force. The current account would remain in equilibrium. database of seizures. the debtor’s assets or obtain payment through debtor must propose a reorganisation plan to all 5% Purchasing power should benefit from an The trade surplus would fall slightly under Legal proceedings a third party (Direct Action). Foreign awards of its creditors. increase in disposable income as a result of tax the pressure of imports. Services will remain Judgments are normally delivered within 30 can be recognised and enforced in Belgium, Outstanding creditors (those whose claims arose + STRENGTHS cuts granted to households as part of the tax in surplus through IT, telecommunications, days after closure of the hearings. A judgment provided that various criteria are met. The before the commencement of the extended shift and lower inflation. The good performance concession fees, transportation and trading. is rendered by default in cases where debtors outcome will vary depending on whether the period) cannot begin any execution procedure for • Optimal location between UK, Germany of the labour market would continue to favour are not present, or represented, during the award is rendered in an EU country (in which case the sale of real or personal property of the debtor, and France employment. Favourable financing conditions The coalition remains in power proceedings. it will benefit from particularly advantageous but can request enforcement of their retention • Presence of European institutions, and declining employer contributions would enforcement conditions), or a non-EU country of title clause. Nevertheless, the extended The federal government of Charles Michel is a Fast track proceedings international organisations and global support the rise in investment, while the rate (for which normal exequatur procedures period does not prevent the debtor from making groups centre-right coalition resulting from the federal This procedure is rarely used in B2B; and when of utilization of production capacity will remain are applied). voluntary payments to any the outstanding elections of the 25th May 2014 and dominated by the debt is disputed, it cannot be implemented. • Ports of Antwerp (second largest in Europe) above its long-term level. The wage moderation creditors. In addition, the extended period does and Zeebrugge, canals, motorways the Flemish parties. It includes Nieuw-Vlaamse A 2016 law implemented a new set of procedural measures (index jump calculated on the basis rules, creating an out-of-court administrative not benefit co-debtors and guarantors, who are • Well-trained workforce through of the health index) have also helped to improve Alliantie (N-VA), Christen-Democratisch en professional education, multilingualism procedure for non-disputed debts. When an still required to meet their commitments. the profitability of Belgian companies, but the Vlaams (CD&V) and Open Vlaamse Liberalen in • Net external creditor position Democraten (Open VLD). The three Flemish parties order of payment has been issued, the debtor latter should only progress slightly following the has a month to pay the amount. If the debtor • Excellent business climate of the coalition a few months earlier formed the restoration of the index. Public investment is also refuses, the creditor can request a bailiff to issue expected to increase more rapidly than in 2017, same coalition within the Flemish government. As for the Reformist Movement, it is the only a writ of execution. Furthermore, under the driven by Flanders investment in the Oosterweel new rules, lodging an appeal against a judgment - WEAKNESSES link (Antwerp ring road). French-speaking party of the federal majority. The socialist party relegated to the opposition will no longer suspend the enforceability of this • Political and financial tensions between Exports should remain strong thanks to the after 26 years of uninterrupted presence in the judgment. Consequently, even if the debtor Flanders and Wallonia expected growth of Belgium’s three main trading Belgian federal government, remains the top starts appeal proceedings, the creditor will be • Complex institutional structure and partners, namely Germany, France and the political force among Francophones. However, it able to pursue the recovery of the debt. multiple administrative levels Netherlands. However, they could suffer from seems to be weakened. The party has in fact been Retention of title clause • Strong dependence on the Western the decline in their competitiveness because of shaken by the proliferation of political scandals in This is a contractual provision stipulating that European situation (goods and services the rising cost of labour. The contribution of net 2017. At the beginning of this year, Wallonia was exports = 82% of the GDP) the seller retains title of goods until receipt of full exports would remain low as domestic demand rocked by the Publifin affair, a public company payment from the buyer. Unpaid creditors can • Exports concentrated on intermediate will continue to pull imports. NUMBER OF CORPORATE FAILURES products and the European Union that shares the management of local authorities make claims on goods in the debtor’s possession. (electricity, etc.) based in Liège, which has paid It therefore follows that the retention of title Total Estimate (e) / Forecast (f) Yearly growth • High level of structural unemployment Slower decline in the structural public local elected representatives for services that clause is enforceable in all situations where 12,000 11,740 15% • Heavy public debt deficit in 2018 have not been rendered. In May 2017, the Samu creditors bear losses arising from insolvencies • Tight housing market Sociale case triggered a controversy related to 10,588 10.9% 10,738 The fiscal deficit contracted in 2017 largely due (see Bankruptcy/Judicial Reorganisation below), 10,222 10,145 9,763 9,985 • Saturation of transport infrastructures to higher budget revenues that benefited from the compensation of its directors and resulted whatever the nature of the underlying contract. 10,000 9,571 10% 6.8% 9,161 the economic recovery and low sovereign rates. in the resignation of Yvan Mayeur, mayor of When goods sold under retention of title are Brussels. These revelations should somewhat converted into a claim (after a sale), the seller- However, it should stabilize in 2018 despite a 8,000 9.0% 5% more expansionary fiscal policy. In fact, the change the political landscape in Belgium, while owner’s rights referring to this claim (the selling government plans to encourage activity by 2018 should experience both a regional and price) are known as real subrogation. 3.6% lowering taxes for households and businesses. municipal election. The results of these two Ordinary proceedings before the commercial 6,000 1.6% 1.6% 0% Current spending is also expected to decline, deadlines should also give an overview of the court electoral dynamics that should operate during but total spending would decrease to a lesser All disputes between companies can be tried 4,000 -5% extent as a result of higher investment spending. the legislative elections of 2019. by the Commercial Court in Belgium. In cases of The 2018 budget should result in a structural cross-border claims using European legislation, -6.2% 2,000 -10% improvement of the budget balance of only a European execution for payment proceedings -8.5% -9.1% 0.3% of the GDP at the risk of not meeting the can be enabled. Claimants also have recourse to requirements of the European Commission. European Small claims proceedings. 0 -15% Belgium has committed to reducing the 2010 2011 2012 2013 2014 2015 2016 2017(e) 2018(f) structural deficit by 0.6% per year until 2019, Source: Statistics Belgium, Coface

48 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 49 BENIN BOLIVIA

COFACE ASSESSMENTS COFACE ASSESSMENTS B C COUNTRY RISK COUNTRY RISK C B BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 2.1 4.0 5.0 5.6 GDP growth (%) 4.8 4.3 4.2 4.0 Exports of goods, as a % of total 11.1 Exports of goods, as a % of total 10.9 Inflation (yearly average, %) 0.3 -0.8 0.5 2.0 POPULATION Inflation (yearly average, %) 4.0 3.6 3.2 5.1 POPULATION India (millions of persons - 2016) Brazil (millions of persons - 2016) 14% Budget balance (% GDP) -8.0 -6.2 -7.9 -6.0 19% Budget balance (% GDP) -6.9 -6.6 -6.6 -6.3 771 3,125 Malaysia Current account balance (% GDP) -7.6 -7.3 -7.2 -6.9 United States Current account balance (% GDP) -5.7 -5.7 -4.7 -4.7 12% GDP PER CAPITA 14% GDP PER CAPITA Public debt (% GDP) 42.4 49.5 54.3 54.4 (US dollars - 2016) Public debt (% GDP) 38.7 43.4 45.7 47.4 (US dollars - 2016) Bangladesh Argentina 10% (f): forecast 11% (f): forecast Belarus Euro Area 7% RISK ASSESSMENT 9% RISK ASSESSMENT China Colombia 6% Continuation of favourable growth path should lead to a higher surplus in the balance of 9% Growth dependent on public sector (USD 3.5 billion in loans for projects in 2016). The Growth is expected to continue on an upward transfers. The current account deficit is mainly In 2018, growth will be sustained by dynamic public debt will, therefore, increase but remain Imports of goods, as a % of total trajectory in 2018, thanks to the moderate financed by concessional loans and by flows Imports of goods, as a % of total internal demand, especially thanks to continued sustainable (external debt amounting to 37% of of FDIs associated with the activity of public- GDP in 2017). Euro Area economic recovery in Nigeria and improved China high levels of public spending in an economy 25% agricultural performance. Cotton production private partnerships for infrastructure services. 20% dominated by the public sector. Public From the perspective of the current account, India especially, in the absence of a major climate Brazil investment should continue to grow under the deficit is expected to remain large, burdened 15% shock, is likely to rise, as is the cotton price. A commitment to reform by a president 18% an ambitious National Economic and Social by a growing trade deficit. The rise in imports Thailand Growth will also be maintained by public and facing popular discontent Argentina Development Plan (Plan Nacional de Desarrollo will be greater than that of exports, given the 12% private investment, especially in connection with Businessman Patrice Talon won the presidential 11% Económico y Social, USD 48.6 billion between significant need for intermediate products for China the government’s action plan: “Benin Revealed”, elections in March 2016. He has set out an United States 2016 and 2020) first implemented in 2016 and investment projects and competition from North 8% 10% costing USD 15 billion over five years (2016-2021), ambitious programme of reforms, aimed, in built on an anti-cyclical stimulus objective in American liquid gas. This deficit will be partially Togo i.e. 170% of GDP and focusing on infrastructure, Euro Area the face of falling commodity prices. Focused on offset by remittances from expatriate workers 7% particular, at restoring investor confidence; 8% energy, tourism and agriculture. The recently especially via prioritising an improvement in a the development of infrastructure and state- (3.4% of GDP in 2016). Weak FDIs (0.5% of GDP signed public-private partnership law should business climate that is marked by corruption, owned enterprises in the energy sector, this in 2016) will force the government to finance + STRENGTHS stimulate participation by the private sector. patronage, red tape and a weak regulatory + STRENGTHS plan targets specifically the gas sector (29% of it by drawing on declining foreign exchange With the aim of making growth more inclusive framework. the country’s exports in 2016) and the refining reserves (14.2 months of imports in 2015, down • One of the most stable democracies and eradicating poverty, the government will • Significant mineral (gas, oil, zinc, silver, gold, industry. Nevertheless, the results were below to 11.6 months in 2016). in Africa continue programmes to reduce the isolation of Despite some progress on business start-ups lithium, tin, manganese) and agricultural the objectives in 2017, due to a lack of skilled • Significant financial support from donors and insolvency resolution – the World Bank’s (quinoa) resources the most remote regions, notably thanks to the th personnel, problems of corruption and priority Heightened political tensions (ODA, HIPC, MDRI) Doing Business report ranks the country 155 • World’s 15th largest exporter of natural gas completion of a railway line connecting Cotonou rd given to the political agenda rather than the • Strategic location (access to the sea for to Niamey, which will also boost activity at the out of 190 countries (153 in 2016) – progress • Member of the Andean Community and effectiveness of the projects. The level of private In power since 2005, President Evo Morales, landlocked countries) Port of Cotonou. Private consumption trends will is slow, and his popularity amongst the public is Association Agreement with Mercosur investment is expected to remain low, because from the MAS Party (Movimiento al Socialismo), remain dynamic overall, while inflation in 2018 crumbling in a context of rising popular discontent • Tourism potential of a business climate being more than inadequate is exacerbating tension by trying to stand for a is expected to remain below the 3% threshold linked to the lack of social progress. Moreover, (152nd in the Doing Business 2018 rankings, with fourth term in the upcoming 2019 presidential - WEAKNESSES fixed by WAEMU, in a context of gradually rising the rejection of the single‑term presidency plan, the risk of nationalisation and discrimination elections. Written into the constitution, the two- domestic demand and higher prices for various although supported by President Talon, could - WEAKNESSES against private investors in favour of state- term limit was scrapped by the Constitutional • High levels of poverty result in him standing again in the next elections Court in November 2017 on grounds that it • Narrow and volatile export base import products (fuel, foodstuffs). • Poorly diversified economy and owned enterprises) and dampening confidence. in 2021 despite having said he would abstain. The manufacturing and mining sectors are likely didn’t respect the President’s rights. This (dependent on fluctuations in cotton price) Nonetheless, the new coalition formed in May dependent on hydrocarbons decision, taken following an appeal by MAS • Erratic electricity supply Gradual adjustment to the current account • Poor development of private sector and to continue to be characterized by the lack of 2017 and composed of 59 members of parliament investment, worn down by structural problems, representatives, was seen as having been forced • Governance shortcomings and fiscal deficits brought together to form the BMP (majority bloc heavy reliance on public sector through by the President, after his defeat in • Landlocked country inefficiency and corruption. Agriculture • Activity and tax revenues impacted While expansionary policies have put a of parties in the National Assembly) supports the (employing 32% of the workforce) should be the February 2016 referendum (51.3% against by Nigeria’s economic policy decisions • Size of the informal sector considerable strain on deficit and debt in recent president, which could potentially speed up the robust provided good weather conditions prevail. unlimited re-election). The appointment of • Terrorist threat (Boko Haram) from years, the government is expected to adopt a implementation of the reforms. • Insecurity, drug trafficking and corruption Private consumption is expected to grow, in judges to the Supreme and Constitutional Courts neighbouring Nigeria more restrictive approach in 2018 through a • Risk of social unrest a context of controlled inflation thanks to the (December 2017), marked by 65% of blank or certain number of reforms aimed at rationalising boliviano’s dollar peg. Nevertheless, the non- spoiled votes, is a sign of this growing defiance spending and modernising the fiscal and customs payment of end-of-year civil service bonuses with regard to the government and the judiciary. regimes. Moreover, the IMF’s approval in April (bonuses subject to growth above 4.5%) could The latter is criticised for its links to the executive. 2017 of a three-year arrangement under the limit this rise. Finally, net exports will contribute However, in response to this lack of satisfaction Extended Credit Facility for an amount of negatively to growth. Higher gas exports, linked with the ruling party, the opposition is far from USD 151 million is expected to facilitate the to the recovery observed in Brazil and Argentina providing a convincing alternative, with support reform programme and thus restore investor (the two main destinations for Bolivian gas) are for opposition candidates even lower than for confidence. unlikely to offset the rise in imports linked to President Morales. Meanwhile, the government The current account deficit is expected to persist, investment projects. faces growing numbers of corruption cases but will reduce in 2018 due to an improved trade involving state-owned enterprises and has been forced to intervene (arrest in June 2017 of top balance. Exports (44% of which is cotton) are Persistent twin deficits expected to increase significantly thanks to executives in the national gas company, YPFB, rising cotton production, accompanied by more In 2018, there will still be a significant budget for peddling influence when awarding contracts). dynamic external – particularly regional – deficit despite the increase in energy royalties This further undermines an already mediocre demand, thanks to the Common External associated with rising hydrocarbon prices. The business climate, given the relative legal Tariff. Imports are likely to remain relatively accommodative fiscal policy, under the five- insecurity (expropriations and nationalisations as dynamic as before due to the considerable year Investment Plan, as well as the considerable are still possible) and the ban on any recourse volume of imports of capital goods and domestic share of spending allocated to civil service wages to international arbitration. The government’s demand. Informal trade continues to occupy and social programmes (28% and 19% of public failure to meet the demands of diverse social a predominate position, with transit trade and spending respectively in 2016) limits deficit groups is a potential source of popular protest. re-export trade to Nigeria representing 20% reduction. To finance its budget, Bolivia relies of GDP. Remittances from expatriate workers on external debt (bond issue for USD 1 billion in (of which almost half come from Nigeria) and aid March 2017) and on the financial support of its strategic partners, including China in particular

50 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 51 BOSNIA AND HERZEGOVINA BOTSWANA

COFACE ASSESSMENTS COFACE ASSESSMENTS C A4 COUNTRY RISK COUNTRY RISK B A4 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 3.1 3.1 2.9 3.2 GDP growth (%) -1.7 4.3 3.3 4.5 Exports of goods, as a % of total 3.9 Exports of goods, as a % of total 2.2 Inflation (yearly average, %) -1.0 -1.1 1.4 2.0 POPULATION Inflation (yearly average, %) 3.1 2.8 3.4 3.9 POPULATION Euro Area (millions of persons - 2016) Euro Area (millions of persons - 2016) 53% Budget balance (% GDP) 0.7 1.0 -0.6 -1.0 20% Budget balance (% GDP)* -4.7 -0.7 -3.6 -4.1 4,298 7,227 Croatia Current account balance (% GDP) -5.7 -5.1 -4.5 -5.0 India Current account balance (% GDP) 8.3 11.7 4.5 4.1 10% GDP PER CAPITA 15% GDP PER CAPITA Public debt (% GDP) 42.0 41.0 40.0 40.0 (US dollars - 2016) Public debt (% GDP) 16.4 15.5 15.5 15.0 (US dollars - 2016) Turkey South Africa 4% (f): forecast 14% *last fiscal year from April 2018 to March 2019 (f): forecast Hungary Namibia 2% RISK ASSESSMENT 12% RISK ASSESSMENT Switzerland United Arab Emirates 2% Activity sustained by consumption and while the servicing of the debt already accounts for 10% Consolidation of growth thanks diamond carats should support income from the exports 5% of GDP, and the future cost of the pension and to diamonds export and re-export of diamonds. Close to non- Imports of goods, as a % of total Despite a low-quality institutional and political healthcare systems suggest a difficult future. Imports of goods, as a % of total Constrained in 2017 by the cessation of activity existent after the closure of the BCL mine in the first half of 2017, exports of copper and nickel, Euro Area environment, economic activity is expected to The current account deficit should remain high in South Africa at both the copper and nickel mine (BCL) and the 41% continue to grow moderately in 2018. Household 2018. The trade deficit should still represent about 64% Lerala diamond mine, growth should resume in bolstered by better prices of these base metals, should help maintain the trade surplus, while the Croatia consumption should be further improved by a quarter of GDP. Immigrant workers’ remittances Namibia 2018. The acceleration of the pace of growth will 10% rising income, which will benefit from the vitality and the surplus of services related to tourism and 10% be supported by the extractive industries sector services balance should benefit from a recovery China of immigrant workers’ remittances (9% of GDP) transport will partially offset the trade deficit, as Canada (20% of GDP). The demand for diamonds, which of tourism. 7% and the tourism boom. Retail trade will benefit usual. FDI (3% of GDP), some financing from the 6% collapsed in 2015, should see a gradual recovery Taking the external accounts situation into Russia from this favourable trend, unless the problem of EBRD, and the short-term indebtedness of the Euro Area and thus support Botswana’s exports, with the account, Botswana has comfortable foreign 4% Agrokor’s local distribution subsidiaries (Konzum private sector will make it possible to balance 5% latter also set to benefit from the first full year exchange reserves (more than ten months of Turkey and Mercator) is not resolved. Primary sector and payments, while keeping foreign exchange reserves India of production at the Mowana copper mine, which imports of goods and services). The surplus 4% industry exports, particularly mineral extraction, at a comfortable level, equivalent to six months 3% reopened in mid-2017. reserves remaining after an assessment of the forestry, basic metallurgy, chemicals, shoes, and of imports. Despite the debt reduction of banks, Public investment, carried out under the Central Bank are transferred to the Pula Fund, + STRENGTHS machinery, will grow thanks to the favourable foreign debt represents 76% of GDP, and its private + STRENGTHS economic stimulus package (adopted in 2015), a sovereign fund created in 1994, which makes economic situation of the main trading partners. share alone accounts for 46%. and the eleventh national development plan it possible to finance a large part of the budget • IMF financial aid The recent update of the commercial component • Abundant natural resources will also support activity, particularly in the deficit. In addition, recourse to domestic and (especially diamonds) • Substantial immigrant workers’ remittances of the Stabilisation and Association Agreement A political environment marked by ethnic services sector. In particular, tourism, financial external borrowing will remain limited: the debt • Stabilisation and association agreement with the EU will contribute to this development. divisions and three coexisting governments • Sustainable level of public and external debt services, education, and health are targeted to should therefore remain low. with the EU However, given that imports will increase with • Substantial currency reserves promote economic diversification, which has consumption at the same time, the contribution of Following the 1995 Dayton Accords, Bosnia • Tourist and energy potential Herzegovina was divided into two distinct • Political stability and level of governance, long been promised but slow to materialize. Ian Khama hands over the reins trade to growth would be small. Public investment placing the country among the leading The construction sector should benefit from autonomous entities: the Federation of Bosnia- countries in Sub-Saharan Africa and in In keeping with Botswana’s political tradition, will depend on the IMF’s release of additional investment in infrastructure. In the short term, funding as part of its expanded credit facility and, Herzegovina, predominately Bosniak (Muslim) the international rankings of the business Ian Khama, re-elected president for a second - WEAKNESSES and Croat, and the Serb Republic of Bosnia, to environment. however, the program is expected to provide only term in 2014, is expected to resign in March indirectly, funding from the EU. Their payment modest support for household consumption, • Institutional, regulatory, ethnic, and is conditional on the adoption of a number of which the Brčko district managed by the central • Member of SACU (Southern Africa Custom 2018, and to hand over the reins to his Vice Union) due to persistently high rates of poverty and economic fragmentation reforms, particularly with regard to indirect taxation State is added. The central State is headed by a President, Mokgweetsi Masisi. After winning • Weak public investment (transport, collegial Presidency that is representative of the unemployment. Industries will continue to suffer the presidential race of the Democratic Party of and bank deposit guarantees. This money would from unreliable water and electricity supplies, education, healthcare) boost construction through the continuation of three “constitutive peoples” with a presidency Botswana (BDP) in July 2017, he will assume the - WEAKNESSES as well as a lack of skilled labour. Despite a slight • Limited diversity and low added value the construction of the “Corridor Vc” motorway, alternating every eight months. The Constitution office of President until the general elections of exports grants only very limited powers to the central rise, inflation should remain contained, reflecting of 2019, when he will likely represent his party. which is expected to cross the country between • Dependence on the diamond sector moderate domestic demand. • High unemployment (25%) and low the Croatian border to the north and the Adriatic State: responsibility for foreign and monetary (more than 80% of exports) In power since the independence of Botswana participation in working life (43%) policy, customs duties, VAT, transport and defence. (1966), support for the BDP seems to have Sea. Both domestic and foreign private investment • Insufficient infrastructure (production and • Inappropriate targeting of social protection will remain modest because of the persistence of Even these competences are difficult to manage, distribution of water and electricity) Public and external accounts burned eroded in recent years: despite obtaining because each ethnic component has a blocking by decreased SACU revenues two-thirds of the seats, the party achieved • Large size of the informal sector institutional weaknesses and a mediocre business • Inequality and high unemployment climate not offset by the low cost of labour. minority within the Central Parliament. In addition, The expansionary positioning of the 2018/2019 only 47% of the popular vote recorded in 2014 at both the central and entity levels, there is a great • Stagnation of poverty at a relatively – the weakest in its history, and for the first high level budget to support growth should continue deal of government instability due to the fact that to widen the deficit. Investment capital time below the symbolic 50% mark. Given the Suitable public accounts, but a high current the nationalist parties fluctuate within government insufficient progress in economic diversification account deficit expenditures, particularly in water and transport coalitions. At the central level, there is no longer infrastructure, are set to have a large impact that could reduce unemployment, poverty, A slight loosening of fiscal policy, coupled with the a majority, preventing the adoption of texts on the budget. Military and defence spending and inequality during Khama’s term, an erosion non-renewal of Russia’s repayment of Soviet debt influencing the resumption of multilateral financing – defined as one of the government’s priorities of support for the BDP could again be seen in in July 2017 for EUR 125 million, is expected to lead to and the candidature for the EU. It is likely that the for the fiscal year beginning on the st1 April 2018 – 2019. However, the divisions of the opposition the re-emergence of a slight public deficit in 2018. general elections of October 2018, both at the should also contribute to the widening of the coalition, the Collective for Democratic Change However, a small deficit and moderate growth will central level and at the level of the two entities, will deficit. In the run-up to the 2019 elections, (UDC), symbolized by the split of the Botswana stabilise the proportion of public debt, the foreign not improve the situation, with voters continuing to allowances and subsidies to public companies Movement for Democracy (BMD) and the share of which represents 29% of GDP, which was vote exclusively in favour of nationalist parties. The have also been revised upwards. Tax incentives formation of the Alliance of Progressives in obtained under favourable conditions from public political instabilities will remain, with the Bosniak for companies setting up in the Selebi Phikwe September 2017, could work in favour of the BDP. multilateral agencies and is denominated mainly in Muslim politicians attempting to increase the role region – the location of the BCL mine, and hit hard Regularly positioned among its sub-Saharan euros and the local currency, the mark, pegged to of the central government, whilst Croat politicians, by its closure – are notably planned. Progress African peers in international rankings, Botswana the euro. It is divided almost equally between the striving to establish their own autonomous entity, in domestic revenue mobilisation and a likely still has some progress to make to improve country’s Bosnian-Croat and Serbian constituent as well as the Serb politicians work to block the increase in mining revenues will only partially its business environment and support private entities, but, given the respective GDPs, the legislative process. Institutional complexity makes offset the decline in SACU customs revenue. sector development. Serbian public debt is more burdensome (60% of it difficult to correct inadequacies of justice, GDP). While the public accounts situation appears regulatory disparities, corruption, oppressiveness, The current account balance surplus is to be adequate, their management fragmented and poor administrative efficiency. expected to continue to decline in the wake of between the central State and the two constituent deterioration in the transfers balance. Transfers entities, the blocking of multilateral payments from SACU would be the main contributors to forcing the acquisition of debt locally at a high rate, this degradation. An increase in the price of

52 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 53 BRAZIL BRAZIL

COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN BRAZIL Payment be appealed at the state level. Legal costs vary from in order to allow him to claim his rights against the B state to state. debtor. This is the most direct and effective court COUNTRY RISK Bills of exchange (letra de câmbio) and, to a lesser extent, promissory notes (nota promissória) are The second type of jurisdiction involves the Federal vehicle to recover credits in Brazil. This lawsuit does the most common form of payment used in local Courts. There are five regional Federal Courts not require prior guarantees from foreign creditors A4 (as the bond in the monitory suit for example). BUSINESS CLIMATE commercial transactions. The validity of either (Tribunais Regionais Federais, TRF), each with instrument requires a certain degree of formalism its own geographic competence encompassing Moreover, Brazilian legislation renders some in their issuance. several States. documents enforceable. These are separated in two The use of cheques is relatively commonplace – For recourse on non-constitutional questions, TRF main categories: TRADE EXCHANGES Key economic indicators 2015 2016 2017(f) 2018(f) often post-dated in practice and thus transformed judgments can be appealed to the highest court of · Legal enforcement titles, including judgments GDP growth (%) -3.8 -3.6 0.7 2.3 Exports of goods, as a % of total 206.1 into credit payment instruments – and their law, the Superior Tribunal de Justiça (STJ) located in made by a local Court recognizing the existence Inflation (yearly average, %) 9.0 8.7 3.7 4.0 POPULATION issuance requires comparable formalism. Brasilia. of a contractual obligation, and court-approved China (millions of persons - 2016) 19% Budget balance (% GDP) -10.2 -9.0 -9.2 -7.6 Although the use of the above credit payment Brazilian law provides a wide range of legal conciliations and arbitral awards 8,727 Euro Area Current account balance (% GDP) -3.3 -1.3 -0.6 -1.6 instruments for international settlements is not measures to be used in defence of the rights of · Extra-legal enforcement titles, such as bills of 16% GDP PER CAPITA advisable, they nonetheless represent, an effective creditor against debtor, and provides also a large duplicata Public debt (% GDP) 65.5 69.9 74.4 74.8 (US dollars - 2016) exchange, invoices, promissory notes, United States means of pressure in case of default, constituting number of appeals to debtor. mercantil, cheques, official documents signed by (f): forecast 13% an extra-legal enforcement title that provides Monitory Action the debtor, private agreements signed by debtor, Argentina creditors with privileged access to enforcement The ação monitória is a special procedure that creditor and two witnesses (obligatory) – as an 7% RISK ASSESSMENT proceedings. can be filed by any creditor who holds either acknowledgement of debt, secured agreements, Japan a non-enforceable written proof, or any proof and so on 2% Activity is gradually recovering the Lower House and in the Senate – was delayed The duplicata mercantil, a specific payment that is considered as an extrajudicial instrument - It is obligatory to submit the original versions of by new political scandals that came into light and instrument, is a copy of the original invoice After two years of sharp recession, the economy recognized by the law as enforceable (even if it these documents – copies are not accepted by threatened President Temer’s government, who presented by the supplier to the customer within Imports of goods, as a % of total rebounded in 2017, with GDP growing by 0.6% year- 30 days for acceptance and signature. It can then does not comply with all the legal requirements). the court on-year during the first three quarters of the year. managed to weather two complaints imposed Euro Area circulate as an enforceable credit instrument. If the debtor’s obligation is deemed certain, liquid On average and within the main states, it takes 19% On the supply side, agriculture climbed by 14.5% by the Attorney General, but not without and eligible, the Municipal Courts usually render year-on-year, driven by the favourable weather consequences. The now-weakened government, Bank transfers, sometimes guaranteed by a a year for a judgement to be made following the United States payment orders within fifteen days. If the debtor 18% conditions that contributed to a record harvest. with less political support in Congress, is running standby letter of credit, are also commonly used initiation of legal proceedings. fails to comply within three days, the order China Industrial and services activities improved as well: out of time to pass a softer version of the social for payments in domestic and foreign transactions. 17% industry rose by 0.4% year-on-year in the third security reform, which nonetheless might be They offer relatively flexible settlement processing, becomes enforceable. In cases of appeal, the Insolvency proceedings unsuccessful due to the proximity of the legislative particularly via the SWIFT electronic network, to creditor has to commence formal ordinary legal Argentina quarter of 2017, while services grew by 1%. On the Out of Court restructuring 7% demand side, the rebound has been mainly driven elections in October 2018. which most major Brazilian banks are connected. action. The difference between this procedure and the Enforcement Proceeding is in the legal Debtor can negotiate a restructuring plan informally South Korea by household consumption. The improvement is For transfers of large sums, various highly 4% requirements and in the possibility of questioning with their creditors. The plan must represent a explained by more benign macro fundamentals, Presidential elections of October 2018 automated interbank transfer systems are the merit of the obligational relationship by the minimum of 60% of the total debt amount. This plan such as declining unemployment, low inflation will be closely watched available, e.g. since April 2002, the STR real time debtor over the course of the suit. must be approved by the court. level, and a strong easing monetary cycle since Interbank Fund Transfer System (Sistema de + STRENGTHS Former Vice President Michel Temer (centre-right Judicial Restructuring Procedure October 2016. On the other hand, investments Transferência de Reservas) managed by Banco The ação monitória is slower than a regular PMDB party) became President in August 2016, The objective of this procedure is to help companies • Varied and rich mineral resources and have weakened as a result of political turmoil: gross Central do Brasil or the RSFN / National Financial Enforcement Proceeding: if the debtor presents an after President Dilma Rousseff (leftist Labour Party) overcome financial difficulties and to preserve the agricultural harvests fixed investments shrunk by 3.6% in the first nine System Network (Rede do Sistema Financeiro objection in the court, the merits of the commercial was impeached by the Congress. The case was company, its employees and creditors’ interests, • Well diversified industry months of 2017 year-on-year. triggered by the accusation that her government Nacional) linking various financial operators in Brazil relation will be thoroughly discussed in the same with the goal of leaving it able to continue business • Improving institutional transparency was hiding the size of the public deficit (breaking in real time. fashion as a Standard Lawsuit. The estimated Activity is set to gain strength this year, driven by once the procedure is completed. following recent corruption scandals a stronger recovery of household consumption and the Fiscal Responsibility Law). Her dismissal, period of this lawsuit is on average two years. • Strong internal reserves position (import by exports. A repressed consumption, a stronger however, gradually became more likely with the Debt collection Ordinary proceedings are presided over by an The principal stages of this lawsuit are as follows: coverage of roughly 30 months) “Operation Car Wash” investigation approaching interrogating judge (inquisitorial procedure), and • Debtors make a restructure to the request to the job market and a faster pass-through from lower Amicable Phase the heart of her party. This investigation, initiated require a scrupulous examination of evidence court, or request the conversion of a liquidation policy rate to the final interest rates will contribute Creditors begin this phase by attempting to to this movement. In addition, foreign trade should in March 2014 and carried out by the Federal Police submitted by each party in conjunction with study request to the court from their creditor(s) - WEAKNESSES contact their debtors via telephone and email. If continue to benefit from a still solid global activity of Brazil, has revealed widespread corruption of any expert testimony. The creditor must serve • If the plan is accepted by the court, debtors unsuccessful, creditors must then make a final (particularly the recovery in Argentina). Despite the scandals within several of the country’s political the debtor with a registered Writ of Summons, typically have typically 60 days (though this period • Very sensitive fiscal position demand by a registered letter with recorded generally more positive perspective, investments parties, and impacted President Temer in May 2017. which the debtor must answer within fifteen days is not necessarily mandatory) to present a list with • Bottlenecks in infrastructure delivery, requesting that the debtor pay the are likely to remain undermined by upcoming The new turmoil was triggered by the content of of receipt. The initial proceedings encompass an all debts from creditors, and a payment plan • Low investment level outstanding principal increased by past-due presidential elections (October 2018). the plea bargain of the chairman of Brazil’s largest investigation phase and an examination phase. The • A judge schedules two creditors’ meetings, with • High cost of production (wages, energy, interest as stipulated in the transaction agreement. meat processing group. President Temer was able final step of the process is the main hearing, during the second only occurring if the first one does not logistics, credit) In the absence of an interest-rate clause, the civil to survive two charges brought against him by the which the respective parties are heard. After this, a take place. During these meetings, the proposed • Shortages of qualified labour; inadequate Comfortable trade surplus diverges from code stipulates use of the penalty interest rate Attorney General, thanks to a mobilization that judgement is made by the court. The tribunal may plan must be accepted by a majority of creditors education system a bleeding fiscal account imposed on tax payments, which is 1% per month included the ostensive use of the state apparatus. render a default judgment if a duly served writ • Payments start as decided in the approved plan. Brazil’s current account has improved significantly past due. is left unanswered. It takes two to three years to in recent years. This shift has been mainly led by The presidential and legislative elections in The estimated period of this lawsuit is between When creditors are unable to reach their debtors obtain an enforceable judgment in first instance. a record trade surplus. Weakened local demand October 2018 will be held in a challenging political 5 and 20 years SECTOR RISK ASSESSMENT by phone and/or email, a search of the company’s versus the relatively higher global growth played environment. The population is both tired of the Liquidation current government (only 5% considers the PMDB contacts, partner businesses, and owners is a decisive role. The current account deficit is Enforcement of a legal decision The objective of the liquidation process is to collect government good or very good) and angered by conducted, in order to establish contact and enter expected to marginally widen in 2018 as economic Of a Court decision all of the incomes of debtors who are declared the widespread corruption. This scenario might into a settlement negotiation. If there is still no rebound gains traction. Nevertheless, the current A final judgment is normally automatically enforced bankrupt. The principal stages of liquidation are as create an opportunity for outsiders, but because contact, this leads to an investigation of assets, account deficit will remain easily covered by direct by Brazilian Courts. Since the reforms in 2005 and follows: the presidential candidates are not yet concretely an on-site visit, and an analysis of the debtor’s investments received by the country (coverage of 2006, attachment of the debtor’s assets is possible • Liquidation can be requested by either debtors confirmed, it is too early to try and predict the financial situation so as to ascertain the feasibility of approximately eight times). if the latter fails to obey a final order within three (auto-falência), or any of their creditors if the winner. However, former president Luiz Inácio taking legal action. Considering the slow pace and days. In practice, execution can prove difficult, as debt totals more than 40 times the minimum The fiscal aspect remains the Achilles’s heel of the Lula da Silva (Labour Party) and the extreme-right the cost of legal proceedings, it is always advisable Brazilian economy. Gross public debt has increased to negotiate directly with defaulting debtors where there are very few methods for tracing assets in wage populist Jair Bolsonaro were doing well in the polls Brazil. significantly over recent years, leading the country in late 2017. “Lula” is currently the frontrunner, but possible, and attempt to settle on an amicable • The initiating party must prove the existence to successive downgrades by rating agencies. might not be able to run after being found guilty on basis, taking into consideration that a repayment Foreign awards can be enforced if they meet certain of a net obligation, overdue and defaulted by The economic team of President Michel Temer corruption and money-laundering charges in July plan may last for up to two years. If amicable conditions: presenting protested enforceable title (special took office in May 2016 and has since pursued 2017. If his sentence is maintained on appeal, he will settlement negotiation is unsuccessful, creditors · The homologation has to be concluded by the protest – personal notice of debtor); a tightened fiscal policy. Improvements were be prevented of running for elections. may attempt to reclaim the money owed via the Superior Court to be enforced in Brazil • Upon analysis of a debtor’s financial situation, achieved, such as the approval in Congress of a Brazilian judicial system. · The parties have be notified the judge can decide that the company must be spending cap that limits the growth of government Legal proceedings · The award has to comply with all the requirements liquidated expenses by the previous year’s inflation. A social The legal system comprises two types of for enforcement (such as being translated from All of the company´s assets have to be sold and security reform, which is a key to containing fiscal jurisdiction. The first of these is at the state level. Portuguese by a public sworn translator). the obtained amount is shared equally between bleeding, was also sent to the Lower House in Each Brazilian state (26 states, plus the Distrito Of an extra judicial instrument creditors, respecting eventual privileges. December 2016. However, the proposal – which Federal of Brasilia), notably including a Court of The enforcement of extrajudicial instruments is a The estimated period of this lawsuit is between requires 60% support in two rounds of voting in Justice (Tribunal de Justiça) whose judgments can legal type of enforcement granted to the creditor 7 and 20 years .

54 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 55 BULGARIA BURKINA FASO

COFACE ASSESSMENTS COFACE ASSESSMENTS A4 C COUNTRY RISK COUNTRY RISK A3 C BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 3.6 3.9 3.8 3.7 GDP growth (%) 3,9 5,9 6,4 6,5 Exports of goods, as a % of total 7.1 Exports of goods, as a % of total 18.4 Inflation (yearly average, %) -1.1 -1.3 1.1 1.6 POPULATION Inflation (yearly average, %) 0.9 -0.2 1.5 2.0 POPULATION Germany (millions of persons - 2016) Switzerland (millions of persons - 2016) 14% Budget balance (% GDP) -2.8 1.6 -0.4 -0.6 67% Budget balance * (% GDP) -1.6 -2.4 -4.6 -3.6 7,377 658 Italy Current account balance (% GDP) -0.1 4.2 2.4 1.9 India Current account balance (% GDP) -8,0 -6.8 -7.2 -7.1 9% GDP PER CAPITA 6% GDP PER CAPITA Public debt (% GDP) 25.6 27.8 24.6 24.2 (US dollars - 2016) Public debt (% GDP) 33.4 35.7 36.5 37.7 (US dollars - 2016) Romania South Africa 9% (f): forecast 5% * Including grants (f): forecast Turkey Singapore 8% RISK ASSESSMENT 4% RISK ASSESSMENT Greece Euro Area 7% Growth sustained by domestic demand Despite the favourable exports trend, the trade 4% Strong growth associated with Despite the increase in orders for intermediate In 2018, household consumption will continue deficit will remain considerable (5.8% of GDP in construction and mining activity goods and equipment under the PNDES, the import Imports of goods, as a % of total to be the main contributor to growth, despite 2017) because of lively internal demand and rising Imports of goods, as a % of total Growth recovered in 2016 and 2017, after two bill is not expected to rise strongly as it is mostly energy prices. This deficit will be more than offset dependent on the oil price and on the price of Germany slightly higher inflation. Households will benefit Euro Area years of political instability, poor rainfall and 13% from higher wages resulting from the lack of a by the services surplus (7.4%) generated by road 26% relatively low commodity prices. Growth is set to foodstuffs. Gold and cotton are the country’s two transport and tourism on the Black Sea beaches, main export items (64% and 16.1% respectively in Russia skilled workforce linked to inadequate training China remain high in 2018, boosted by gold production 9% and emigration. A higher minimum wage and but which could decline as more Bulgarians travel 12% and public investment. The construction of a road 2016). The external public debt (23.2% of GDP in Italy jobs growth will also provide a boost, with abroad. Meanwhile, remittances from expatriate Ivory Coast linking the capitals of Ivory Coast and Burkina 2016) is still mainly financed by concessional loans 8% unemployment at a historic low (6.7% in October workers and European subsidies (3.4%) have 8% Faso (Yamoussoukro and Ouagadougou) is due to from international creditors. Romania 2017). Meanwhile, higher bank profits and the exceeded dividend repatriation by foreign Japan begin in 2018. The estimated cost of the project for 7% decline in non-performing loans have helped investors and the payment of external interest 8% Burkina Faso is CFA 1,200 billion (EUR 1.83 billion) The post-Compaoré political transition Turkey consolidate the banking sector, weakened in 2014 rates (2.3% of GDP, both taken together). The India and will probably be financed under a public/private faces a security challenge 6% current account surplus, European funds and 4% by the collapse of the country’s fourth largest partnership (PPP). Reforms enabling such contracts In October 2014 the political scene was destabilised bank. Combined with satisfactory stress test foreign direct investments all help to fuel foreign were introduced in 2017 and more public services exchange reserves whose abundance (over by a popular uprising (against a constitutional + STRENGTHS results and low interest rates, this will continue + STRENGTHS are likely to be delivered by private companies in reform allowing the president to remain ad vitam to encourage borrowing, both by households and 9 months of imports) ensures the credibility the years to come. In 2018, consolidation in the of the lev’s peg to the euro. They also allow the aeternam) which brought down Blaise Compaoré, • Fixed parity against the euro businesses. Private investment will benefit from • Africa’s leading cotton producer building and public works sector thus seems to be who had been in power since 1987. This was (1 euro = 1.96 lev) backed up by significant positive export trends as well as the recovery gradual repayment of the external debt (70.7% of • Gold exporting country (Africa’s 5th largest the order of the day and business owners in the foreign exchange reserves GDP), which is mainly private and a third of which followed by an attempted military coup d’état in residential property. Construction will also be producer) sector are confident. Meanwhile, the AfDB has against the transitional government in September • Diversified productive base alone is represented by intragroup loans. buoyed by robust public investment, associated • Member of the West African Economic approved the 2017-2021 Country Strategy Paper, 2015. Roch Marc Christian Kaboré was elected as • Low production costs: good competitiveness with better use of European structural funds. and Monetary Union (which ensures the which is included in the National Plan for Economic president with 53.5% of the votes cast in late 2015. • Low public debt Tourism growth will be more modest, due to the The EU presidency will maintain precarious stability of the CFA franc, fixed parity and Social Development (PNDES) 2016-2020 and against the euro) His party, the Movement of People for Progress • Many tourist assets stabilisation of the security situation in Turkey, political stability which focuses on growth by developing the energy (MPP), won the local elections in 2016. Because • Low unemployment rate (4%) as the country broadly benefited from Turkey’s Following the defeat of the candidate he and agriculture sectors. Agriculture will receive a of the violence and unrest preventing smooth decline as a tourist destination. Nonetheless, supported during the November 2016 • Supported by the international financial boost from the start of operations at the agro- and fair elections in nineteen departments, partial exports of goods will continue to be underpinned community (one of the first countries to poles in Samendeni, Sourou and Bagre. The Zagtouli - WEAKNESSES presidential elections, Prime Minister Boyko have benefited from the HIPC initiative) elections had to be organised in 2017 to determine by dynamic European Union demand (67% of Borissov stood down. His centre-right party, solar power plant, inaugurated in late 2017, financed the distribution of 814 unfilled seats and this led to • Government instability, fragmented exports). They are still competitive, as salaries Citizens for the European Development of thanks to loans from the African Development an increased lead for the MPP. However, the MPP’s political landscape and close ties to the remain low, despite outpacing productivity gains Bank (AfDB) and the Agence Française pour le business community Bulgaria (GERB), nonetheless won 32.5% of the - WEAKNESSES position remains vulnerable against a background since 2013. The country exports a huge variety of Development (AFD) will enable the country to • Corruption and organised crime votes cast in the early elections held on 26 March of local ethnic tensions and in a country strongly products such as cereals, oilseed crops, tobacco, 2017, while the Bulgarian Socialist Party almost • Economy highly exposed to weather generate over 100 megawatts of electricity a year. affected by poverty, unemployment and corruption. • Mediocre effectiveness of public services medicines, machinery, metals and electricity. events Gold mining, the country’s most vibrant industry, is and legal system (influence of business doubled its 2014 share of the votes to reach 27%. Supporters of Mr Compaoré remain alert to the circles) Prime Minister Boyko Borissov was thus forced • Size of the informal sector expected to remain dynamic with positive results slightest false move by the government. posted by new market entrants in 2017. Private • Poor use of European structural funds and Sound public and external accounts to form a coalition with the United Patriots, • Vulnerable to movements in cotton and Poor-quality infrastructure, difficulty in accessing mediocre infrastructure which won 9% of the votes by bringing together gold prices consumption will be sustained by stable food prices, The 2018 budget provides for a substantial lower unemployment and higher real wages. credit and a weak financial system make for • Supervision of banking sector still increase in spending on education (higher three ultra-nationalist parties, including the • Heavily dependent on foreign aid a difficult business climate (146th out of 190 inadequate salaries for teachers), social protection (higher extreme right, pro-Russian Atalka. Achieved • Weak electricity infrastructure Inflation, which is very sensitive to variations in food according to the World Bank’s 2017 Doing Business • Lack of skilled workforce and high long- pensions) and defence. Public investments are at the cost of fiscal concessions and vulnerable • Demographic pressures, high poverty rate, prices, and accordingly, to weather conditions, is rankings). Regional security remains one of the term unemployment (61% of the total) expected to increase by 50%, thanks to the to splits on foreign policy, the very relative very weak human development index likely edge up in 2017, but will be contained thanks main challenges for the country, attacked several • Low rate of participation in the labour implementation of infrastructure projects with stability of the coalition is, however, expected to WAEMU’s monetary policy. times since 2015, especially from the north. The market by rural workers, Roma community the assistance of European structural funds. to last at the expense of wide-ranging reforms, latest attack was on a restaurant in Ouagadougou, and older people Despite higher spending, the fiscal deficit will thus confirming the ongoing dependence of the The sustainability of the fiscal deficit which left eighteen dead and about ten injured in • Relatively poor (per capita GDP = 45% of remain weak in 2018, due to the accompanying two main parties on several small groupings. depends on foreign aid August 2017. The threat posed by Islamist groups EU average) and declining population A tacit agreement between the different political rise in tax receipts. These will be boosted by The fiscal deficit is likely to widen and remain at a in the Sahel is a challenge to political stability and domestic demand, improved tax collection and alliances will help stabilise the political situation an obstacle to overall progress on investment. In during the first half of 2018, which is the year reasonable level in 2018, thanks to grants, which the award of operating license for Sofia Airport, represented 18% of government revenues in 2016. 2017, the G5 Sahel countries (Mali, Mauritania, income from which is intended to shore up in which the country will hold the Presidency Niger, Chad and Burkina Faso) decided to set up a of Council of the European Union. However, Revenues are growing steadily, especially taxes on the heavily indebted national railway. Despite goods and services. Against this, current spending counterterrorism force to combat Al-Qaeda in the the bank rescue in 2014-2015, the public debt the frequency of early elections is a factor of Islamic Maghreb (AQMI). This joint force will benefit instability, especially as electors are starting to rose by 31.4% in the second quarter of 2017. This is burden has remained modest. The increase in a direct consequence of the implementation of law from training and logistical support from Morocco 2016 is explained by prefinancing used to boost express their frustration with their relatively and from financial support from the European Union low standard of living, the inequalities of a flat- 081, which establishes a new civil service salary government reserves. Thanks to the weak deficit grid. The government is struggling to meet the (EUR 50 million). and growth above average interest rates, the rate tax of 10%, corruption, organised crime and vote buying. WAEMU convergence criteria with regard to the debt burden should ease. fiscal deficit, wage bill and the tax burden. 74% of the deficit is financed via external debt, mainly through international creditors (AfDB, IMF, World Bank) as the domestic banking sector remains very precarious.

56 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 57 BURUNDI CABO VERDE

COFACE ASSESSMENTS COFACE ASSESSMENTS E B COUNTRY RISK COUNTRY RISK E C BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth(%) -3.9 -0.6 -1.5 0.9 GDP growth (%) 1.7 3.8 3.8 4.0 Exports of goods, as a % of total 9.6 Exports of goods, as a % of total 0.5 Inflation (yearly average, %) 5.5 5.5 15.7 13.2 POPULATION Inflation (yearly average, %) -0.2 0.8 0.8 1.6 POPULATION Congo DR (millions of persons - 2016) Australia (millions of persons - 2016) 30% Budget balance (% GDP) -14.1 -9.1 -11.1 -11.8 72% Budget balance (% GDP) -3.8 -4.1 -2.8 -1.7 325 3,086 United Arab Emirates Current account balance (% GDP) -22.0 -17.1 -14.1 -14.2 Euro Area Current account balance (% GDP) -4.3 -7.2 -8.8 -8.4 16% GDP PER CAPITA 25% GDP PER CAPITA Public debt (% GDP) 46.0 47.2 57.1 65.7 (US dollars - 2016) Public debt (% GDP) 127.9 133.8 134.6 133.0 (US dollars - 2016) Kenya El Salvador 14% * excluding grants (f): forecast 1% (f): forecast Euro Area Togo 8% RISK ASSESSMENT 1% RISK ASSESSMENT Sudan Turkey 5% Burundi’s economy brought to its knees Under pressure from these twin deficits, the 1% A strong economic performance again The current account balance, structurally in by political crisis Burundian franc is set to depreciate further. in 2018 deficit due to the country’s dependence on Imports of goods, as a % of total After three years of recession, the Burundian Already weakened by low revenues, the Imports of goods, as a % of total In 2018, Cabo Verdean growth should remain at imports of consumer goods (40%), intermediate dependence on international aid, and the goods (25%), and energy (8%), could benefit from Euro Area economy is expected to timidly resume growth Euro Area the same level as in 2017, benefiting in particular 14% in 2018. Nevertheless, political uncertainty and weak export base before the political crisis, 75% from the activity of its European economic the appreciation of the escudo, Cabo Verde’s the country is all the more exposed to the risk currency. Given that this currency is pegged to China sanctions imposed by the European Union – the China partners. There should be an increase in tourism 13% country’s main financial donor – are expected to of over-indebtedness. Financing its external 5% revenue, predominantly via in accommodation the euro, its appreciation should contribute to India continue to put pressure on activity. A shortage debt and some of its fiscal deficit through Brazil and restauration. The growth of European declining prices of imports from non-European 12% of fuel at a national level in 2017, triggered by the borrowing, Burundi has seen its public debt ratios 3% countries – although moderate – should trading partners. Exports, dominated (81%) by Tanzania depletion of foreign exchange reserves, shows deteriorate. Domestic debt, mainly taken out United States contribute to this growth, as they are the main fishing products (fish, seafood, and processed 8% an economy grinding to a halt. Rising prices, with the Central Bank, is, in particular, rising very 2% source of tourists to Cabo Verde (81% in 2016). products), are expected to increase slightly Saudi Arabia particularly for imported goods, are strangling rapidly and now accounts for over 65% of the Japan The number of British tourists (the United due to foreign demand, which is also expected 8% household consumption, on which growth total outstanding debt, whereas it represented 1% Kingdom is the main country of origin of Cabo to grow slightly. The current account balance is primarily depends. Inflation, although expected less than 50% at the end of 2013. Verde tourists) is expected to continue to grow, therefore significantly in deficit for goods and in surplus for services. The current account deficit + STRENGTHS to benefit from a slowdown in the depreciation + STRENGTHS albeit at a slightly slower rate due to the initial of the national currency, is likely to remain high in Political impasse continues effects of the Brexit referendum. Nevertheless, remains primarily funded by FDI (7.3% of GDP) • Natural resources (coffee, tea, gold) 2018 and continue to erode the meagre incomes • Growth of tourist activity the structural constraints related to the lack of and remittances from Cabo Verdeans in Europe The tensions following President Pierre (11% of GDP). • Cancellation of 75% of the external public of the Burundian people. The 2017/2018 harvest Nkrunziza’s decision to stand for a third term • Fisheries’ reserves diversification of the economy remain significant. debt in 2009 years for coffee and tea, the country’s main in 2015 and his re-election, in breach of the • Efficient banking and telecommunications The dependence on tourism and public spending Given that the capital market and the financial • Membership of the East African export products (almost 48% of export income in constitution, have not disappeared. Despite services remains a dominant factor. market remain underdeveloped, the banking Community (EAC) 2016), are, admittedly, likely to be better than the government denials, reports of violence – which • Stable, independent political institutions The government’s fiscal policy of austerity is sector is the primary source of financing. It is previous years, but will not be sufficient to bring has become “more clandestine but just as set to continue in 2018, and should result in a dominated by European banks, particularly relief to a country whose population is among brutal”, according to a report published by the reduction of public investment spending in favour Portuguese banks. The central bank has taken - WEAKNESSES the poorest in the world (per capita GDP in 2016 UN in 2017 – remain just as widespread. The - WEAKNESSES of private investment, particularly through measures over the past two years to improve its was USD 325, according to the World Bank). The United Nations and NGOs continue to denounce foreign direct investments (FDI), mostly from the credit profitability, which, unlike its accessibility, • Entrenchment of the political crisis which • Very high level of public debt began in 2015 government’s limited resources are primarily the human rights violations and the repressive United Kingdom and China, in the tourism and real is low. The microfinance sector should continue to directed towards maintaining order, with public system put in place by the ruling party (CNDD- • High unemployment (15%, 28.6% among develop in order to finance very small businesses. • Suspension of international aid following young people) estate sectors. the political crisis spending providing only minimum support for FDD). Since April 2015 and the beginning of the • Poor infrastructure quality; lack of Household consumption should grow slightly, • Border tensions with Rwanda growth. The still high tensions will curb any crisis, almost half a million Burundians have fled Despite political stability, a slight rebound in private investment, thus adding to the maintenance benefiting from low inflation. It should also be • Poorly diversified economy, vulnerable the violence and the economic slump into which deterioration of the business climate gloomy assessment of the Burundian economy. • Food and energy wholly imported favoured by the economic situation of Portugal, to external shocks Burundi has sunk. Burundi’s withdrawal from the which is the main source of income inflow from Cabo Verde is an established democracy. The International Criminal Court (ICC), which became • Dependence on external shocks, • Geographic isolation international aid, the diaspora, and tourism workers abroad (11% of GDP). However, it may be country is among the top-ranked countries in • Activity hampered by lack of infrastructure In the absence of international aid, effective in October 2017, in no way affects the negatively affected by the decline in consumer sub-Saharan Africa according to World Bank the imbalances persist preliminary investigations launched by this • Exposure to climate change, volcanic and and limited access to electricity seismic events, cyclones confidence. indicators, in particular on fighting corruption The pressure on public accounts is expected to international body. The political crisis has negated (44th out of 214 countries). continue in 2018. Income flows are expected the efforts made to improve the very challenging business climate. Reduction of budgetary expenditure and The Movement for Democracy Party won the to remain weak: tax income remains steady a current account deficit mainly covered legislative elections of March 2016, and its only thanks to tax levels which sap Burundian Burundi’s government flatly refuses to cooperate by FDI flows candidate, Jorge Carlos Fonseca, was re‑elected households’ purchasing power, while the with any international partners, thus increasing to the head of the country for a second term collection of non-tax income, with donations the country’s isolation. The current crisis The budget deficit is expected to continue to decline in 2018, as in the previous fiscal year. The during the first round of the presidential cut, is expected to remain mediocre. Deprived exacerbates the diplomatic tensions, including elections of the 2nd October 2016. The current of support from international donors, who were those in the Great Lakes region where porous government is expected to reduce its spending on investments, subsidies, and purchases government’s priorities are to reduce the mainly responsible for financing infrastructure, borders, political instability and ethnic conflicts unemployment rate and the budget deficit. capital spending will remain modest. Accordingly, regularly wreak havoc. of goods and services, as well as implement privatisation. However, payroll should not decline Recent changes in foreign policy are directed it is current spending which will continue to put towards China: Chinese investment is constantly pressure on the overall balance. in 2018, given the lack of short-term flexibility. The decrease in public investment, from 10.3% of increasing and is expected to be concentrated in The current account deficit, exacerbated by the GDP in 2013 to 3.5% in 2016, could have a negative the sectors of tourismand infrastructure, as well suspension in aid from the European Union, will impact on growth in 2018. Recent tax reforms, as in the construction of a special economic zone. remain under pressure in 2018. Dependent on particularly the tax exemption during the start- The main tool of this cooperation is the Africa- imports, Burundi suffers from a trade balance up period of a business, should encourage private China Development Fund. structurally in deficit which puts pressure on initiatives. The public debt level is expected to Cabo Verde’s Doing Business ranking remains the current account deficit. In 2018, despite a stabilise, while remaining at a high level. The risk rather stable (129th out of 190 countries), and the probable increase in coffee and tea production, of default remains under control, mainly in the country has one of the best business climates in the value of exports is expected be hit by the form of concessional loans from international sub-Saharan Africa. However, it suffers from the unfavourable development in the price of these organisations and long-term loans. lack of infrastructure, especially electrical, and two commodities. the absence of regulations governing insolvency.

58 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 59 CAMBODIA CAMEROON

COFACE ASSESSMENTS COFACE ASSESSMENTS C C COUNTRY RISK COUNTRY RISK C D BUSINESS CLIMATE BUSINESS ENVIRONMENT

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 7.2 7.0 6.9 6.9 GDP growth (%) 5.7 4.5 3.9 4.3 Exports of goods, as a % of total 15.8 Exports of goods, as a % of total 23.7 Inflation (yearly average, %) 1.2 3.0 3.2 3.1 POPULATION Inflation (yearly average, %) 2.7 0.9 0.6 1.1 POPULATION Euro Area (millions of persons - 2016) Euro Area (millions of persons - 2016) 27% Budget balance (% GDP) -1.5 -2.9 -3.2 -3.6 53% Budget balance (% GDP) -2.7 -6.2 -3.5 -2.7 1,278 1,238 United States Current account balance (% GDP) -9.3 -8.7 -8.6 -8.5 India Current account balance (% GDP) -4.1 -3.6 -3.3 -3.2 21% GDP PER CAPITA 11% GDP PER CAPITA Public debt (%GDP) 32.5 33.0 33.6 34.3 (US dollars - 2016) Public debt (% GDP) 33.0 34.1 36.1 36.2 (US dollars - 2016) United Kingdom China 9% (f): forecast 8% (f): forecast Japan United States 8% RISK ASSESSMENT 3% RISK ASSESSMENT Canada Chad 6% Growth is expected to remain dynamic will remain stable. However, the public finances 3% Upturn in growth, driven by oil and gas and of goods is likely to persist as a result of demand in 2018 will continue to be highly dependent on external infrastructure spending for capital goods. Demand for technical services Imports of goods, as a % of total Growth is expected to maintain a steady finance (in part concessional), mainly from China, Imports of goods, as a % of total Following two years of slowdown in growth, will continue to support the deficit in the balance Russia and the United States. of services. Interest due on debt held by non- China pace in 2018. The Cambodian economy is set Euro Area mainly due to declining oil and gas production, the 35% to continue to benefit from lively domestic Meanwhile, credit is growing rapidly and the 27% economy is expected to pick up pace in 2018. The residents will remain a drag on the income account, whilst the surplus in transfers will continue thanks Thailand demand supported by moderate inflation, banking sector remains weak because of China start of production at the floating liquefied natural 15% rapid wage growth (both in the private and inadequate supervision and a concentration of 18% gas unit off the coast at Kribi should help boost to immigrant workers’ remittances. The size of the Vietnam public sectors) and increased public spending. risks in the property sector. At the same time, Nigeria exports. The reduction in oil production is likely, deficit will probably require recourse, once again, to 11% Private consumption, which represents 75% the economy is highly dollarised with foreign 12% however, to continue, a result of the low level of external borrowing. Singapore of GDP, is expected to receive a boost from currency deposits accounting for almost all Thailand investment since 2014 in costly offshore projects. Since the country’s inclusion in the HIPC debt 4% higher household disposable income, even if the deposits, leaving very little space for the rial, 5% A public investment programme will boost growth, reduction initiative in 2006, its debt, mainly Taiwan agriculture sector, which employs two thirds the local currency, whose exchange rate is very Togo especially in the construction and services sectors. external (75% of debt stock at the end of 2015), 4% of the workforce, is still likely to suffer from tightly controlled. Accordingly, banks are heavily 4% The projects aimed at developing the country’s has expanded rapidly. The reforms to reduce the weak agricultural commodity prices. Public exposed to exchange rate risk. hydroelectric potential will be drivers of this growth. volume of borrowing and the increased rate of + STRENGTHS investment will be directed mainly towards + STRENGTHS As of 2018, the production from the Memve’ele completion of the projects agreed in the context of education, vocational training, agriculture and Political and social tensions in the run-up dam will help sustain hydroelectricity generation. the triennial programme with the IMF, should help to • Dynamic textile industry and tourism sector infrastructure. Meanwhile, exports of textile to the parliamentary elections • Agricultural, oil, gas and mineral resources Manufacturing industries (textiles and cement restore control over the trajectory of the debt. with strong potential products, mainly consisting in clothes and • Diversified economy, compared to those of production) are expected to perform well. Projects • Offshore hydrocarbon reserves (oil and gas) shoes, will continue to benefit from the country’s Following the parliamentary elections, which other oil exporting countries aimed at developing the agri-foods sector should were hotly contested by the opposition in 2013, 2018 elections in a worsening • Financial support from bilateral and increasing integration in the regional value • Ongoing modernisation of infrastructures also help boost agricultural production (wood, security context multilateral donors chain, as well as from the modest recovery the Cambodian People’s Party (CPP) led by cocoa, cotton). Growth in the sector will however Prime Minister Hun Sen lost a large number of Paul Biya (85) and in power since November 1982, • Integrated into a dynamic, regional network in world trade. The construction sector is remain limited by the lack of protection for property seats. The opposition benefited from a weariness has yet to declare whether he wishes to stand, (ASEAN) profiting from the booming property market - WEAKNESSES ownership and limited access to credit. These regarding Hun Sen’s reign (Prime Minister since in October 2018, for his seventh Presidential term • Young population and the development of tourism infrastructure. obstacles reflect the continuing difficult business There has effectively been a rapid expansion 1998) and acute social tensions over wrongful • External and public accounts dependent climate, which is holding back private investments. of office. In the event that the President decides, on oil and gas in tourism, especially from Asia. Foreign direct expropriations and poor working conditions It could also suffer because of a worsening in or is obliged, to withdraw, there are no obvious - WEAKNESSES in the textile sector. The prime minister and • Growth not very “inclusive” and business replacement candidate within Mr Biya’s party, investments are likely to remain high, especially climate remains difficult the political and security context. Whilst likely in the textile sector, despite steadily rising wages his party (CPP) are, nonetheless, expected to to continue on its upwards trend, household the Cameroon People’s Democratic Movement • Considerable share of agriculture in GDP remain in place after the parliamentary elections • Heightened political risk: insecurity in (RDPC). The opposition appears fragmented: even and vulnerability to weather hazards and competition with neighbouring countries the far north of the country, uncertainty consumption will continue to be restricted by the (Bangladesh and Myanmar, in particular). in July 2018, while the risk that they will hold onto minimal incomes from subsistence agriculture before the candidate of the leading opposition • Underdeveloped electricity and transport power in the event of defeat appears increasingly surrounding the succession to Paul Biya party (Social Democratic Front or FSD) has been networks (85 and in power since November 1982) and the low level of financial inclusion. Weak local likely. In the run-up to the elections, the ruling and increasing tensions between the demand and membership of the franc zone are announced, around ten candidates have already • Lack of skilled workforce Substantial deficits, generating a party seems to be intensifying its campaign of English-speaking minority and the regime likely to help limit inflationary pressures. emerged. Akéré Muna ’s candidacy, lawyer and • Dependence on concessional finance due dependence on external financing repression against its political opponents, the (mostly French-speaking) sons of former Prime Minister Salomon Tandeng to weak fiscal resources In 2018, the country’s current account balance media and NGOs. The arrest in September 2017 Muna, could weaken the FSD. • Significant governance shortcomings will continue to show a large deficit. The trade of the leader of the opposition party (CNRP) on Efforts to rebuild the public and external accounts The outbursts of violence in the English-speaking • Poverty rate still high; low levels of deficit will remain huge (17% of GDP), but will grounds of treason also seems to point to an regions since the end of 2016 have increased spending on health and education reduce due to strong exports associated with authoritarian turn. Besides, the Supreme Court Having suffered from the fall in oil and gas receipts, the stakes for the presidential and parliamentary • Growing reliance on construction, clothing firmer global demand, even though the value dissolved the CNRP in November 2017 saying the public accounts are recovering, underpinned elections next October. Unrest within a linguistic exports and tourism of imports of capital goods and oil products will it was conspiring with foreign governments by work to consolidate the budget. Reductions minority experiencing a growing sense of political remain high. Tourism growth will help maintain to overturn the ruling party. As a result, 44 of in State expenditure, aimed at protecting social and economic marginalisation represents a threat the surplus in the balance of services. Moreover, the 55 parliamentarians have been replaced by spending, will remain a priority. The rationalisation to political stability and security. This danger high levels of international aid as well as members of the CPP. It is, therefore, unlikely that of capital investment spending should make it comes on top of that arising from the incursions, remittances by expatriate workers will offset the the upcoming elections will be free and fair and possible to concentrate on those projects having of Boko Haram, the Islamist terrorist group, in the repatriation of dividends by foreign companies, there may well be renewed mass protests. the greatest impact. Higher oil prices and increases north of the country, which remained a common which dominate the textile sector. FDIs are The business climate is still marked by a lack in gas production will help sustain the rise in occurrence in 2017. Whilst economic activity, rising steadily, especially those from China and of transparency and high levels of corruption. revenues. At the same time, work on improving the mainly concentrated in the south of the country Japan, and make it possible to finance the current Political and social fragility prevent the economy collection of non-oil and gas revenues will continue. currently remains unaffected, the humanitarian account deficit. Foreign exchange reserves are, from growing more quickly, while investments The introduction of a 5% export tax on certain situation is worrying. In addition, this increasing therefore, expected to continue to grow to reach will remain constrained by the country’s agricultural products will in particular help broaden political risk could undermine perceptions of the almost eight months of imports. infrastructure shortcomings, notably as regards the tax base. The reforms to improve revenue economic climate which already suffers in an With regard to the public accounts, the budget energy, as well as by the deficiencies in the collection and the effectiveness of spending will be institutional and regulatory context that is not deficit is expected to widen slightly because education system. supported by the USD 666 million Extended Credit hugely favourable for the expansion of the private of higher spending levels not offset by higher Facility granted by the IMF. sector, as demonstrated by its 163rd (out of 190) revenues associated with the dynamism of the The current account deficit is expected to stabilise place in the Doing Business 2018 ranking. economy. The government has introduced a in 2018. Despite the growth in revenues from oil fiscal consolidation policy aimed at improving and gas and the efforts to diversify the export base tax collection. In this context, the public debt (wood, cotton, cocoa), the deficit in the balance

60 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 61 CANADA CANADA

COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN CANADA Payment provinces, the same legal system applies Enforcement of a legal decision A3 throughout the country, bar Quebec. COUNTRY RISK A single law governs bills of exchange, In most cases, except when the judge decides promissory notes and cheques throughout Within each province, provincial courts hear most otherwise, each party is required to bear the full A1 Canada; however this law is frequently disputes of all kinds concerning small claims, and cost of the fees of his own attorney whatever the BUSINESS CLIMATE interpreted according to common law precedents superior courts hear large claims – for example, outcome of the proceedings. As for court costs, in the nine provinces or according to the civil code the Quebec superior court hears civil and the rule stipulates that the winning party may in Quebec. As such, sellers are well advised to commercial disputes exceeding CAD 70,000 and demand payment by the losing party based on accept such payment methods unless where jury trials of criminal cases. Canadian superior a statement of expenses duly approved by the TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) long-term commercial relations, based on mutual courts comprise two distinct divisions: a court of court clerk. GDP growth (%) 0.9 1.5 3.0 2.1 trust, have been established with buyers. first instance and a court of appeal. Exports of goods, as a % of total 36.2 The change precisely concerns institution Inflation (yearly average, %) 1.1 1.4 1.5 1.9 POPULATION Centralised accounts, which greatly simplify the At federal level, the Supreme Court of Canada, in of a standard “originating petition” (requête United States (millions of persons - 2016) settlement process by centralising settlement Ottawa, and only with “leave” of the Court itself introductive d’instance), with the payment of 76% Budget balance (% GDP) -1.1 -1.9 -1.6 -1.5 42,225 procedures between locally based buyers and (leave is granted if the case raises an important judicial costs joined, introducing a 180-day China Current account balance (% GDP) -3.4 -3.3 -3.1 -3.1 question of law), hears appeals against decisions 4% GDP PER CAPITA sellers, are also used within Canada. time limit by which the proceedings must be Public debt (% GDP) 98.4 99.1 97.5 97.7 (US dollars - 2016) SWIFT bank transfers are the most commonly handed down by the provincial appeal courts, or scheduled for “investigation and hearings” (pour Euro Area by the Canadian Federal Court (stating in appeal 4% (f): forecast used payment method for international enquête et audition), delivery of a judgement on division), which has special jurisdiction in matters the content within a timeframe of six months United Kingdom transactions. The majority of Canadian banks 3% RISK ASSESSMENT are connected to the SWIFT network, offering concerning maritime law, immigration, customs after the case was heard and encouragement and excise, intellectual property, disputes Japan a rapid, reliable and cost-effective means of of the parties to submit to a conciliation stage 2% Towards moderate growth and the possible negative repercussions are payment, notwithstanding the fact that payment between provinces, and so on. during legal proceedings, with the judge presiding over an “amicable settlement conference” After progressing strongly in 2017, in connection unlikely to happen until 2019. is dependent upon the client’s good faith insofar The collection process begins with the issuance (conférence de règlement à l’amiable). Imports of goods, as a % of total with the boom in consumption and the recovery as only the issuer takes the decision to order of a final notice, or “seven day letter”, reminding payment. the debtor of his obligation to pay together with United States of business investment, activity is expected Low public deficit, significant trade deficit 52% to settle at a pace closer to its growth potential when excluding energy A real time electronic fund transfer system in any contractually agreed interest penalties. China estimated at 1.6%, with a significant gap While public debt (40% federal, 60% provincial operation since February 1999 – the Large Value Ordinary proceedings 12% remaining between the Atlantic provinces and or local) accounts for almost 100% of GDP, the Transfer System, or LVTS introduced by the Ordinary legal action – even if the vocabulary Euro Area the rest of the country. Household spending is modest nature of the public deficit, moderate Canadian Payments Association – facilitates used to describe it may vary within the country 9% expected to lose steam. Real disposable incomes growth and low interest rates will suffice to electronic transfers of Canadian dollars – proceeds in three phases. Mexico and jobs will not rise as fast and the effects of stabilise it. Moreover, thanks to its low cost due countrywide and can also handle the Canadian 6% Firstly, the “writ of summons” whereby the income tax cuts and higher transfers to the to its triple A rating, it is perfectly sustainable, portion of international operations. plaintiff files his claim against the defendant Japan middle and lower-income households in 2017 will 3% especially as net of financial assets held by the The letter of credit (L/C) is also frequently used. with the court, then the “examination for dissipate. Settling property prices (excluding the federation and the Canada and Quebec pension discovery”, which outlines the claim against the regions of Vancouver and Toronto where prices funds, it accounts for just 28% of GDP. Quebec Debt collection defendant and takes into account the evidence + STRENGTHS will continue to rise) will dampen the wealth and Ontario are the two most indebted provinces, to be submitted by each party to the court and, effect sparked by surging prices in the last two with 80% of net provincial debt and a share of Canada’s Constitution Act of 1867, amended in finally, the “trial proper” during which the judge • Abundant and diversified energy and mineral years. Credit, although still cheap, could get their respective GDP of 47% and 38%. But they April 1982, divides judicial authority between the resources hears the adverse parties and their respective more expensive, if the central bank raises its represent 60% of Canadian GDP and population federal and provincial Governments. Therefore, witnesses, who are subject to examination and • World’s fifth largest oil and gas producer key rate (1% in December 2017), which it could and will maintain a cautious fiscal policy with a each province is responsible for administering cross-examination by their respective legal • Robust banking sector, well capitalised and decide to do given the increased inflationary fiscal balance close to equilibrium. justice, organizing provincial courts and enacting counsels, to clarify the facts of the case before rigorous supervision pressures and near full employment. Residential the civil procedure rules applicable in its territory. Energy exports do not suffice to offset the making a ruling. • Serious nature of the budget construction could taper off, especially because Though the names of courts vary between • Direct proximity with large US market new prudential regulations are due to be adopted significant deficit in trade of other goods (5% of • All-out development of trade relations on credit in order to ease the pressure on the GDP). The services deficit and investment income (CETA with the EU) market and strengthen the banks. 45% of deficit (ca. 1% of GDP each) come on top of the • Excellent business climate outstanding credit awarded by the six largest trade deficit (1% of GDP). Given that investments banks, which account for 93% of the banking abroad are higher than FDIs, financing the current account deficit relies on foreign portfolio - WEAKNESSES industry’s assets, relate to property and over half of borrowers are not insured. Against this, investments. The result is growing external debt • Dependent on US economy (half of FDI business investment is expected to remain (115% of GDP in 2016), mainly contracted by stock, integration of both countries’ robust due to growing capacity constraints, banks and businesses - a reflection of inadequate automotive industries) and on energy prices domestic savings. • Loss of competitiveness by manufacturing firm hydrocarbon prices and a still strong credit enterprises associated with weak labour environment. The increase in corporate profits, productivity even if slower than in 2017, should point in the Proactive Prime Minister Justin Trudeau • Inadequate R&D spending same direction. Public investment in transport, Justin Trudeau was sworn in as Prime Minister of • Decrease in the labour force, just slowed renewable energy, housing, and early childhood Canada following the October 2015 parliamentary down by large-scale selective immigration is expected to remain firm in the context of a still elections, succeeding the Conservative Stephen • High levels of household debt (165% of fairly accommodative fiscal policy, especially Harper, who had been in post for almost ten years. NUMBER OF CORPORATE FAILURES disposable income) / very high house prices since a public infrastructure investment bank Mr Trudeau’s (centre-left) Liberal party won 184 of • Weakening energy exports due to has just been set up. The contribution of external 338 seats in parliament, giving it an absolute Total Estimate (e) / Forecast (f) Yearly growth inadequate supply pipelines to the United trade to growth will be weak. While exports majority. The focus was quickly put on inclusive 4,500 -1.5% -0.9% 0% States and the US’s own resources of energy (hydrocarbons and electricity), growth with tax cuts for the middle classes, 4,072 metals (gold, aluminium, copper, iron, nickel), 4,000 -2.2% -5.0% higher family benefits and the development 3,643 -5% SECTOR RISK ASSESSMENT -6.6% -7.0% agricultural products (oilseed crops, cereals, of environmentally-friendly infrastructure. 3,500 3,236 3,187 meat, legumes) and shellfish will continue on a However, this did not prevent the government -10.5% 3,117 3,089 steady upward trend, especially in terms of price, from supporting the Trans Mountain Pipeline 3,000 2,884 -10% 2,682 other exports (vehicles, engines, automotive Project between Alberta and the Pacific coast. 2,548 components, planes, polymers, medicines, Differences with the United States have multiplied 2,500 -11.2% -15% paper) are expected to benefit only moderately on diplomatic and trade issues (timber, aeronautics, 2,000 from healthy world demand and a Canadian dairy products), resulting in a move to strengthen dollar which has appreciated along with oil ties with other countries, as in the trade agreement 1,500 -20% prices but is still relatively under-valued against between Canada and the EU, signed in late 2016. 1,000 the US dollar. This needs to be set against the The Prime Minister also aims to reduce obstacles -25% loss of manufacturing competitiveness which to trade between the country’s ten provinces where 500 coincided with the period of high oil prices. non-tariff barriers are still hampering the circulation -24.9% Meanwhile, timber exports will continue to be of goods, capital and people. 0 -30% hit by countervailing duties applied by the United 2010 2011 2012 2013 2014 2015 2016 2017(e) 2018(f) States. The end to renegotiations over NAFTA Source: Statistics Canada (CANSIM), Coface

62 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 63 CENTRAL AFRICAN REPUBLIC CHAD

COFACE ASSESSMENTS COFACE ASSESSMENTS D D COUNTRY RISK COUNTRY RISK E D BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 4.8 4.5 4.7 5.0 GDP growth (%) 1.8 -6.4 0.6 2.4 Exports of goods, as a % of total 4.9 Exports of goods, as a % of total 11.9 Inflation (yearly average, %) 4.5 4.6 3.8 3.7 POPULATION Inflation (yearly average, %) 4.1 -1.1 0.2 1.9 POPULATION Belarus (millions of persons - 2016) United States (millions of persons - 2016) 33% Budget balance (% GDP) -0.6 1.6 -0.3 0.6 54% Budget balance (% GDP) -3.1 -4.9 -0.7 -0.2 364 852 Euro Area Current account balance (% GDP) -9.0 -9.1 -9.7 -6.5 India Current account balance (% GDP) (e) -12.3 -9.2 -8.9 -9.1 31% GDP PER CAPITA 8% GDP PER CAPITA Public debt (% GDP) 51.1 44.3 38.8 33.4 (US dollars - 2016) Public debt (% GDP) 43.3 51.2 50.5 49.0 (US dollars - 2016) Chad Euro Area 13% (f): forecast 8% (f): forecast Cameroon China 10% RISK ASSESSMENT 6% RISK ASSESSMENT China Japan 8% Growth conditional on how the security The president is struggling to rebuild the 4% Slightly improved growth prospects the talks over oil-backed debt with Glencore, situation develops country against a background of persistent Activity is expected to pick up in 2018. The which represents more than a billion dollars, are Imports of goods, as a % of total The country remains one of the poorest in the conflict Imports of goods, as a % of total climate of insecurity linked to the activities of deadlocked and jeopardize the sustainability of the public debt. With over 80% of the debt Euro Area world and is still marked by the humanitarian President Faustin-Archange Touadéra, who Euro Area terrorist group Boko Haram will keep adversely 30% and security crisis of 2013. Progress on the came to power in March 2016, is struggling to get 37% impacting the agricultural sector in the west service owed to the oil company, and as external arrears accumulates, default of payments looms Egypt National Recovery and Peacebuilding plan (DDRR, the country back on its feet, despite his initial vow China of the country. However, agriculture (12% of 29% Disarmament, Demobilisation, Reintegration and to make the CAR a united country by appointing 16% GDP) is expected to sustain growth, given the if an agreement is not found in 2018. China Repatriation) is very modest. The growth rate is opposition members to the government. The Cameroon government’s plans to support cotton production The current account deficit is expected to widen. 7% forecast to accelerate slightly in 2018, thanks to country is still in a very precarious position: 15% in order to diversify the economy. In its five-year Despite weak domestic demand and, in particular, Cameroon recovery in farm activity (43% of GDP), as well civilians continue to be killed, and there is an ever India development plan (2016-2020), the government weak investment, imports are expected to 5% as in mining and forestry – although this will increasing number of refugees (over 480,000 6% shows its resolve to rebalance the economy by increase slightly as economic activity picks up. United States take place in a security context that remains people or 10% of the population), most having United States taking full account of the country’s agricultural The precariousness of oil production (almost 4% very tense. Activity will be buoyed by public fled from neighbouring countries (Cameroon, 5% potential. This plan also includes sections on 90% of exports) and terrorism in the Lake Chad spending thanks to international aid, which , Chad, Democratic Republic of the Congo). improving human capital, governance and social region, which depends on agriculture, will hit + STRENGTHS notably funds the country’s water and electricity Clashes between the Seleka militia, a majority + STRENGTHS protection. Nonetheless, the government’s exports of oil and agriculture infrastructure programmes (only 55% of health Muslim armed group, and the majority Christian ambitions will likely be constrained by weak • Agricultural potential (cotton, coffee), facilities are functional), under the Recovery and Anti Bakala militia continue, and many armed • Exploitation of new oil fields public accounts. Tax receipts – 50% of which Strong regional tensions and a degraded forestry and mineral wealth (diamonds, Peacebuilding plan. It will, nonetheless, still be hit groups are trying to gain a foothold in the political • Development potential of the agricultural derive from oil production – will continue to be business climate gold and uranium) by weak internal demand (taking into the account landscape. The government is hampered by the sector hit by ongoing difficulties in this sector, which has • Significant international financial support the population that has gone into exile), even if international arms embargo and cannot, as a failed to reach its pre-2014 levels, notably due to Idriss Déby, president since 1991, was re- inflation is on a downward trend, while remaining result, create a Central African army in order to reduced investment by Glencore. However, the elected in 2016 for a fifth five-year term. above the 3% target set by the Economic and protect its civilians from attack. Following the - WEAKNESSES oil industry remains dominant (one-fifth of GDP) After announcing in February 2017 that the - WEAKNESSES Monetary Community of Central Africa. completion of Operation “Sangaris” in October and the exploitation of new oil fields in the south parliamentary elections would be delayed • Over-reliance on oil because of insufficient public funds, the • Extreme poverty (over 76% of the 2016, the security forces were unable to take of the country will boost activity. Oil company over and Minusca, the UN peace mission, does • Business climate not conducive to thriving investments are expected to continue to rise president said that they will be held in 2018. population) Public finances bolstered private sector; high level of corruption not have sufficient resources to protect civilians. slightly in the form of foreign direct investments This electoral uncertainty coupled with weak • Economy vulnerable to external shocks by international aid • Geographic isolation economic performance could lead to further • Poor transport infrastructure and The UN has flagged up “early warning signs of (3.2% of GDP in 2017 according to IMF estimates). The country has shown progress on fiscal genocide” and believes that another large-scale • Worsening security conditions at both Finally, private consumption will be hit by public social discontent. In addition, regional tensions inadequate power production capacity management, giving rise to the disbursement by national and regional levels (Sudan, Central African Republic) have sharply • Geographic isolation humanitarian crisis is on the cards. (role of Boko Haram) spending cuts and rising inflation, even though the IMF of a second loan tranche in 2017 under the latter will be contained due to the CFA franc’s increased the influx of refugees in the country, • Unstable political and security situation; In this context of ongoing violence, the business the Extended Credit Facility arrangement (total fixed exchange rate against the euro. while attacks by Boko Haram have resulted in presence of several armed foreign rebel aid amounts to almost 7% of GDP over three climate will remain unstable and tense. According displacements of people within the country. The groups years) helping the country to pay its arrears and to the Doing Business index, which measures the terrorist group has conducted a growing number improve growth and social inclusion. The fiscal ease of doing business, the country is ranked The failure of debt restructuring of suicide attacks since 2015. The military co- position should continue to improve thanks among the worst in the world (and the last with negotiations weakens debt profile operation among the four countries on the Lake to contained fiscal spending and higher tax regard to new start-ups). and public accounts Chad border (Cameroon, Niger, Nigeria, Chad) receipts on the back of stronger tax and customs Budgetary income, half of which comes from oil and France aimed at eradicating its influence administrations, even if progress is likely to be revenues, is expected to increase, in line with remains strong. Chad is therefore very active slow. The country will, however, still be highly the evolution of oil prices and the start-up of diplomatically, as the country is also a founder dependent on international aid (IMF, EU, World new oil fields. Fiscal assistance from various member of the G5 Sahel and currently presides Bank, BAD, etc.), and there is still a high risk of donors remains a significant source of income. over the Central African Economic and Monetary over indebtedness. The tax base is extremely narrow, and so the Community (CEMAC). The current account deficit is expected to decline government has to raise its taxes on foreign The humanitarian situation in the country is an in 2018 thanks to a reduction in the trade deficit. A investors – thus weakening the business increasing cause for concern, with 3.5 million gradual recovery in diamond exports associated climate. Moreover, regional unrest has led to people affected by food insecurity in 2016, with the partial lifting of the embargo on higher spending on security, which prevents the according to UN estimates. Finally, Chad is among Central African diamonds (suspension from the government from allocating more spending to the countries with the most difficult business Kimberly process) is expected, as is a recovery sustaining growth. Due to these fiscal difficulties, climate (180th out of 190 countries in the World in the exports associated with timber, coffee and in the summer of 2017 the IMF approved a three- Bank’s most recent Doing Business rankings). cotton, which will continue to be hit by insecurity year USD 312 million arrangement to “restore Corruption is endemic and does not appear to and the disruptions affecting the transport and macroeconomic stability and lay the foundation be improving, with the country ranked 159th on logistics sector. Imports will remain significant for robust and inclusive growth”. About USD Transparency International’s index (176 countries given the country’s reconstruction needs. 49 million was immediately disbursed with the assessed). remaining amount due to be phased in over the duration of the programme. However, the next disbursement, which is contingent to the outcome of debt restructuring negotiations, is already delayed and could be suspended. Indeed,

64 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 65 CHILE CHILE

COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN CHILE Payment the corresponding legal action ruled by the civil also, the debtor is prohibited from disposing of A3 procedure. According to the local procedural any of its assets. After approval, the plan has the COUNTRY RISK Promissory notes, cheques and bills of exchange are frequently used for commercial transactions laws, there are two kinds of judicial collection same effect as a judicial reorganization. in Chile. In an event of default, it offers creditors procedures; i), ordinary proceedings (Juicio Restructuring proceedings: Judicial A3 Ordinario); ii) and abbreviated proceeding (Juicio BUSINESS CLIMATE some safeguards, including access to the reorganization summary proceeding (Juicio Ejecutivo). Under Sumario) depending on the value of the sued These agreements are more formal than extra- a juicio ejecutivo, based on his appraisal of the amount and the type of documents that support judicial agreements, and can only be filed by documents submitted, a first instance judge the debt . debtors, as they have to declare their insolvency TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) (Juzgado Civil) may order a debtor to pay at Claimant needs to explain the basis for their legal to the court. The proceedings apply to both GDP growth (%) 2.2 1.5 1.5 2.7 18.2 the moment of the notification – if the debtor action and enclose all supporting documents secured and unsecured creditors. Once debtors Exports of goods, as a % of total fails to do so, his property will be seized. These (original copies) and evidence. After the first enter the judicial reorganization process, they Inflation (yearly average, %) 4.3 3.8 2.2 2.4 POPULATION China (millions of persons - 2016) documents may need to be validated by court presentation in court, the judge will decide must subsequently propose a reorganization 29% Budget balance (% GDP) -2.1 -2.7 -2.7 -2.1 before becoming legally enforceable. whether the legal action has basis or not. If the plan, which requires the approval of at least two 13,576 United States Current account balance (% GDP) -2.0 -1.4 -1.7 -1.2 Bills of exchange that are guaranteed by a bank judge considers there are enough arguments and thirds of the total number of creditors. 14% GDP PER CAPITA Public debt (% GDP)* 17.4 21.3 24.3 27.0 (US dollars - 2016) are widely accepted, though somewhat difficult evidence, he will give course to the process. Liquidation Euro Area 10% * Central government debt (f): forecast to obtain. They limit the risk of payment default All judicial action needs the presence of a Liquidation is organized through a single by offering creditor additional recourse to the barrister or solicitor (lawyer), whether taking procedure initiated upon demand of the debtor Japan 9% RISK ASSESSMENT endorser of the bill. place in front of a minor court (Juzgados – or creditors. The latter can file for bankruptcy South Korea Cheques, which are used more often than bills primera instancia) or superior court (Corte when a debtor defaults without appointing an 7% Stronger growth in 2018 context of FDIs. The flow of FDIs is, moreover, of exchange or promissory notes, offer similar Apelaciones o Suprema- segunda instancia) administrator for its business. Once bankruptcy is declared, a trustee is given responsibility for Growth is expected to pick up in 2018. Following exceeded by Chilean direct investments abroad legal safeguards under Juicio Ejecutivo in the Debtors can dispute ruling with motivated the debtors’ business and assets. Imports of goods, as a % of total the rise in prices and production, copper exports mostly by pension funds. It is therefore no event of unpaid for a cause (protesto), uncovered arguments that law contains at the Código surprise that Chile’s foreign assets are almost as cheques, or closed accounts. Checks and the de Procedimiento Civil (Civil Procedure Code, China (50% of total exports) are expected to rise. This 24% upturn in mining should encourage investment high as its foreign liabilities. other mentioned documents, if not paid on time, defences) such as payment of debt, prescription, Euro Area in the sector, as well as jobs and wage growth. can be reported to a Credit Report Company compensation, etc. Judges will consider these 15% In this context, and with imported inflation Opposing President and Parliament called Boletin Comercial. arguments and will accept or reject the defence. United States moderated by the peso’s appreciation, the will co-habit The same is true of the promissory note (pagaré), It is important to note that, while the defences of the debtor are discussed by the parties in the 15% contribution of household consumption (64% From the centre-right and supported by the which - like bills of exchange and cheques – is an trial, the steps relating to seizure of assets are Brazil of GDP) to growth is expected to rise. Public business world, and a businessman himself, instrument enforceable by law and, when unpaid, 9% not stayed. The idea of this is that the debtor consumption will perform at least as well. Sebastian Piñera (already president from 2010 may also be recorded at Boletín Comercial. Argentina The non-mining sector is expected to benefit The promissory note needs to be validated cannot delay the procedure unnecessarily. 4% to 2014) was elected in the second round of the indirectly, even if construction could lag behind presidential elections on the 17th December 2017 (protestada) by a public notary or in a judicial trial. Trials can last from six months up to two years, because of persistent overcapacity. Save for a with over 54% of the vote and a participation rate The “Boletín Comercial” is a company dedicated depending on the document, the debtor’s + STRENGTHS climate disaster, the production of fruit, timber, of 48.5%, beating Alejandro Guillier, the centre- to conducting financial risk analysis. It provides defence, and if an appeal is filed following the paper pulp, wine and prepared fish will benefit left candidate. He succeeds Michelle Bachelet, to other information companies (such as Dicom, initial judgement. • Mining (leading copper producer), from strong North American and European also from the centre-left. Bachelet, who was agricultural, fishery and forestry resources SIISA) information about the debts registered demand, as well as the improved regional ineligible to stand for a second consecutive at national level for all kind of debtors. Boletín Enforcement of a legal decision • Numerous free-trade agreements economy. Nevertheless, confidence among term, lost a good deal of popularity because of Comercial is the official and most important Domestic judgments are enforceable when all • Flexible monetary, fiscal and exchange rate business owners, hit by higher taxes introduced the economic downturn, corruption scandals company, on this matter, at national level under policies by the previous government, will influence appeals have been exhausted. If the debtor fails involving high-profile figures and allies, as well the authority of the Santiago Chamber of to comply with the decision, the court can order • Favourable business climate, political and investment and recruitment. as reforms deemed insufficient by her electorate Commerce (Cámara de Comercio de Santiago). institutional stability an auction of the debtor’s assets. Collection from but damaging by business leaders. Both, Companies and individuals, can be a third party owing to the debtor is not possible. • International companies operating in Gradual rebuilding of budget leeway registered as debtors in the Boletin Comercial. distribution, air transport and paper The new government, installed in March 2018, Foreign judgments may be enforced if the The robust initial position of the public finances will have to co-habit with a parliament from the The register provides key financial information • Member of the OECD and the Pacific that can be consulted by anyone who is Supreme Court validates these through Alliance and the fiscal easing have helped mitigate the opposing side. This is because at the same time an exequatur proceeding. Chilean law only negative impact of falling copper prices on as the first round elections on the 19th November, interested in obtaining a picture of the financial behaviour of a Company or individual. recognises foreign judgements on a reciprocity activity without the deficit and the debt reaching the centre-right party Chile Vamos only basis: the issuing country must have an - WEAKNESSES significant levels. In order to rebuild room for won 73 seats out of 155 against 56 for the Electronic transfers via the SWIFT network, agreement with Chile regarding recognition and manoeuvre, fiscal consolidation is expected centre-left party Nueva Mayoria led by the widely used by Chilean banks, are a quick, fairly • Small, open economy vulnerable to enforcement of legal decisions. Proceedings can to begin in early 2018, though at a measured unfortunate opponent, 20 for the Frente Amplio reliable, and cheap instrument last from between one to two years. external shocks given the dependence on pace so as to manage investment in healthcare, on the left and 6 for the independent centre- copper and Chinese demand, as well as exposure to climate and earthquake risks education and in road and energy infrastructure. left candidates. In the Senate, half of whose Debt collection Greater use of concessions, as well as higher members was renewed, Nueva Mayoria now has Insolvency proceedings • Weak budgetary resources: 20% of GDP income drawn from copper extraction and the 22 seats out of 42. With a left-leaning parliament, Amicable phase Out-of court proceedings: Extra-judicial • Inadequate research and innovation completion of the 2014 tax reforms will make this Sebastian Piñera will find it difficult to go back Collection begins with an amicable collection reorganization • Vulnerability of the road network and easier. Nevertheless, it will not be enough to halt on the reforms carried out by his predecessor process where parties can agree on a payment The 2014 bankruptcy law recognizes agreements electricity grid; high energy price because the increase in debt. on tax, social and education matters. The settlement or other payment plan. The between creditors and debtors that are reached of the country’s geographic situation (long length of this amicable phase depends on the and narrow) long and narrow country confrontation will focus on the pace of fiscal outside of a bankruptcy proceeding, whereby Low current account deficit and significant consolidation, the cancellation of the taxation predefined term of the documents supporting a court approves the agreement that was • Income disparity and poor education the debt (cheque, invoice, promissory note, bill of system investment abroad hike for corporates and wealthy households, the developed outside of the bankruptcy court. In extension of free education and reform of the exchange). A formal notice is sent by a recorded order to be approved, two or more creditors The current account deficit, already fairly low, is private pension system. There will be little in the delivery letter inviting the debtor to pay. whose claims represent at least 75% of the total expected to fall thanks to improved trade terms way of significant progress, which could make If the parties did not include any specific clauses claims corresponding to their respective group SECTOR RISK ASSESSMENT in 2018. Higher copper exports will generate everyone unhappy. Internationally, the main in the commercial contract, the applicable rate must accept the plan. an increase in the trade surplus increase. An problem remains the conflict with Bolivia over the for delays on the payment is the conventional increase in imports linked to robust internal Chilean law distinguishes different categories re-establishment of Bolivian access to the sea. interest rate as defined by the Central Bank of demand and the slight upturn in oil prices is of creditors during a bankruptcy process, e.g. Chile on a periodical basis. likely to be dampened by the appreciation of the employees owned money, creditors that have a peso. The services deficit, broadly due to the Ordinary proceedings mortgage (usually banks), etc. Creditors in these reliance on foreign transport services will fall in When a settlement agreement cannot be categories have preference for payment over a context of higher tourism income. Against this, reached with the debtor, the creditor will initiate others. If creditors do not meet the criteria to the income deficit will rise in connection with a legal collection process ruled by local civil be part of these categories, they do not receive higher dividend repatriation by foreign mining procedure which. have any kind of preference for payment. companies and higher payment of interest on Besides the Juicio Ejecutivo creditors who are While considering the approval of said plan, the external debt, which represented 63% of GDP unable to settle with their debtors out of court court stays the procedure and the legal actions at end September 2017, three quarters of which may enforce their right to payment through against the debtor. However, during this time concerns the private sector, specifically in the

66 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 67 CHINA CHINA

COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN CHINA Payment The court issues the order if the facts are clear Insolvency proceedings B and valid. The debtor has fifteen days to pay the COUNTRY RISK Cash is primarily used in face-to-face retail The 2007 Chinese enterprise bankruptcy law payments. It is mostly held by domestic debt. If the court rejects the application, the sets out three types of formal bankruptcy B companies and institutions. Only a small amount creditor may choose to litigate. Upon receiving proceedings: bankruptcy, reorganization and of cash flows from China to foreign countries. the repayment order, the debtor must either reconciliation. BUSINESS CLIMATE pay or submit a defence. If he does neither, the Cheques can be used to withdraw cash and creditor may apply for actual enforcement based Out-of-court proceedings transfer funds, and are mainly used for making on the repayment order. If the debtor submits a Parties may agree debt restructuring payments by governments and businesses. arrangements without going to court. However, TRADE EXCHANGES Coface assessments 2015 2016 2017(f) 2018(f) written objection, and the objection is supported Cheques used in local areas are generally cleared upon examination, the people’s court issues a such arrangements must not jeopardize the GDP growth (%) 6.9 6.7 6.7 6.5 by local clearing houses. If a cheque does not interests of any other creditors – otherwise, Exports of goods, as a % of total 1,382.7 ruling to terminate the procedure for urging debt Inflation (yearly average, %) 1.4 2.1 2.0 2.2 POPULATION bounce within the required time, the issuing bank repayment, and the order for repayment shall they may subsequently be declared invalid in any United States (millions of persons - 2016) has to transfer the money to the beneficiary court bankruptcy proceedings. 18% Budget balance (% GDP) -2.7 -3.0 -3.3 -3.5 be automatically invalidated. Where an order for 8,123 account. Hong Kong Current account balance (% GDP) 2.7 1.7 1.4 1.2 repayment is invalidated, the litigation procedure Restructuring proceedings 14% GDP PER CAPITA Commercial acceptance drafts are a form of shall be initiated, unless the creditor disagrees to This prevents the bankruptcy of enterprises that Public debt* (% GDP) 41.1 44.3 47.6 50.8 (US dollars - 2016) Euro Area negotiable instrument issued by companies to initiate an action. have plentiful assets but are experiencing cash Including central and local government debt (excl. financing vehicles) (f): forecast 11% entrust the payer to unconditionally pay the Ordinary Procedure flow problems. Both the debtor and the creditors Japan specified amount to the beneficiary on the date. The commencement of legal proceedings can apply to the People’s Court for Restructuring. 6% RISK ASSESSMENT Bank acceptance drafts are another type of involves filing a Statement of Claim at the During the proceedings, the debtor may South Korea negotiable instrument issued by the acceptance competent court, showing the basis and manage its property under the supervision of 4% Gradual deceleration in 2018 Overall indebtedness in the Chinese economy applicant, entrusting the acceptance bank amount of the claim. Once acknowledged, a writ an administrator. A restructuring plan must be remains extremely elevated (more than 260% Chinese growth will continue to moderate in to make unconditional payment of a certain of summons is sent to the debtor. Generally adopted by a majority of the creditors in each of GDP at the end of 2016, compared with 160% Imports of goods, as a % of total 2018. This moderation will be brought about amount of money to the payee or bearer on the speaking, in a month, a first hearing will be voting class (secured creditors, employees, etc.) in 2008). Most of the debt is held by corporates, by more restrictive policies aimed at curbing designated date. Bank acceptance drafts are planned in which the Court will make a final present at the creditors’ meeting representing Euro Area a large proportion of which are state-owned 11% financial vulnerabilities and asset bubble risks. more widely used and accepted than commercial attempt to amicably settle the matter through at least two-thirds in value of total claims in that enterprises. Many of these are “zombie” South Korea In particular, the authorities will ramp up efforts acceptance drafts. mediation. If the parties cannot reach an class. If the plan is adopted, the administrator enterprises, struggling with high levels of debt 10% to reduce the vulnerabilities associated with Letters of Credit are one of the most popular agreement, the lawsuit will continue and several or debtor must file an application to the court and overcapacity, but which generate employment Japan corporate indebtedness. The People’s Bank of payment methods used for large transactions. other hearings (if necessary) will be arranged, for approval within ten days from the date and output. In addition, corporate debt is difficult to 9% China (PBOC) has resumed monetary policy However, these are not always feasible for small in most cases during which the parties can of adoption. assess due to the expansion of shadow banking; Taiwan tightening. The authorities have also stepped in to businesses due to exorbitant bank charges, and exchange evidence. Eventually, a judgment will After the restructuring plan has been while public debt may be higher than reported if you 9% curb housing price speculation in major cities. The complex procedures and paperwork. be rendered by the Court. implemented, the administrator submits United States effects of a cooling property sector have yet to factor in the surge in local government financing SWIFT bank transfers are also among the most In theory, first instance decisions ought to be a supervision report to the court and his 9% materialize into a slowdown in the real economy. through local government financing vehicles popular payment means as they are rapid, rendered within six months of acceptance of the supervision duties end. If the court decides This is expected to take place in 2018, especially (LGVFs). Moody’s estimates that shadow banking secure, and supported by a developed banking case, but proceedings can be much longer when to terminate the procedure, the debtor can as sluggishness spills over into second- and third- assets grew by 21% in 2016, to reach 87% of GDP. + STRENGTHS network, both internationally and domestically. numerous creditors are involved. Furthermore, be declared bankrupt at the request of the tier cities. Consumption, which accounts for two- The number of bond defaults increased in 2016 and appeal proceedings must be terminated within administrator. • Sovereign risk contained as public debt thirds of GDP, has remained on target, supported 2017, and it is expected that the pace of defaults remains mainly domestic and denominated three months after appeal acceptance. In Reconciliation by relatively low inflation. Fiscal policy was very will continue as the authorities focus on removing Debt collection in local currency practice, the proceedings can extend by up to The procedure aims for an enterprise to accommodative in 2017. 2018 will see authorities implicit guarantees and reducing debt. Amicable phase • Reduced risk of external over indebtedness two years before a decision is rendered – and compromise and settle its liabilities with its thanks to the high level of foreign exchange oscillate between policy accommodation and The creditor begins the debt recovery procedure Uncertainties dissipate on the domestic and even longer when a foreign party is involved. creditors. The debtor applies directly to the reserves and to the maintenance of a tightening in order to manage a gradual slowdown. by addressing a letter to the debtor, who is court by submitting a compromise proposal current account surplus Rising levels of corporate indebtedness coupled foreign political fronts informed of any existing debts towards the • Gradual move upmarket as part of China Enforcement of a legal decision after the court has accepted a bankruptcy with overcapacity concerns in some sectors During the 19th National Congress of the creditor. If the debtor is responsive, creditors and petition against the debtor and before the 2025 strategy to boost high-value added (cement, aluminium, chemicals, ship building, etc.) debtors can begin a negotiation process in order Domestic judgments, once obtained, can be output Communist Party of China (CPC), all members of court declares it bankrupt. On the approval of will put pressure on profits. This will act as a drag on to obtain the payment in the shortest amount of executed by, for example, seizing the debtor’s • Services and infrastructure developments the Politburo Standing Committee – excluding the proposal, the administrator will hand over already slowing levels of private investment. President Xi Jinping and the Premier Li Keqiang – time possible. If there is no dispute between the bank accounts, property, or by a transfer of the property and business to the debtor and retired. The new line-up includes Li Zhanshu, Wang creditor and the debtor, the creditor can make rights. The creditor can apply for enforcement - WEAKNESSES report to the court on the performance of his Current account surplus Yang, Wang Huning, Zhao Leji and Han Zheng. The a repayment plan according to the debtor’s with the People’s Court or with an enforcement duties. An approved compromise proposal is economic situation. If a dispute exists, parties officer. • Credit risks remain a cause of concern. Exports in US dollars increased by approximately future policy direction is expected to be announced binding on the debtor and all its creditors who High corporate indebtedness to impact at the inauguration of the new Politburo in March, can negotiate an agreement on the debt amount. For foreign judgments, the recognition and had no security when the court accepted the growth potential 8% in the first ten months of 2017 compared to the same period in 2016. Exports have benefited from albeit some details will likely be leaked before then. Legal proceedings enforcement is based on the provisions of an bankruptcy petition. If the debtor is unable or • Overcapacity concerns in certain industrial Xi Jinping did not announce a successor and it is The Chinese court system is complex. It is divided sectors will continue to drag on profits robust demand from developed markets as well as international treaty concluded or acceded to by fails to implement the compromise proposal the unlikely that this will come from this list for two into multiple tribunals at different levels. The • Exposure of banks to rising corporate debt higher commodity prices. The yuan appreciated, both China and the foreign country or under the court can at the request of the creditors bound levels and deterioration in asset quality which has helped to reduce capital outflows, but reasons: first of all, most members will be close to basic People’s Courts are at the lowest level principle of reciprocity. In practice, enforcing by the compromise, terminate the procedure and • Government’s strategy is ambiguous on its appreciation has not yet been strong enough retirement age by the time President Xi steps down with the County People’s Courts or Municipal foreign arbitral awards is easier than enforcing declare the debtor bankrupt. in five years; and second, not everyone on this list arbitrating between reform and growth to erode export competitiveness. However, it is People’s Courts. The basic People’s Courts have foreign court decisions in China, because over Bankruptcy is a “Princeling” –a faction within the Communist • Environmental issues unlikely that any more yuan appreciation will be jurisdictions over most cases of first instance. 150 countries including China have signed and This aims to liquidate an insolvent enterprise and Party comprised of descendants of prominent and • Ageing population and gradual depletion of tolerated in 2018. The current account is expected Intermediate People’s Courts handle certain ratified the United Nations Convention on the distribute its assets to creditors. The procedure cheap labour pool influential communist officials, of which President to shrink slightly but remain in surplus in 2018. cases in first instance, such as major foreign- Recognition and Enforcement of Foreign Arbitral commences by an application with the court, Xi is a member. Most likely, a number of members th related cases, as well as appeal proceedings Awards (New York, 10 June 1958). either filled by the debtor or a creditor. On In the first quarter of 2017, the Chinese financial will be groomed to become potential heirs from the brought against decisions rendered by the Another method of enforcement is the accepting a bankruptcy petition, the court will SECTOR RISK ASSESSMENT account was in surplus for the first time in three extended 25-member Politburo, where Xi Jingping basic People’s Courts. At the Higher level, the “Arrangement on Reciprocal Recognition appoint an administrator from the liquidation years, with an upturn in net non-FDI flows, as a supporters abound. High People’s Courts decide on major cases in result of stricter enforcement of capital controls. and Enforcement of judgments in Civil and committee and will notify the debtor within On the foreign policy front, fears of a full-fledged first instance. The Supreme People’s Court is at Commercial Matters” (REJA) between China five days of accepting a bankruptcy petition. Even if this surplus is good news, it does not reflect the highest level, which handles interpretation a significant increase in capital inflows. Authorities trade war between the US and China have and Hong Kong. There are similar arrangements The debtor must submit certain financial dissipated, but the new American administration issues, and has jurisdiction over cases which between mainland China and Macao, as well as statements to the court within fifteen days of will continue to tighten the screws to avoid outflows have a major impact nationwide. while simultaneously attempting to attract more will continue to impose anti-dumping charges on between mainland China and Taiwan. It provides receipt of this notification. The administrator foreign investment. For example, stock and bond Chinese goods on a case-by-case basis. The crux Fast-Track Procedure a legal basis for Chinese courts to enforcement prepares a list of claims and submits it to the connects between Hong Kong and the two onshore of the question in the coming months will be to Creditors can apply for a repayment order judgments from Hong Kong, Macao, and Taiwan. first creditors’ meeting for verification. Once the financial centres Shanghai and Shenzhen were observe how the relations between China and the against the debtor if three conditions are met: It allows creditors to use courts from Hong Kong, final distribution is completed, the administrator inaugurated in 2017. US evolve over tensions in the Korean peninsula. the debt is purely monetary, there are no other Macao and Taiwan for cases in mainland China. reports this to the court, which will decide Some progress on this regards seems apparent debt disputes between the creditor and the within fifteen days whether to conclude the following from U.S. President Donald Trump’s visit debtor, and the repayment order can be served proceedings. to China in November 2017. Diplomatic tensions on the debtor. surrounding The Hague’s decision to rule in favour of Philippines in a high-level case over China’s activities in the South China Sea have also eased compared to a year ago.

68 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 69 COLOMBIA COLOMBIA

COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN COLOMBIA Payment Legal proceedings Insolvency proceedings A4 Fast-track proceedings COUNTRY RISK The invoice is the security title most frequently Insolvency proceedings in Colombia are ruled by used for debt collection in Colombia. When a When the debt is certain and undisputed (such the 2006 Colombian Insolvency Act, which sets sale has been made, the seller ought to issue one is the case for a bill of exchange), the creditor out reorganizations proceedings and judicial A4 can initiate summary proceedings to obtain a BUSINESS CLIMATE original invoice and two copies. The original must liquidation proceedings. be kept by the seller to be used for legal issues. payment order. The debtor must comply with the decision within ten days or submit a defence. In cases of insolvency or bankruptcy, the process One copy is then handed to the buyer, and the must be filed with the Superintendencia de other is kept by the seller for accounting records. Ordinary proceedings Sociedades with the requirements of the law TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) Other means of payment used in Colombia are The debtor must be notified through a writ 1116 of 2006. The case will then be assigned to an GDP growth (%) 3.0 1.9 1.7 2.8 48.7 bills of exchange, cheques, promissory notes, that the judge has authorized the proceedings. agent or liquidator, according to the situation of Exports of goods, as a % of total The debtor must then answer the claim within Inflation (yearly average, %) 5.0 7.5 4.3 3.3 POPULATION payment agreements, bonds, bills of landing, or the debtor company. United States (millions of persons - 2016) waybills. They are commonly used in domestic twenty days. If the debtor fails to do so, the judge 33% Budget balance (% GDP) -3.4 -3.0 -3.2 -2.7 can render a default judgment depriving the Out-of Court proceedings 5,792 business transactions, and tend to be considered Debtors may discuss debt restructuration Euro Area Current account balance (% GDP) -6.4 -4.3 -3.8 -3.6 as debt recognition titles that can facilitate defendant from their right to appeal. Otherwise, 11% GDP PER CAPITA agreements with their creditors before becoming Public debt (% GDP) 50.6 50.2 48.5 48.6 (US dollars - 2016) access to fast-track proceedings before the the court will invite the parties to attend a Panama mediation proceeding in order to reach an insolvent. The final agreement must be validated (f): forecast courts. 6% agreement. If an agreement cannot be reached, by an insolvency judge. Ecuador Bank transfers are rapidly developing in the parties will present their arguments and Reorganization proceedings 4% RISK ASSESSMENT Colombia. SWIFT bank transfers are becoming a evidences. Afterwards, the court will render The proceedings start by filling of a petition by China very popular payment method for international a decision. the debtor, one or more of the creditors, or by 4% Upturn in growth in 2018 but remaining scheduled for March and May 2018 respectively, transactions. For transactions of high value, the Superintendent. If admitted, the debtor is below potential is liable to drive the Colombian peso down. This payments are made through a national interbank In principle, first instance decisions ought to be rendered within a year, while Courts of deemed insolvent and all enforcement claims are Following two years of weak growth, economic is likely to limit any appreciation of the peso network called SEBRA (Electronic Bank of Imports of goods, as a % of total Appeal will render these within an additional six stayed. The reorganization plan is submitted by activity is likely to pick up again in 2018. The resulting from relative increases in oil prices. the Republic) It uses a system of real time United States months period of time. Nevertheless, in practice, the debtor, and the creditors and the judge must 27% slowing of inflation, expected to fall below the In terms of the external account, the price of settlement. SEBRA turns use two systems Colombian courts are unreliable, taking up to approve it. The court may designate a “promoter” target level set by the Central Bank (2-4%), oil, which remains unfavourable, will continue CEDEC (Check Clearing System) and CENIT China five years to obtain a first instance ruling and ten in order to manage the business. 19% should provide the bank with more room to as a drag on the balance of trade in goods and (National Electronic IntTerbank Compensation.). years for a full disputed lawsuit. Liquidation proceedings Euro Area continue its relaxation of monetary policy. This services (-4.7% of GDP in 2016) faced with rising For low-value payments, cash and cheque are 11% primarily used. This occurs as a result of a failure to reach a will help stimulate domestic demand – and imports (strength of domestic demand). The reorganization compromise, or when the debtor Mexico household consumption in particular – thanks increase in remittances from expatriate workers, Enforcement of a legal decision 8% has failed to abide by the negotiated terms. It can to low interest rates. An increase in public boosted by the relatively positive conditions in Debt collection Domestic judgments become enforceable be requested by the debtor and the creditors. Brazil infrastructure investments is also expected the United States, should help hold the current when all venues of appeal have been exhausted. 5% Amicable phase A liquidator is appointed to establish a list of to further add to growth. Under its Agenda 4G account deficit steady. This deficit is mostly being The creditor begins the amicable recovery Compulsory enforcement occurs through the creditors’ claims and to manage the estate’s transport infrastructure program, the country financed by foreign direct investments (3.2% of process by reminding the debtor of the debt seizure and auctioning of the debtor’s assets. liquidation. + STRENGTHS is working towards rectifying its deficiencies GDP in 2016) and other portfolio investments owed over the telephone. If this is unsuccessful, Nevertheless, collection of the debt from a third in this area. Although behind schedule, these (1.6% of GDP). through an email or a registered letter the party is possible through a garnishment order. • Ports on two oceans projects will help open up certain regions, creditor subsequently requests immediate For foreign awards, domestic courts will normally • Large population (almost 50 million) particularly rural areas, taking advantage of the Uncertainty in the political situation payment of the debt. If the debt is paid, the debtor enforce them provided that they have been recent peace treaty signed with the guerrilla • Plentiful natural resources (coffee, oil and The political situation is dominated by the will not bear the penalty interest, charges nor recognized by the Supreme Court through the gas, coal, gold) organisation Revolutionary Armed Forces of disagreements arising from the peace treaty legal fees. exequatur procedure. Colombian courts will not • Significant tourism potential Colombia—People’s Army (FARC-EP). These with FARC-EP, approved at the end of 2016. The Amicable phase is a recommended alternative recognize foreign decisions issued in countries • Cautious economic policies investments should benefit the construction which do not recognize Colombian decisions. sector, alongside the vitality seen in the legislative measures needed for its application to formal proceedings. Under Colombian law, • Institutional stability agricultural sector that is being stimulated by have been held up in Congress, with the mutiny of conciliation or mediation hearings before • Healthy banking system rising coffee prices and favourable weather former President Álvaro Uribe, who was opposed commencing formal proceedings are mandatory. conditions. The financial sector is also expected to the treaty. The scope for action by President Pre-trial mediation must also be conducted in to do well, bolstered by low interest rates. The Juan Manuel Santos is severely restricted as he administrative litigation. - WEAKNESSES trade balance is not expected to make any approaches the end of his term of office in August contribution to growth as the increase in coffee 2018. The next presidential elections will be • Sensitivity to raw material price extremely fragmented (26 possible candidates). movement and US economic situation (volume and price) and oil (price) exports will not compensate for the increase in imports (strength At the time of writing, Sergio Fajardo (centre- • Shortcomings in road and port left, former Governor of Antoquia and Mayor infrastructures of domestic demand). However, despite these improvements, the economy is still growing at of Medellin, running as an independent) and • Problematic security situation due to drug Vargas Lleras (Cambio Radical, Vice-President trafficking a rate below its potential (currently estimated by the government at 3.9%), held back by low until March 2017) are leading the polls. The newly • Relatively undiversified economy created FARC (Fuerza Alternativa Revolucionaria • Size of the informal sector (60% of jobs) levels of confidence among investors and consumers, despite a slight improvement since del Comun, a successor to the FARC-EP) party, • Shortages of skilled labour and poor the peace treaty. led by Rodrigo Londoño, has published its list productivity of candidates for the congressional elections • Cumbersome legislative, judicial and (March 2018) for the seats allocated to it under administrative systems; corruption A strict budget policy generating revenues the peace treaty. This announcement stirred • Structural unemployment, poverty and The 2016 tax reforms (VAT raised from 16 to 19%, up much debate as a considerable number of inequality, deficient educational and health extension of the tax base, and simplification the candidates were former guerrilla members care systems of the tax regime) are beginning to bear fruit, awaiting the outcome of legal action. In addition, resulting in increased receipts and a reduction negotiations with the National Liberation in the deficit. The increased rate of growth Army (ELN), the other guerrilla organisation, in 2018 should make it possible to end the are ongoing following the implementation of countercyclical fiscal measures implemented by a ceasefire last September – another area of the government to stimulate the economy. The uncertainty. central bank is likely to further relax its monetary In terms of the business climate, there are many policy following the surprise reduction of its outstanding corruption cases, including the most key lending rate in October 2017 to 5%, made recent ones of Francisco Ricuarte (Head of the possible thanks to slowing inflation. Another cut Supreme Court between 2008 and 2012) and to rates is expected in 2018, even if the reduction Bernardo “Ñoño” Elías (majority Senator). At the in the differential with US Federal Reserve key same time, security threats associated with drug rates is likely to limit the scope of this. This trafficking and organised criminal gangs, are also same reduction in the differential rate, together undermining the business climate. with the degree of uncertainty surrounding the congressional and presidential elections

70 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 71 CONGO (DEMOCRATIC REPUBLIC OF THE) CONGO (REPUBLIC OF THE)

COFACE ASSESSMENTS COFACE ASSESSMENTS D C COUNTRY RISK COUNTRY RISK E D BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 6.9 2.4 2.8 3.0 GDP growth (%) 2.6 -2.8 -1.9 2.8 Exports of goods, as a % of total 84.1 Exports of goods, as a % of total 4.2 Inflation (yearly average, %) 1.0 18.2 49.8 44.0 POPULATION Inflation (yearly average, %) 2.7 3.6 1.8 1.2 POPULATION China (millions of persons - 2016) China (millions of persons - 2016) 35% Budget balance (% GDP) 0.9 0.1 -0.3 0.6 40% Budget balance (% GDP) -17.8 -20.5 -9.1 -4.5 467 1,855 Euro Area Current account balance (% GDP) -3.9 -3.4 -4.6 -2.1 Euro Area Current account balance (% GDP) -42.9 -70.1 -15.9 -6.0 17% GDP PER CAPITA 19% GDP PER CAPITA Public debt (% GDP) 16.1 16.8 17.0 15.8 (US dollars - 2016) Public debt (% GDP) 96.3 115.0 117.7 116.0 (US dollars - 2016) Zambia Australia 17% (f): forecast 7% (f): forecast South Korea Gabon 9% RISK ASSESSMENT 7% Growth still highly reliant on oil and gas There is continuing uncertainty, however, relating to the repayment of the debt following a temporary Saudi Arabia Angola and China 8% Fragile growth in an undiversified economy The current account deficit is expected to shrink in 6% After two years of recession, growth is set to default by the Congo on its Eurobonds in July 2018 as exports increase, benefiting from higher return in 2018 under the stimulus of increased 2017. This default arose following a court-ordered The fall in raw material prices in 2016 led to a freeze on funds allocated for interest payments, Imports of goods, as a % of total reduction in the country’s rate of growth. Activity raw material prices and growing demand for cobalt. Imports of goods, as a % of total oil and gas production, bolstered by higher At the same time, imports are likely to decline as the prices. The increase in production from its two as part of a dispute between the Congo and the China remains primarily dependent on the prices of Euro Area Commisimpex construction consortium. The 21% cobalt and copper, as well as shifts in the political country no longer has the means to pay for them. 27% new Moho Project (Total & Chevron) and Banga Revenues at Congolese ports, the main entry points Kayo (Wing Wah Petrochemical) oil and gas company is claiming USD 1.1 billion against unpaid Euro Area and security contexts. Copper production was South Korea infrastructure work, and – if a settlement to the 19% for goods, were already down 2017. As an example, 18% fields should bring output up to 300,000 barrels up 9.3% in the first nine months of 2017, at dispute is not reached –the danger of another South Africa the same time as that of cobalt increased 18% revenues at the port of Goma dropped from China per day (b/d) in 2018 from 238,000 b/d in 2016. 16% 186 million Congolese francs in 2016 to 99 million in 12% The launch of a free-trade zone in the Pointe- freeze on the transfer of debt interest payments in benefiting from its strong price performance on the future remains. Zambia the international markets. The strength of world 2017. The Central Bank has only three weeks’ worth Norway Noire region, financed by China and due to be 9% demand for cobalt, used in the manufacture of of currency reserves for imports, after having used 11% inaugurated at the 2018 China-Africa Summit, In terms of external accounts, there is a large Tanzania batteries, will be a driving force in what will be its currency reserves in an attempt to slow the United Kingdom is expected to improve the diversification of the deficit (58% of GDP in 2016) in the balance of 6% moderate growth in 2018. The National Strategic depreciation of the Congolese franc. In this context, 3% economy around the petrochemical, tourism trade in goods and services. Increased oil and Development Plan (PNSD) could be implemented its sources of external finance, mainly FDI and and agri-food products sectors. Growth will, gas production in 2018 should stimulate exports grants, are likely to continue contracting. however, continue to be limited by infrastructure and help achieve a substantial reduction in the + STRENGTHS in 2018 (provide there is political logjam). As part + STRENGTHS of this plan, agreement has been reached with deficiencies, including namely the rail connection current account deficit. This latter is being partly • Plentiful mineral resources (copper, cobalt, Chinese companies covering the financing of Postponing of the presidential election • Abundant natural resources (oil, iron ore, between the economic capital, Pointe-Noire, financed by indirect foreign investments and diamonds. Gold and tin) road infrastructures at a cost of 3 billion dollars, exacerbates problems potash, phosphates, wood); agricultural and Brazzaville, which ended in late 2016 other net investments (10% of GDP in 2016). potential • Significant tourism potential as well as electricity infrastructures in an amount The decision by the Supreme Court to postpone following the collapse of two bridges. China, the • International involvement and regional of 660 million dollars with the aim of reducing • Potential economic diversification with Congo’s leading economic partner, is playing a President strengthens grip on power the presidential election, initially scheduled for opening of free-trade zones cooperation in resolving conflicts in the country’s energy deficit, in particular with its December 2016, allowed the President, Joseph principal role in infrastructure investments (new in context of serious social and security the Great Lakes region Zambian neighbour. In addition, the operating Kabila (in office since 2001, on the death of his hydroelectric dam near Liouesso, inaugurated in tensions • Debt relief as part of the HIPC and MDR agreement between Société Nationale d’Electricité father), to hang on to power. The Saint-Sylvestre May 2017). initiatives - WEAKNESSES Following his re-election for a third term of and the largest South African electricity Agreement between J. Kabila and the opposition The slowdown in growth in China itself could lead office in 2016 in a challenged election, President company is going to enable an increase in copper for a peaceful handover of power and the holding • Heavy reliance on oil and gas, and on China to a reduction in these investment flows, thereby Sassou-Nguesso’s grip on power was production, the most energy intensive industry limiting the financing options for the Congolese - WEAKNESSES of elections before the end of 2017 has not been • Lack of infrastructures; lag in poverty strengthened in the parliamentary elections in the country. According to the government, the respected. In April 2017, the President appointed reduction government, which is already subject to severe of July 2017. His party (Congolese Party of • Tensions in the East of the country with increase in electricity supplies will eventually a new Prime Minister, Bruno Tshibala, a minor • Poor business climate and weak budgetary pressures. Looking at consumption, the Labour) won 90 out of the 151 seats in the the recurrence of rebellions make it possible to increase copper production by opposition figure. On the 5th November 2017 the governance government’s efforts at budget consolidation, in the Assembly, in addition to the ten seats won by • Political crisis following the Supreme Court 20%. The high level of inflation, together with the Electoral Commission (CENI) published a timetable • Lack of transparency in terms of its debts; context of negotiations with the IMF, are likely to his allies. The opposition (Union Panafrican ruling to delay the presidential elections significant depreciation in the Congolese franc (all setting the date of Presidential elections at uncertainties about interest payments impact on domestic demand. Inflation is expected for Social Democracy, and the Union of and lack of any political desire to organise manufactured goods, as well as most foodstuffs, 23 December 2018, thus allowing the President to hold relatively steady in 2018, continuing below Humanist Democrats) is split, and won a total of them are imported), will have a serious downwards to continue in office until 2019. According to the target rate of 3% set by the BEAC (Bank of approximately ten seats. • Extreme dependence on raw material impact on the purchasing power of Congolese the regime, the lack of financial resources, as Central African States). prices households, meaning that household consumption The social context remains extremely tense, with well as the impossibility of holding elections in protests by government employees triggered by • Poor level of infrastructures (transport, (74.8% of GDP in 2015) is expected to decline in certain regions (because of the level of violence) energy, telecommunications) and weak Slow improvement in the twin deficits late payments of wages. In addition, there has 2018. With the aim of reducing the pressure on vindicated this decision. The elections would have governance The financial situation of the Congolese also been a renewed deterioration, since April household purchasing power, the Central Bank cost in excess of 500 million euros, and foreign • High poverty levels government has declined significantly over 2016, in the relations within the Pool region, raised its key interest rates from 7 to 14% in January funding for the CENI is well below expectations. The the last three years, hit by falling raw material adjoining Brazzaville, between security forces 2017, then to 20% in June. These remain a long way leaders of the opposition rejected this timetable prices: the main source of government income. and former rebel soldiers, who are supporters of below the rate of inflation. and Moise Katumbi, exiled in Belgium, plans to The government’s commitment to continue Pastor Ntumi. return to Kinshasa before 2018. The unrest has with its infrastructure investment programme, been particularly intense in the Kasai region, in the Relations with the neighbouring Democratic Back to small budget surplus and reducing despite the sharp drop in its revenues, has south, where the anti-Kabila insurrection since Republic of the Congo are likely to remain the current account deficit resulted in a mushrooming of public debt. The August 2016 has led to 5,000 deaths and 1.5 million precarious as a result of rising political instability The budget balance should be in slight surplus deficit has been largely financed by drawing on displaced persons (half of whom returned as in the country. This political instability will likely in 2018. Public expenditure in mostly (52%) foreign exchange reserves, which are now at a the situation calmed down at the end of 2017). In have a negative impact on the business climate allocated to wages. Compliance with the budget is very low level (three and half weeks of imports 2017 there were a number of attacks against the in the country, in a context of inadequate essentially dependent on operating costs (28% of in July 2017), undermining the country’s ability UNO mission in DRC (MONUSCO), resulting in the governance and an extremely high level of spending), which exceeded the budget forecasts to pay. Measures aimed at cutting current death of a number of blue helmets responsible for corruption. by 152 percentage points in 2016 and by 52 points spending (exposure of fictitious jobs, controls on protecting civilians. With a strength of 18,000 and in the first nine months of 2017. Following the bonuses for ministers, restrictions on travelling) an annual cost of USD 1 billion, MONUSCO is the decision by President J. Kabila to remain in office, helped reduce the deficit in 2017. The current UN’s biggest mission. there could be a reduction in foreign grants as a round of negotiations with the IMF, with the result of possible sanctions. Nevertheless, public Political uncertainty, corruption and weak aim of enabling the Congo to join a new Fund debt, significantly reduced thanks to the 83% debt governance has created an extremely poor programme, is grounds for hope for a further write-off in 2010 as part of the IMF’s HIPC initiative, impaired business climate (182nd out of improvement in the public accounts in 2018. remains viable and set to fall in 2018. 190 countries in the Doing Business 2018 ranking).

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COFACE ASSESSMENTS COFACE ASSESSMENTS A4 B COUNTRY RISK COUNTRY RISK A4 A3 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 4.7 4.3 4.0 4.1 GDP growth (%) 2.2 3.0 3.1 2.8 Exports of goods, as a % of total 4.9 Exports of goods, as a % of total 4.2 Inflation (yearly average, %) 0.8 -0.1 1.9 3.0 POPULATION Inflation (yearly average, %) -0.3 -0.6 1.3 1.6 POPULATION United States (millions of persons - 2016) Italy (millions of persons - 2016) 41% Budget balance (% GDP) -5.6 -5.1 -5.1 -5.2 13% Budget balance (% GDP) -3.3 -0.9 -0.9 -0.9 11,836 12,165 Euro Area Current account balance (% GDP) -4.5 -3.5 -3.8 -3.7 Slovenia Current account balance (% GDP) 4.6 2.3 3.0 2.0 19% GDP PER CAPITA 12% GDP PER CAPITA Public debt (% GDP) 40.8 43.7 46.7 48.8 (US dollars - 2016) Public debt (% GDP) 85.4 82.9 80.0 78.0 (US dollars - 2016) Panama Germany 6% (f): forecast 12% (f): forecast Nicaragua Bosnia Herzegovina 5% RISK ASSESSMENT 9% RISK ASSESSMENT Guatemala Austria 5% Stable growth sustained by domestic to remain in deficit due to dividend repatriation 6% Buoyant activity unprofitable businesses, which employ 13% of the demand by the multinationals established in the country. The economy is expected to post a third boom year workforce. Imports of goods, as a % of total Despite the ongoing monetary policy tightening, However, the services surplus will increase Imports of goods, as a % of total in 2018, buoyed by domestic and foreign demand. slightly, boosted by the rise in tourist visitor United States growth is expected to remain buoyant in 2018. Germany Even if the effect of the tax cuts in 2017 are expected Tourism and European funds are essential 37% Household consumption is expected to benefit numbers, notably from the United States. The 16% to fade, household consumption will benefit from current account deficit will be funded not only The current account balance has shown a surplus China from the wage growth in recent years, as Italy firm employment and wage trends, the recovery since 2013. This covers a large deficit (17% of GDP 14% well as the moderation in food prices, and the through inflows of FDIs, but also portfolio flows, 13% of credit and tourism benefits. Public investment, particularly through bond issuance. Meanwhile, 2017) in the trade of goods offset by tourism Euro Area recent fall in unemployment (down from 9.7% Slovenia especially in energy and transport, will benefit from income (20%). Nevertheless, the current account 8% to 8.5% between March 2016 and July 2017). the strong dollarisation of credit will force the 11% improved absorption of European funds, while private central bank to intervene so as to maintain the surplus is expected to decline in 2018. Strong export Mexico Nevertheless, rising inflation – triggered by the Austria investment will rise somewhat due to high corporate and tourism performance will be outweighed by 7% stability of colón, by drawing on foreign exchange 8% earlier depreciation of the local currency, the debt levels (80% of GDP), despite the resumption in rebounding imports associated with the problems Japan colón – will put pressure on disposable income. reserves. Hungary credit and growing tourism requirements. Tourism 3% 7% local industry has in responding to demand and with Conversely, public investment is likely to be (25% of GDP) will continue to benefit from the the high import content of exports. Meanwhile, the hit by funding constraints, forcing authorities Continuity of reforms despite a change disaffection with several Mediterranean countries, sum of remittances from expatriate workers and + STRENGTHS to postpone or delay the completion of some of government + STRENGTHS while exports of goods (timber, underwear, shoes, European funds will be close to that of outgoing infrastructure projects (as in the case of the The February 2018 parliamentary and presidential electric transformers, engines, automotive parts, dividends and interest payments. Foreign direct • Democratic institutions (since 1949) Port of Moin). The government wants to attract elections could result in a centre-left government • Hydroelectric power covers 75% of boats, medicines, electricity) will benefit from the investments, 4% of GDP in 2016, from the European electricity needs • Best social indicators in the region: foreign investors to sectors of tourism and led by the National Liberation Party (PLN). Like conquest of strongly performing European markets. Union, previously concentrated in the banking sector, education and health infrastructure (construction of a new airport at its predecessor, this new government is likely • Tourist attractiveness and long coastline Moreover, to maintain competitiveness in the tourism will be directed to real estate, energy and chemicals in • Services and cutting-edge industries San José), as well as cutting-edge technologies to be faced with fragmented parliamentary • Oil and gas potential sector, the central bank is expected to intervene on response to the development needs of tourism and (pharmaceuticals, microprocessors) (microprocessors, electronics), by offering representation. The reforms, initiated by the • Kuna pegged to the euro the markets to maintain the stability of the kuna for energy resources. External debt accounted for – attractive for FDIs advantageous tax conditions in the country’s previous government, are expected to continue, • High-quality infrastructure and keep monetary policy in line with that of the 78% of GDP at end July 2017. Primarily denominated in • Diversified trade thanks to multiple trade free trade zones and by opening up the services although with downwards-revised tax measure ECB. However, trade’s contribution to growth could euro, it represents exchange rate risk for non-financial agreements sector. Public/private partnerships are being targets so as to arrive at a compromise. The be negative, as imports will be boosted by internal companies (40% of the total), the public sector (30%), • Tourism resources: hotels, national parks used increasingly frequently, especially to build fight against criminality and money laundering - WEAKNESSES demand. Resolving the failure of Agrokor is not as well as for the banks (8%, markedly declining). transport infrastructure such as roads or railway networks linked to drugs trafficking will, however, expected to have a significant impact, unless it unfolds However, the risk is lessened by the kuna’s peg to lines. Despite the still underdeveloped tourist still be one of the new government’s priorities. • High private and public debt in a disorganised and unsystematic way, in which case the euro, a counterweight to the economy’s strong - WEAKNESSES facilities, a dynamic tourism sector will sustain • Lack of efficiency in administration and local suppliers and their employees could be affected. euroisation (almost 60%). activity, benefitting the construction sector The business climate will continue to be affected justice • Exposed to natural disasters by infrastructure shortcomings (especially in particular. Improved trade terms, together • Uncertainty over resolution of Agrokor • Inadequate transport infrastructure Fiscal consolidation to be continued Strong opposition to reforms with favourable financing terms, will continue transport and telecommunications) and case, the country’s largest company • Economically (FDIs, exports) and to encourage exports (notably of bananas, relatively high energy costs (electricity). In terms and employer The country exited the European excessive debt Less than a year after voters went to the polls, early financially (banks) dependent on of international relations, the country has not yet • Weak industrial development/lack of procedure. The public accounts are close to equilibrium elections in September 2016 returned the coalition the United States pineapples and coffee), even though import growth will limit trade’s contribution to growth. decided whether or not to join the Pacific Alliance. competitiveness and, if one excludes debt interest, are even showing a formed by the centre-right Democratic Union (HDZ) • Weak public accounts Discussions with the OECD about the country’s • Manufacturing exports (22% of GDP) of surplus (primary balance). Apart from better control and the reformist party MOST (The Bridge). This • Lack of skilled workforce / accession are still ongoing. medium or low added value of current spending, the improvement greatly relies coalition swiftly fell apart over the reform programme. undeclared work Persistent public and current account on the beneficial impact of the return to growth on deficits • Poor absorption of European funds/ The Prime Minister and leader of the HDZ, Andrej • High income inequalities administrative complexity/corruption tax receipts. This relativises the improvement and Plenkovic, has managed to form a new coalition Although fiscal consolidation has begun (better • Low female employment rate and high introduces a cyclical fragility. The wage bill remains with the liberals from the People’s Party (HNS). With tax collection, operating savings), the country’s youth unemployment high and the national collective wage agreement 78 seats (of which 61 for the HDZ) out of 151, it is fiscal position remains worrying. Higher financing • Emigration taking away skilled workforce means it is expected to rise in 2018. Likewise, social weak. The programme of reforms aims to restructure costs, as well as a persistent public deficit will transfers, not sufficiently targeted to those who need the administration and public-sector enterprises lead to another increase in public debt. Real them most, military pensions, spending on defence (1/3 of jobs), if necessary through privatisation and improvement will depend on the adoption of a tax and healthcare will also rise. On the income side, job cuts, to review social security benefits and the reforms to boost revenue (currently 13% of GDP) the banks’ cancellation of non-performing loans, pension system and to reform the hospital system. by replacing the current sales tax (13%) with a let alone the final cost of a messy management of It is sparking opposition, not only from the social 15% VAT, and the abolition of tax exemptions. the collapse of Agrokor, will put pressure on income democrats in the SDP, but also within the HDZ. Nevertheless, adoption of the reforms is subject from corporation tax. Against this, the authorities There is consensus over the refusal to accept the to the February 2018 election timetable and the are expected to benefit from greater absorption judgement of the Permanent Court of Arbitration difficulties in obtaining political consensus on of European funds and higher social security granting Slovenia access to the sea through the Bay implementation. contributions, as well as from lower borrowing costs. of Piran, the construction of the Peljesac bridge linking The current account deficit is expected to remain However, the primary surplus and growth are enough the northern and the southern coasts of Croatia by stable in 2018. The trade balance will widen to bring about a slow easing of the heavy burden of spanning Bosnia’s only and narrow maritime access, slightly as the growth in exports of goods will debt, three quarters of which is denominated in euros as well as the management of the Agrokor case. not offset that of imports, mainly because of and mostly held by domestic institutional investors, the modest oil price recovery (the 3rd most- of which the banks, 90% of which are subsidiaries of imported item) and the dynamism of domestic Austrian and Italian groups. Progress is made difficult demand. The income balance is also expected by the size of the informal economy (28%) and the many state-owned enterprises, often low-profit or

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COFACE ASSESSMENTS COFACE ASSESSMENTS E A4 COUNTRY RISK COUNTRY RISK E A3 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators* 2015 2016 2017(f) 2018(f) GDP growth(%) 4.4 -0.9 -0.4 1.3 GDP growth (%) 2.0 3.0 3.5 3.0 Exports of goods, as a % of total 11.5 Exports of goods, as a % of total 0.8 Inflation (yearly average, %) 4.6 4.5 5.2 5.9 POPULATION Inflation (yearly average, %) -1.5 -1.2 1.0 1.0 POPULATION Euro Area (millions of persons - 2016) United Kingdom (millions of persons - 2016) 26% Budget balance (% GDP) -5.5 -6.3 -11.0 -8.9 12% Budget balance (% GDP) -1.2 0.5 1.1 1.4 7,811 23,352 Russia Current account balance (% GDP) 0.7 0.9 0.6 0.7 Greece Current account balance (% GDP) -2.5 -4.9 -5.4 -6.2 23% GDP PER CAPITA 10% GDP PER CAPITA Public debt (% GDP) 39.7 42.5 48.2 51.2 (US dollars - 2016) Public debt (% GDP) 108.0 107.0 107.0 103.0 (US dollars - 2016) Venezuela Sweden 15% Sources: EIU, government, Coface (f): forecast 7% * Turkish Cypriot controlled territory excluded (f): forecast Lebanon Liberia 4% RISK ASSESSMENT 6% RISK ASSESSMENT Brazil Libya 4% Activity subject to external factors The December 2015 agreement with the Club de 5% Growth driven by internal demand and the increase in deposits recorded since 2016, the Growth is expected to pick up only slightly in 2018 Paris opened the way to bilateral reconstruction, tourism growth in new credit and the ending of recourse to Imports of goods, as a % of total as it is still constrained by external factors. Poor following the 1986 default, through an Imports of goods, as a % of total Private consumption (69% of GDP) will contribute central bank liquidity assistance are positive signs. arrangement to clear interest payment arrears China economic and political conditions in Venezuela Greece strongly to growth, encouraged by lower 28% will continue to dampen Cuba’s growth by and negotiate repayment of the principal on the 18% unemployment, more jobs and higher wages, low High levels of public and external debt initial debt by instalments over eighteen years, Euro Area limiting deliveries of crude oil, refinement of Germany inflation as well as the recovery in house prices (after and a grace period for interest payments up The public accounts surplus could increase with 28% which is a major source of foreign currency. 17% a 30% slump since 2010). It will also be sustained until 2020. From the perspective of the current royalties on gas exploration. The primary surplus Argentina Renewed tensions between Cuba and the United China by spending by three million tourist visitors to the account, the trade balance shows a deficit, with (i.e. excluding interest) and growth will ease the 5% States following allegations of sonic attacks on 8% Island, namely three times the local population. the country very dependent on imports (of heavy burden, with 50% due to public-sector Brazil members of the US diplomatic corps led to the Italy The construction of tourism facilities (marina, golf 4% food and energy). The economic downturn in 6% creditors (EU, Russia, etc.) mainly in euro and with re-imposition of sanctions in November 2017. courses, ports and luxury residences) and offices Venezuela is likely to weigh on exports obliging medium to long-term maturities. The improvement Mexico Individual tourist trips for US citizens are again United Kingdom will remain buoyant, thanks to external finance 4% Cuba to buy oil at market prices for its refining 5% derives to a great extent from good economic limited and a blacklist of entities with links to encouraged by the Citizenship-by-Investment industry. Nevertheless, higher nickel prices conditions, which is confirmed by the narrow Cuba’s military service has been drawn up. The scheme. National investment will remain hesitant equilibrium in the structural balance. However, the return of these restrictions has led one rating should partly offset this drop in oil income. + STRENGTHS Services are likely to show a surplus, enlivened + STRENGTHS because of household and corporate debt levels reduced influence of European institutions and the agency to change Cuba’s sovereign rating equivalent to 123% and 150% of GDP respectively IMF since the end of the assistance programme in • Tourism and mining (nickel, cobalt) sector outlook from positive to stable. The impact of by growth in the tourism sector. The influx of • At the crossroads of Europe, Africa and Asia and agricultural potential remittances from emigrants living in the United (excluding Special Purpose Vehicles engaged in 2016 could lead to a relaxation of efforts in what is a the destruction linked to Hurricane Irma (late • Eurozone membership offshore activity) which does not encourage the long-haul struggle. So, while administrative reform • Agriculture, trade, hospitality and States is a major source of finance and a source September 2017) is, on the other hand, expected • Tertiary sector: tourism, business and banks to get credit flowing again. Against this, public (promotion, wage structure, mobility) is progressing, construction (over 200 trades) open to the to lessen and the tourism and agriculture sectors of foreign exchange. Finally, the project to merge international finance hub, maritime investment will return thanks to the relaxation of that of the management of public-sector entities private individual and co-operative sectors should pick up. In 2017 the number of visitors the two Cuban currencies, the convertible peso transport and transhipment budgetary constraints. Meanwhile, despite good and local authorities, as well as privatisations • Skilled, relatively cheap workforce to the Island beat the 2016 record to total over aligned with the US dollar (for tourists and worker • Skilled, English-speaking workforce performances by tourism, maritime transport, (telecommunications, electricity) is falling behind. • High quality medical and education sectors 4 million visitors. The sector is expected to remittances) and the domestic peso (24 CUP to • Good quality transport and financial services and other sectors, trade’s • Fairly satisfactory social indicators continue to grow, despite the new sanctions, as 1 USD) in which wages and locally produced goods telecommunications infrastructure Poor manufacturing diversification (cheese, are denominated, remains uncertain. contribution to growth will remain negative due to • Low crime rates and anti- corruption policy US tourists represented only 7% of the total in • Offshore gas potential medications and electronics) explains the trade robust imports associated with internal demand. deficit (20% of GDP). Despite the services surplus • Political Dialogue and Co-operation 2016. From the perspective of investments, the Agreement with the European Union since Cuban government has released an expanded Towards political and diplomatic handover (22%), the current account balance is negative st A convalescent banking sector because of outgoing dividends and interest 1 November 2017, already beginning annual foreign direct investment opportunities In 2018, the Cuban political class is expected to - WEAKNESSES regarding FDIs portfolio (396 projects in 2017). A special change following the results of the presidential Following Cyprus’s EU accession in 2004, the payments. The current account is financed by FDIs economic zone has even been set up at Mariel • Island divided (since 1974) and tense in property and tourism and through bond issues. elections in February, which will see Raoul relations with Turkey Cypriot banking sector swelled to six times GDP. The port to develop the biotechnology, agrofood Castro’s step down as Head of State (new limit contraction in the local property market in late 2008 Meanwhile, significant sums come in from abroad - WEAKNESSES and renewable energy industries. Household • Small domestic market, isolated, remote (especially from Russia), but in the main only transit of two terms of office). The municipal elections and outside the centre of Europe and the collapse of the Greek economy in early 2010, consumption is expected to benefit from the in which was heavily invested, were fatal resulting the country. Gross external debt represents seven • Vulnerability to external factors (climate, of 27 November 2017 were a precursor to the • Poor economic diversification (tourism, commodity prices, Venezuelan aid) positive impact of tourism in the form of jobs and handover, with particular attention paid by those in the insolvency of its main players. Incapable times GDP. 89% is held by the private sector, of property, finance) and limited foreign which 60% corresponds to commitments from the • Weak productivity in public sector and increased remittances from expatriate workers in power to limiting the participation of dissident customer base, with the United Kingdom of rescuing the sector alone, given the severe agriculture mostly living in the United States. Inflation candidates so as not to interfere with the and Russia providing 36% and 24% degradation of the public and external accounts and special purpose vehicles intended to finance ship- • Low levels of investment and inadequate should remain within the average of previous appointment of the new Head of State (elected of visitors (2016) under pressure from the European Commission, the owners or businesses without any real local activity. infrastructure years, around 5%, as most prices and wages are by the parliamentary assembly whose members • Regional geopolitical instability ECB and the IMF whose financial assistance was Nonetheless, the share owed by local borrowers still • Burdensome administrative processes and controlled by the State. Finally, net exports will are appointed by local elected representatives, • High levels of debt of all economic actors on condition that the sector is restructured, the accounts for more than three times the GDP. still very new trade regulations make a negative contribution to growth with still before being confirmed during parliamentary and dependent on external finance authorities carried out a restructuring mainly paid • State control of wholesale trade, credit, very low sugar prices, nickel below its historical elections). The current vice-president • Huge banking sector, hyper-concentrated for by creditors and depositors whom the authorities A minority government levels and lower refined oil output. foreign trade and foreign investment Miguel Diaz-Canel is standing as successor and burdened by non-performing loans are planning to indemnify. Despite the bankruptcy The May 2016 parliamentary elections confirmed • Subsidies for basic products (those to Raoul Castro who will continue to lead the • Slow legal process of one of the largest banks, the sector, currently the President’s conservative Democratic Rally Party featuring in the libreta or Supplies booklet) External conditions influencing budget Cuban Communist Party. The army remains highly concentrated with three major institutions, is put pressure on public spending (Disy) as the largest party in parliament with 18 seats and current accounts omnipresent, both in the institutions as well as still very large (3.5 times GDP in June 2017, excluding out of 56. With sixteen MPs from the Progressive • Limited access to external finance The explosion in the budget deficit observed in the economy, limiting the risk of instability. offshore banks). With the gradual implementation Party of Working People (Akel, left-wing) on the • Exchange rate unrelated to reality in 2017 following hurricane Irma is expected to Meanwhile, Cuba’s diplomatic strategy has of insolvency and foreclosure legislation approved opposition benches, President Anastasiades and his upholding dualism of the economy, start to shrink in 2018. The cut in Venezuelan aid, recently evolved and the country is looking for in 2015, the scale of non-performing loans ratio is government need to find circumstantial majorities the black market, scarcity economy and new allies in the face of Venezuelan default. The the informal sector the reduction in exported services (education, declining but still represents 46% of bank portfolios with the nine centrist members of the Democratic new agreement between Cuba and the European • Lack of statistical transparency healthcare) to Venezuela, Angola and Brazil, as (60% in large institutions) and 135% of GDP (June Party (Diko) and members of the five small parties well as low sugar prices are putting considerable Union, which entered into force on 1 November 2017). Dealing with these is made arduous by poor by combining fiscal restructuring measures, with pressure on the public finances, at a time when 2017, will facilitate dialogue and co-operation registering, immunity for the main residence and the social measures such as the introduction of a spending is set to rise in the run-up to elections. between Cuba and Europe. Relations with Russia difficulty in valuing assets. Given this mess, neither national health system in 2019. Despite the failure The government is relying on the controlled have also become closer, with the shipment of households nor developers have an incentive to of negotiations between the governments of the development of the non-governmental large quantities of crude oil and participation in repay their loans, while banks are reluctant to Island’s Greek and Turkish communities aimed at economic fabric to increase tax receipts. The energy and rail infrastructure projects. commit to long procedures in respect of households ending the division of the country, the economic public debt has increased in recent years but and SMEs who are liable for 4/5 of these loans, recovery should be enough to ensure the President’s there is a lack of data to analyse its structure. preferring to wait until property prices rise. However, re-election in February 2018.

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PAYMENT AND COLLECTION PRACTICES IN CYPRUS COFACE ASSESSMENTS Payment The recovery process commences with the For foreign awards rendered in a European debtor being sent a final demand for payment Union member-state, Cyprus has adopted A2 Bills of exchange are used by Cypriot companies COUNTRY RISK in domestic and international transactions. In the by recorded delivery mail, reminding him of his advantageous enforcement conditions, event of payment default, a protest certifying payment obligations, including any interest such as EU Payment Orders or the European penalties as may have been contractually agreed Enforcement Order. For decisions rendered by A2 the dishonoured bill must be drawn up by a public BUSINESS CLIMATE notary within two working days of the due date. – or, failing this, those accruing at the legal rate non EU countries, they will be automatically of interest. enforced according to reciprocal enforcement Similarly, cheques are still widely used in Interest is due from the day following the date of treaties. In the absence of an agreement, international transactions. In the domestic exequatur proceedings will take place. business environment, however, cheques payment stipulated in the invoice or commercial TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) are customarily used less as an instrument agreement at a rate, unless the parties agree GDP growth (%) 5.3 2.6 3.9 2.8 10.6 otherwise, equal to the European Central Bank’s Insolvency proceedings Exports of goods, as a % of total of payment, and more as a credit instrument, Inflation (yearly average, %) 0.3 0.7 2.3 1.8 POPULATION making it possible to create successive payment refinancing rate, plus seven percentage points. Restructuring proceedings Germany (millions of persons - 2016) 32% Budget balance (% GDP) -0.6 0.6 0.5 0.6 due dates. It is therefore a common and Legal proceedings This procedure aims to help debtors restore 18,508 Introduced in 2015, cases with small claims their credibility and viability, and continue their Slovakia Current account balance (% GDP) 0.2 1.1 0.5 0.1 widespread practice for post-dated cheques to 8% GDP PER CAPITA be endorsed by several creditors. Furthermore, (no more than EUR 3,000) can follow a simplified operations beyond bankruptcy, by aiming to Public debt (% GDP) 39.9 36.8 34.5 32.5 (US dollars - 2016) negotiate an agreement between the relevant Poland issuers of dishonoured cheques may be liable to and faster procedure. To engage such a 6% (f): forecast prosecution provided a complaint is lodged under procedure, the creditor must possess a written debtors and creditors. During this procedure, United Kingdom both Civil and Criminal procedures. document substantiating the claim underlying claims and enforcement actions against the 5% RISK ASSESSMENT his lawsuit, such as a Statement of Account, an debtor may be stayed, but the court will appoint Instead of promissory letters or notes, which France an administrator to control the debtor’s assets are not usually used as a security or payment acknowledgement of debt established by private 5% Dynamic activity despite an economic still held by local investors. This success explains and performances. The reorganization process method in Cyprus, a written acknowledgement deed, the original invoice summarising the goods slowdown why 86% is denominated in koruna and issued at starts with the debtor’s submission of a plan to of debt may be obtained, which can be used as sold and bearing the buyer’s signature and stamp negative yields on short maturities. the court, which conducts a judicial review of the Imports of goods, as a % of total Following the outstanding performance of 2017 essential evidence during the Hearing trials in a certifying receipt of delivery, or the original delivery slip signed by the buyer. proposed plan, while a court-appointed mediator Germany associated with the recovery of investment, The trade balance shows a structural surplus later stage to the Court. 31% growth in 2018 is expected to settle at a level (5.6% of GDP in 2016) thanks to close integration For all other claims, the usual procedure is assesses the creditors’ expectations. SWIFT bank transfers, well-established in Poland in line with potential but will remain hampered in the European, especially German, production Liquidation Cypriot banking circles, are used to settle a followed. The creditor files a claim with the court, 10% by the shortage of a local workforce due to low chain and for automotive. Engineering, household The procedure commences with an insolvency growing proportion of transactions, and offer a who serves the debtor within twelve months. The China unemployment (2.7% in October 2017). Private appliances and electrical equipment will also petition either by the debtor or its creditors. quick and secure method of payment. In addition, hearing would be set at least eighteen months 7% investment will continue to be the second most make a positive contribution. Nevertheless, The court appoints an administrator as soon SEPA bank transfers are becoming more popular later. Cypriot law allows the court to render a Slovakia important contributor to growth, after private the slight appreciation of the koruna, as well as the debts are verified. In addition, a Pool of as they are fast, secure, and supported by a more default judgment if the respondent fails to file 6% consumption, because of the high capacity as robust domestic demand, will limit the trade Creditors (three members representing each developed banking network. a defence. The ruling issued by the judge allows Netherlands utilisation ratio. Construction will continue to surplus. Services also show a surplus (2.3%) immediate execution subject to the right granted class of creditors) will be given the responsibility 5% benefit from the return to normal of European thanks to tourism. The substantial income deficit to the defendant to lodge an objection. To obtain of overseeing the proceedings, which terminate structural finance, but will be hampered by (6.1%) is explained by the substantial FDI stock. Debt collection suspension of execution, the debtor must once the proceeds of the sale of the business’ + STRENGTHS the residential property downturn. This will This results in a small current account surplus, Amicable phase petition the court accordingly. assets are distributed. suffer from more expensive credit linked to which could be jeopardised by a drop in the trade Before initiating proceedings in front of the • Central geographic location at the heart of the central bank’s monetary policy tightening. surplus, even if the potential for deterioration competent court, an alternative method to Enforcement of a legal decision industrial Europe Automotive – which accounts for 28% of seems fairly limited. Moreover, external debt recover a debt is to try to agree with the debtor Enforcement of a domestic decision may begin • Tightly integrated in the international, industrial production, 20% of exports of goods, (74% of GDP) presents a low risk, as it mostly on a settlement plan. Reaching the most especially German, production chain once the final judgment is made. If the debtor fails and 10% of GDP – is expected to continue to consists of intragroup liabilities, loans linked to beneficial arrangement is usually achieved by • Preferential destination for foreign direct prosper. This is because automotive exports FDIs, short-term commercial loans, and deposits means of a negotiating process. to satisfy the judgment, the latter is enforceable investments in Central Europe directly through the attachment of the debtor’s will benefit from strong German consumption by foreign banks with their local subsidiaries (87% assets. • Significant industrial potential and performance, as well as the positive trend of bank assets), which are by nature fairly fixed. • Robust public accounts and banking on the European market on which they greatly system rely. Nonetheless, export momentum will be Formation of a minority government, • Low reliance on external energy dampened by the appreciation of the koruna, weakened by allegations concerning reducing export competitiveness and trade’s the new Prime Minister contribution to growth. Inflationary tensions will The ANO 2011 (centre-right) movement led by - WEAKNESSES start to put pressure on household consumption. Nevertheless, household consumption Andrej Babis, won the October 2017 elections by • Small, very open economy: exports a large margin, obtaining 30% of the votes cast account for 84% of GDP will continue to be underpinned by robust employment figures and wages, as well as by and 78 out 200 seats in parliament. Nevertheless, • Very dependent on European demand: the traditional parties have refused to enter 63% of exports are to the Eurozone, one the gradual appreciation of the krona, enabling a reduction in the cost of imported goods. into a coalition with this party whose leader third to Germany has been charged with the fraudulent use of • Automotive occupy large share of the European funds. The traditional parties received economy Excellent fiscal position and satisfactory a historically low share of the votes, for example • Lack of rapid transport links with the rest external accounts the Social Democratic Party (CSSD), to which of Europe Despite some easing, the new government’s the outgoing Prime Minister belongs, was • Ageing population and shortage of skilled fiscal policy is expected to remain cautious, relegated to sixth place with only 7% of the labour helping keep the public accounts in equilibrium in votes. Conversely, the rival parties have made 2018. Infrastructure spending will increase due to significant progress with the Czech Pirate Party the necessity of using European funds awarded (10.8%) and the extreme-right Freedom and SECTOR RISK ASSESSMENT under the 2014-2020 programme, on pain of Direct Democracy Party (10.6%) able to profit seeing the level reduced in future. Moreover, from distrust of migrants and Euroscepticism. massive fiscal reforms are planned by the new With nine parties represented, the fragmented government, which wants to take advantage of parliament makes it difficult to form a majority the strong increase in revenues generated by government. Therefore, Andrej Babis will lead a the lively pace of activity to finance the reforms minority government and will have his work cut without worsening the budget position. The out to win the parliamentary vote of confidence. reforms include a cut in VAT in the hospitality He could win the vote if the far-right and far- sector (from 21% to 15%), a reduction in employer left parties, which have given him their tacit contributions, as well as cuts to income and support at the price of major concessions, were corporation tax. The reform programme will to abstain. If he fails, another less controversial also be financed by cuts to current spending, member of his party could take over in order to allowing budget equilibrium to be maintained and reassure the traditional parties. debt reduction to continue. Despite the influx of foreign capital attracted by prospects for an appreciation of the koruna, 80% of the debt is

78 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 79 CZECH REPUBLIC DENMARK

PAYMENT AND COLLECTION PRACTICES IN THE CZECH REPUBLIC COFACE ASSESSMENTS Payment · Other costs and other costs of (approximately) · Bankruptcy 3% · Debt clearance (or in other words, discharge of A2 Czech law limits cash payments to a maximum COUNTRY RISK of CZK 270,000 (approximately EUR 10,000). - e.g. expert testimony, translation and debts) Purchasers who wish to make payments that interpretation An insolvency petition can be lodged by either Fast-track procedure / Order to pay A1 exceed this limit must pay the entire sum via debtors themselves or their creditors, but a BUSINESS CLIMATE wire/bank transfer. (platební rozkaz) creditor must provide unambiguous evidence to This is a practical and rather short procedure, Bank transfers are by far the most widely-used support its claim, with one of the following: outlined in sections 172 - 175 of the Code of Civil · An acknowledgement of debt (with the certified means of payment. The SWIFT system is fully Procedure (občanský soudní řád, CCP). operable in the Czech Republic, and provides an signature of the debtor or its representative) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) easier, quicker and cheaper method for handling The judge, convinced of the merits of the claim · An enforceable judgement GDP growth (%) 1.6 1.7 2.2 2.0 5.7 and without hearing the case, issues a payment · An enforceable notary act Exports of goods, as a % of total international payments. The Czech Republic Inflation (yearly average, %) 0.4 0.3 1.0 1.4 POPULATION is part of the SEPA system, simplifying bank order which is served to the defendant, who may · An enforceable executor´s act, Germany (millions of persons - 2016) either accept it or file a statement of opposition · Confirmation of auditor or expert witness or 16% Budget balance (% GDP) -1.7 -0.6 -1.4 -0.8 transfers inside the European region. 53,745 against it within fifteen days of its service. tax advisor Sweden Current account balance (% GDP) 9.1 7.8 8.3 8.0 Cheques for domestic transactions are not 12% GDP PER CAPITA If the debtor opposes the debt, then the process The creditor must in addition prove the existence Public debt (% GDP) 39.6 37.7 37.8 36.9 (US dollars - 2016) widely used. Bills of exchange and promissory United States notes are commonly used as a security continues as standard court proceedings. of other creditors. Creditors are liable for 8% (f): forecast damages caused by filing a bankruptcy petition instrument, which present the purchaser with If the legal action duly described and substantiated United Kingdom the option to access a fast-track procedure for the creditor’s claim, the court can issue an order where the conditions of insolvency were not met. 6% RISK ASSESSMENT ordering payment by court (under certain legal to pay, even if the creditor has not requested such All insolvency petitions are recorded in an Norway conditions). an order. It takes on average three months for a insolvency register (insolvenční rejstřík) kept 6% Internal demand boosts activity abroad. As a result, the deficit and the public debt Electronic invoices are widely accepted. decision to be made, ranging from a minimum of by the Ministry of Justice, where all important In 2018, growth will remain vigorous, buoyed by will remain broadly below the threshold set by two months to a maximum of six months. information on insolvency proceedings is Imports of goods, as a % of total private consumption and investment. Private the European Stability and Growth Pact (3% and published (sections 419-425 of the Insolvency 60% of GDP respectively). Debt collection Ordinary procedure Germany consumption will be sustained by historically Ordinary proceedings takes place after the Act). This also allows for insolvency proceedings 22% low interest rates (key rate: 0%; interest on There will still be a substantial current account To ensure the recovery of a debt in case of defendant has disputed the claim during the to remain transparent. Sweden bank deposits with the central bank: -0.65% surplus in 2018. Lively export momentum will default, creditors should keep all documentation platební rozkaz or by filing a dispute directly via Reorganization proceedings 12% since February 2015), higher wages, as well as help maintain a trade balance surplus (5.3% of related to the transaction. This includes the the courts. Ordinary proceedings are partly in Reorganization is a method of resolving Netherlands low unemployment (4.4% in September 2017). GDP), even if imports will also rise, stimulated original (written) contract, any documents writing (parties filing submissions accompanied insolvency that aims to preserve the debtor’s 8% Moderate inflation will help significantly increase by consumption and investment. Exports related to the transaction (e.g. invoices and by all supporting case documents), and partly business, while granting satisfaction to China household disposable income, also sustained of agricultural products (pork, milk) will be confirmed delivery notes, such as internal oral (both creditors and debtors present their creditors. Insolvent debtors may initiate 7% by lower income taxes in 2018 as agreed by the the least dynamic, especially those to Asian delivery notes, CMRs , CIMs, bill of lading, airway cases during the main hearing). In practice, proceedings, but debt restructuration proposals Norway government. Moreover, households will benefit countries and Germany. Machinery and transport 6% bills, packing lists, etc.), individual orders, and ordinary proceedings typically last from one to must be approved by the court, with periodical from the wealth effect associated with property equipment will also be among the top exports, any other relevant documentation and/or three years before the court renders a final and inspection of its fulfilment by the creditors. The prices, as well as more flexible credit conditions as will chemical products (biotechnology). correspondence. enforceable judgement. management retains the right to manage the + STRENGTHS thanks to deleveraging since 2014, although Nevertheless, Brexit could have a negative The main factors influencing effectiveness in On the 1st July 2009 onwards (Act No. 7/2009 business. household debt is still the highest in the OECD impact on export items due to lower demand • World’s fifth largest shipping operator th debt collection are the age of the debt (the earlier Coll.), the CCP was amended to introduce more Bankruptcy proceedings (240% of disposable income). Higher capacity from the United Kingdom (4 biggest export the start of collection, the larger the chance for digital options in the justice process, so as to Bankruptcy is a court-ordered method of • Energy self-sufficiency (oil in the North Sea utilisation, as well as the shortage of labour, will market). External debt is still considerable and Greenland) and net energy exporter a successful recovery) and the reason for non- lessen the burden of judges and ensure the resolving insolvency, whose aim is to monetize encourage private investment in the industrial (130% of GDP), even though it has fallen strongly payment. prevention of delays in proceedings. Since all assets of debtor and thus obtained yield • Niche industries (renewable energy/ sectors (pharmaceuticals, capital goods). The since 2013. Two thirds of this can be attributed biotechnology) The more typical reasons for non-payment, this amendment, all correspondence from to distribute between creditors who have transport sector (50% of services) will benefit to the Danish financial sector because of the with their associated probability of successfully Czech authorities to legal entities is delivered lodged their claims into the proceedings. The • Well managed public finances from the recovery in world trade, on which it interconnection between the Nordic banking settling the debt, are as follows: electronically via registered data boxes with authorization to dispose of debtor´s assets and • Large current account surplus is heavily reliant. Residential construction will sectors. · administrative mistake (very high probability of special legal regulations (Act No. 300/2008 Coll., to sell those assets is granted to a bankruptcy be especially dynamic due to the recovery in successful collection) effective as of 1st July 2009). trustee who is appointed by court. At this property prices and the improved financial A weak government coalition, dependent · secondary payment inability (high probability point; the business declared bankrupt is no - WEAKNESSES position of households. However, the energy on the support of the extreme right of successful collection under condition that longer allowed to conduct business operations sector (oil and gas) will represent a smaller and Enforcement of a legal decision • Small open economy sensitive to external smaller share of the economy and will still be Prime Minister Lars Lokke Rasmussen has led a the debtor´s own outstanding will be paid by its independently. demand centre-right coalition government since 2016, customers (debtors) Judicial enforcement is reserved only for matters affected by weak commodity prices. Improved specifically listed in the law, such as family law. Debt clearance • Government instability linked to economic conditions in the main partner made up of his party (Liberal Party), the Liberal · dispute (depends on mutual negotiations and Used mainly by individuals (non-entrepreneurs), the fragmentation of Parliament Alliance (LA) and the Conservative People’s solution) All monetary claims stemming from business countries are expected to sustain exports, relationships are enforced by a judicial executor this is a method of resolving insolvency which • Very high household debt levels (240% of while the country’s competitiveness remains Party (KF). This coalition is in the minority as it · debtor´s intention not to pay (very low presents an alternative to declaring bankruptcy. disposable income) brings together only 53 MPs out of 179. However, probability of successful collection, legal action (soudní executor) under Act No. 120/2001 Coll. satisfactory. (exekuční řád, the Execution Act). The Insolvent debtor clears the debt, but under • Public sector strongly represented in job it benefits from the support of the extreme right, recommended) Court control he is obliged to pay only a reduced market (30% of employees) Low inflation means the central bank can the Danish People’s Party (DF), which has 37 MPs · insolvency as objective status (negligible Enforcement by judicial executor is considered percentage of total debts. • Tensions over housing in certain cities maintain its very accommodative monetary but does not want to participate in government. probability of successful collection) to be more effective, because the executor is a policy, in line with that of the ECB and maintain Significant disagreements between the different Liquidation proceedings private-sector entity whose fees depend on a the Danish krone’s peg to the euro. This policy coalition parties, combined with the demands Amicable phase The liquidation procedure begins once it is successful enforcement. A specific fees schedule has enabled export competitiveness to be of the extreme right-wing party (DF) leave Amicable debt collection is recommended, decided that a company is to be wound up. applies based on the amount concerned by the maintained while supporting domestic demand. the prime minister little leeway for reforming because it remains cheaper for creditor Either the management or the court appoints a execution. the country. Effectively, the implementation compared to legal proceedings. Amicable liquidator in charge of liquidating the company’s Large current account surplus and healthy of the government’s Strategic Plan (2017- settlements are also enforceable in court. As part of the European Union, enforcement assets and collecting receivables. Creditors must public finances 2025) could be strongly compromised by these Legal proceedings of foreign awards issued by a European Union register their claims within 90 days following disagreements. The persistence of these splits The costliness and length of average legal member state will benefit from advantageous publication of the court’s decision, in order to get The government is expected to maintain a could lead to early elections in 2018. Greenland’s proceedings is comparable to European enforcement conditions, such as the EU Payment satisfaction during the liquidation proceedings. cautious fiscal policy, in order to prevent the desire for independence (the Arctic is a region standards. Order or the European Small Claims procedure. All claims of creditors must be fully satisfied in economy from overheating, given the low Foreign awards rendered by non-EU countries potentially rich in natural resources) will also be Average court costs total 20 to 25% of the liquidation proceedings. unemployment rate. The slight increase in can be recognized and enforced, provided that spending is expected to be concentrated in two a major challenge, which Denmark will have to nominal value and include: It is important to note that liquidation they have gone through the exequatur procedure areas: security, by means of higher allocations resolve in the medium term. proceedings are not considered as a method of · A court fee of 5% and a minimum value of under the Czech Private International Law and to defence, and the recruitment of more tax insolvency in Czech law: in the event that the CZK 1,000 Procedure Act. administration staff following a scandal in 2017 liquidator finds there are not enough assets to - This is reduced to 4% and a minimum of CZK over poor tax collection. New tax measures were satisfy all claims during liquidation, he is obliged 400 when the plaintiff applies for an electronic Insolvency proceedings also announced in the Strategic Plan (2017-2025). to file a petition for insolvency. At this point, the payment order, These comprise, specifically, cuts to income tax The insolvency act introduces new methods and liquidation turns into insolvency; a separate · Lawyers’ fees of (approximately) 15% as well as twenty-two initiatives designed to faster process, with single proceedings where proceeding. the court decides on three particular solutions: foster long-term growth. All these measures · Reorganisation will be financed by cuts in funding for the public rail company and by reducing social transfers

80 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 81 DENMARK DJIBOUTI

PAYMENT AND COLLECTION PRACTICES IN DENMARK COFACE ASSESSMENTS Payment presided over by a panel of three judges, or one Insolvency proceedings judge assisted by experts, who consider both C Denmark is in the process of becoming a Out-of-court proceedings COUNTRY RISK cashless society and bank transfers are the written and orally-presented evidence. Non-judicial restructuring can take place through most commonly used means of payment. All Appeals on claims which exceed DKK 10,000 are formal composition agreements, whereby the D major Danish banks use the SWIFT network, as heard by one of two regional courts - either the debts owed to the creditors are acknowledged BUSINESS CLIMATE it is a rapid and efficient solution for the payment Vestre Landsret in Viborg (for the Jutland area) and payment instalment agreed upon, without of domestic and international transactions. or the Østre Landsret in Copenhagen (for the rest having recourse to a judge. Nevertheless, as Denmark has also implemented the Single Euro of the country). Exceptional cases that involve Danish courts are an efficient solution, out-of- Payments Area (SEPA) in order to simplify bank questions of principle can be submitted directly court proceedings tend to be used as informal TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) transfers in euros. to the appropriate regional court. negotiation tools. GDP growth (%) 6.5 6.3 6.9 7.0 Exports of goods, as a % of total 1.0 Cheques and bills of exchange are now These proceedings involve a series of preliminary Restructuring proceedings Inflation (yearly average, %) 2.1 3.3 2.9 3.0 POPULATION seldom used in Denmark. Both are seen as an hearings, during which the parties present Restructuring procedures are based on decisions Ethiopia (millions of persons - 2016) 39% Budget balance (% GDP) -21.7 -15.8 -1.5 -0.6 acknowledgement of debt. written submissions and evidence, and a plenary handed down by the bankruptcy court. The 1,903 hearing, in which the court hears witness Somalia Current account balance (% GDP) -31.8 -28.6 -21.6 -19.0 Unpaid bills of exchange and cheques that court examines the possibility of a compulsory 18% GDP PER CAPITA have been accepted are legally enforceable testimonies and arguments from both parties. composition and/or a business transfer. These Public debt (% GDP) 72.1 86.6 88.1 87.5 (US dollars - 2016) Court costs depend on the value of the claim. The Qatar instruments that mean that creditors do not proceedings can be initiated by the debtor, in 9% * State guaranteed debt included (f): forecast losing party generally bears the legal costs. cases of insolvency, or by the creditor (but only need to obtain a court judgement. In cases such Brazil as these, a “judge-bailiff” Fogedret( ) is appointed Denmark only has commercial courts in the with respect to legal entities). The court then 9% RISK ASSESSMENT to oversee the enforcement of the attachment. Copenhagen area. These comprise a maritime appoints a restructuring administrator. The Yemen Prior to this, the debtor is summonsed to declare and a commercial court (Sø-og Handelsretten) debtor maintains control of his assets during 5% Growth, thanks to port activity, is enjoying thanks to controlled current spending, but above his financial situation, in order to establish his which are presided over by a panel of the procedure but is not allowed to enter into the fruits of investment all due to a cut in capital investment spending. transactions of material significance without ability to repay the debt. It is a criminal offence to professional and non-professional judges. These Imports of goods, as a % of total In 2018, Djibouti’s growth will likely continue to be The latter, having reached a peak of almost 36% the consent of the restructuring administrator. make a false statement of insolvency. judges are competent to hear cases involving driven by substantial investment, particularly in of GDP in 2015, is expected to be maintained at The outcome of the procedure depends on the United Arab Emirates commercial and maritime disputes, competition 25% transport and public services, and the economic less than 8% in 2018, which will allow continued law, insolvency proceedings and cases involving administrator’s proposal. deficit reduction. Nevertheless, revenue Debt collection Euro Area fruits of recently completed projects. With its international trade. Liquidation 21% strategic geographic location and deep-water collection, which is still unsatisfactory, will likely Amicable phase Liquidation procedures are based on bankruptcy only increase modestly. Furthermore, higher The amicable phase begins with the creditor, or China port, the country intends to become a hub for Enforcement of a legal decision orders issued by the Court, either at the request 10% intermodal transport in East Africa. Located on the debt‑servicing costs will absorb a proportion of his legal counsel (e.g. attorney, licenced collection of the debtor or a creditor. The debtor must be the increased income. Domestic judgements become enforceable when Saudi Arabia second most heavily used shipping route in the agency, etc.), sending the debtor a final demand insolvent. The Court appoints a trustee who is 8% for payment by post, in which he is given ten days all appeal venues have been exhausted. If the world (20% of world exports; 10% of oil transit), The current account deficit is expected to fall, authorised to act in all matters on behalf of the Ethiopia debtor fails to comply with the judgment within the multipurpose Port of Doraleh – officially thanks to exports rising faster than imports. This to settle the principal amount, plus any penalties bankrupt estate. His primary objectives are 7% two weeks, the creditor can have it enforced inaugurated in June 2017 after modernisation is because exports will benefit notably from the for interest provided for in the initial agreement. to liquidate the debtor’s assets and distribute through the bailiff’s Court. Enforcement can works amounting to USD 590 million – is set to completion of the port projects, while imports Once the ten days from the date of the letter of the proceeds between the creditors. Creditors take the form of a payment arrangement, or a + STRENGTHS help strengthen Djibouti’s trading position in 2018. of capital goods are expected to slow as capital demand have expired, the creditor’s legal counsel need to file their claims with the trustee for seizure of the debtor’s assets. Payment plans The Ports of Tadjourah and Goubet, inaugurated a investment spending slows. can charge the debtor for out of court collection assessment. • Ongoing infrastructure modernisation few weeks after that of Doraleh, give the country costs (based on an official tariff) and present the are normally agreed in court and the debtor’s Investment projects – financed by non- assets that can be seized are normally agreed at • Country’s emergence as a regional trading, the infrastructure it needs to accelerate exports of concessional debt taken out mostly with China debtor with a debt collection letter which gives logistics and military hub potash and salt. them ten further days to pay. If this payment the same time. Courts normally accept payment or the object of a PPP guaranteed by the State – plans of up to ten to twelve months depending on • Substantial inflows of foreign direct This port infrastructure is connected to a transport have pushed all borrowing ratios into the red. deadline is not respected, the debtor can be sent investments a warning notice which sets out the date and time the amount. network that notably includes the Djibouti-Addis The construction of the multipurpose port, • Geostrategic position at the entrance to the Ababa railway line. With an expected completion the Djibouti-Addis-Ababa railway line, and the of a visit. A third reminder can be sent and calls As concerns foreign awards, the scenario can Red Sea and supported by the international can be made. be more difficult if the decision is issued by community date at the end of 2018, the construction of Ethiopia-Djibouti water pipeline mainly account an EU member, as Denmark does not adhere the Djibouti Silk Road Station, a free-trade zone for the increased debt burden, giving rise to a high When no specific interest rate clauses have financed by Chinese investment, is expected to risk of over-indebtedness. been agreed by the parties (maximum of 2% to the EU regulations on European Payment Order procedures. Decisions issued by non- - WEAKNESSES stimulate private sector activity and FDI flows. per month),the rate of interest applicable to Apart from transport, other tertiary sector st EU members can be recognised and enforced, Djibouti - outpost of the international commercial agreements contracted after 1 • High risk of over-indebtedness industries stand out, including construction, August 2002 is either the Danish National Bank’s provided that the issuing country is part of a fight against terrorism and piracy bilateral or multilateral agreement with Denmark. • Increasingly dependent on Ethiopia which was boosted by infrastructure projects benchmark, or the lending rate (udlånsrente) and China springing up in the field of renewable energy, such President Ismail Omar Guelleh (IOG), who has st st maintained a tight grip on power since 1999, in force on 1 January or 1 July of the year in • Endemic poverty and unemployment as the construction of a solar farm, and planned question, plus an additional 8%. exploratory drilling starting in 2018 aimed at was re-elected in April 2016 in a landslide • Difficult business climate victory. Faced by a fragmented opposition Legal proceedings exploiting the geothermal potential. • Dry climate subject to regular intimidation, his party – the Fast-track proceedings Despite robust economic growth in recent years, People’s Rally for Progress – is unlikely to be Since 1st January 2008, overdue payments which poverty and unemployment remain endemic. threatened by the parliamentary elections do not exceed 50,000 Danish kroner (DKK) or Job creation has mainly benefited expatriate in February 2018. Accusations of patronage EUR 6,723 and are uncontested are handled workers, as the local workforce lacks the and corruption regularly levelled against IOG via a simplified collection procedure (forenklet NUMBER OF CORPORATE FAILURES necessary skills. In addition, with an economy and his administration account only in part for inkassoprocedure), whereby the creditor Total Yearly growth primarily focused on transport and associated the business climate, characterised namely submits an injunction form directly to the judge- Estimate (e) / Forecast (f) services, Djibouti is exposed to a slowdown in by shortcomings regarding the fulfilment bailiff for service on the debtor. If there is no 8,000 70% 65.6% trade flows in the region – especially in Ethiopia, of contracts, access to credit, and investor response within 14 days, an enforcement order 60% 7,000 6,674 which uses Djibouti for 95% of its imports. The protection. is issued. 6,461 6,340 6,392 unstable security and political environment in 50% Despite this, thanks to its strategic location, Ordinary proceedings Somalia, Eritrea, and Yemen further exposes 6,000 Djibouti enjoys the support of numerous If a debtor fails to respond to a demand for 5,468 5,457 40% Djibouti to this slowdown risk. Economic international governments. China, in particular, payment, or if the dispute is not severe, creditors 5,000 4,994 slowdown in China, which finances most of 30% set up its first foreign military base in Djibouti can obtain a judgement following an adversarial the country’s investment projects, would also 4,050 4,031 in 2017. China’s military establishment present hearing or a judgement by default ordering the 4,000 20% impact Djibouti’s growth. 13.2% alongside military bases established by France, debtor to pay. This usually takes three months. Inflation is expected to remain moderate in 2018, 3,000 0.8% 10% the United States, and Japan, among others. The In the case of a judgement by default, the debtor -0.2% thanks notably to the pegging of the Djibouti 0% strategic challenges posed by the Strait of Bab can be ordered to pay the principal amount plus 2,000 -8.5% franc to the US dollar. el-Mandeb, and its proximity to the regions in interest and expenses (including court fees and, -0.5% -5.0% -10% crisis of Africa and the Middle East, make Djibouti where applicable, a contribution to the creditor’s 1,000 a key military outpost in the fight against piracy -20% Twin deficits and a legacy of legal costs) within 14 days. -15.4% over‑indebtedness and terrorism. 0 -18.9% All cases, whatever the size of the claim and -30% Investments agreed for 2014-2016 have placed 2010 2011 2012 2013 2014 2015 2016 2017(e) 2018(f) level of complexity, disputed or not, are heard great strain on the national budget. However, by the court of first instance (Byret). The court is Source: Statistics Denmark, Coface the budget deficit ratios improved in 2017, partly

82 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 83 DOMINICAN REPUBLIC ECUADOR

COFACE ASSESSMENTS COFACE ASSESSMENTS B C COUNTRY RISK COUNTRY RISK C C BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 7.0 6.6 4.8 4.6 GDP growth (%) 0.2 -1.5 0.0 0.3 Exports of goods, as a % of total 10.1 Exports of goods, as a % of total 16.5 Inflation (yearly average, %) 0.8 1.6 3.0 3.6 POPULATION Inflation (yearly average, %) 4,0 1.7 0.6 0.7 POPULATION United States (millions of persons - 2016) United States (millions of persons - 2016) 49% Budget balance (% GDP) -0.2 -2.9 -2.5 -2.2 32% Budget balance (% GDP) -5.2 -8.4 -5.7 -4.4 7,114 5,917 Haiti Current account balance (% GDP) -1.9 -1.5 -1.6 -2.6 Euro Area Current account balance (% GDP) -2.1 1.4 0.3 -1.5 9% GDP PER CAPITA 15% GDP PER CAPITA Public debt (% GDP) 33.0 34.9 36.7 37.9 (US dollars - 2016) Public debt (% GDP) 26.1 36.2 40.0 43.0 (US dollars - 2016) Canada Chile 8% (f): forecast 7% (f): forecast Euro Area Vietnam 7% RISK ASSESSMENT 7% RISK ASSESSMENT India Peru 6% Slowdown in growth to continue into 2018 gold is expected to hold steady. Energy imports 6% Timid exit from recession issued ten-year bonds for USD 2.5 billion with a The growth slowdown recorded in 2017 is set are, on the other hand, likely to become more The economy is struggling to recover: public coupon of 8.875%. Following the public referendum Imports of goods, as a % of total to continue in 2018, due to the reduction in expensive, as a result of the moderate upturn in oil Imports of goods, as a % of total spending fuelled by oil revenues – its traditional scheduled for early 2018, steps will likely be taken prices, and because demand for non-fuel imports in an attempt to sufficiently bring down the deficit United States public spending and investment, as part of United States driver – is anaemic. The dollarisation of the 42% the budget consolidation being implemented is likely to grow given the country’s dependence 25% economy since 2000 has helped macro-economic so as to control the debt. This will be tough, as the on imported finished goods. Consequently, this president needs to find a compromise with the China by the Dominican government. However, China stability, but low oil prices are exacerbating the 13% growth will likely remain strong, boosted by negative performance of the trade balance is likely 16% country’s weaknesses (low competitiveness, centre-right opposition, while also keeping those Euro Area higher tourist numbers and sustained private to lead to deterioration in the current account Euro Area inefficient and expensive public services, rigid on the left of his party in line. This is compounded 11% consumption, thanks to strong inflows of balance in 2018. This deficit will be partly financed 11% labour market). Internal demand is still performing by poor prospects of a rapid rise in oil revenues, Mexico remittances from expatriate workers given the by the inflow of direct foreign investments Colombia weakly, and the slight upturn in household due to problems with the execution of construction 6% relatively favourable economic situation in the (3.2% of GDP in 2016) in the tourist sector and of 9% consumption seems to have fizzled out. While contracts for a refinery, a gas liquefaction plant, and Brazil United States. Manufacturing output (notably remittances from expatriate workers (7.0% of Panama inflation will remain weak because of the fully two oil pipelines. Meanwhile, production at fields 4% clothing) is expected to increase, with the GDP). These foreign currency flows, together with 5% dollarised economy, household income will likely awarded to the private sector is declining, reducing United States being the leading export market the country’s limited exposure to the financial continue to be affected by wage freeze (not the benefits of increased output from fields markets, should allow for a moderate depreciation operated by Petroamazonas. + STRENGTHS for the Dominican Republic. In addition, the cut + STRENGTHS counting the 10% cut in senior civil servants’ to the key lending rate by the Central Bank in of the Dominican peso. salaries), as well as rising poverty rates and under- Despite the restrictions on imports, the current • Leading Caribbean tourist destination July 2017 is likely to encourage an expansion • Significant mineral oil and gas potential employment (only 39% of the workforce were in account is likely to dip into the red again. Because • Remittances from its diaspora in credit and therefore stimulate investment. Weak institutions, and no effective • Tourism potential (flora, fauna, heritage) full-time employment in March 2017). In addition, of insufficient refinery capacity, the country has • Free-Trade agreement with the United In addition, the weakness of the Dominican peso, opposition • Diverse climate allows for a wide range the informal economy, which concerns 45% of jobs, to import expensive oil products. In addition, States (CAFTA-DR) relative to other regional tourist destinations, President Danilo Médina, re-elected in 2016, of crops means that many households do not benefit from accrued debt interest and profit repatriation • Free-Trade Zones (51% of exports) will further enhance the competitiveness of retains a significant level of popular support. His • Marine resources: leading exporter the minimum wage or social benefits. exceed the value of remittances from expatriate • Political stability its tourist sector, which is expected to attract Dominican Liberation Party (PLD) has an absolute of shrimp Public investment is expected to fall further. The workers. Finally, freight costs and oil sector service significant foreign investments. Mainly focused majority in both parliamentary houses, as well • Low risk of inflation due to fully dollarised government is making efforts to reduce the fiscal payments to foreign companies will exceed tourism on infrastructure, these investments are likely as a considerable degree of influence over the economy deficit, so as to prevent the debt from further income. Weak FDIs will not suffice to cover the - WEAKNESSES to provide a boost for the construction sector. judiciary. This context ensures political stability, hikes, and is prioritising politically important social deficit, so there will undoubtedly be a need to once The country’s poor performance in terms of but remains subject to the danger of negating the spending rather than capital spending. Meanwhile, more turn to external borrowing, potentially from • Dependence on US economy energy supply, however, remains an impediment separation of powers in the absence of a strong - WEAKNESSES interventionism and the lack of competitiveness China – who is already the country’s main foreign • Dependence on gold prices to growth, and the political environment creditor and investor. Foreign exchange reserves and organised opposition (the PLD absorbed its • Economy dependent on oil reduce private investor interest. • Sporadic electricity shortages – dominated by cases of corruption – is unlikely traditional rival, the Dominican Revolutionary are low, despite tax incentives for companies to to facilitate the implementation of the structural • Competitiveness subject to US dollar Exports might pick up slightly: oil sales are repatriate their foreign exchange and the tax on • Deficiencies in education and health Party, leaving only the Modern Revolutionary performance due to fully dollarised expected to benefit from firm prices, the slight care systems reforms needed to improve the situation. Party as the opposition in a very minority role). economy capital outflows. In this context, the IMF carried upturn in production after the decision to no out another local inspection mission. Renewed • High levels of poverty and inequality As a result of the 20% increase in the minimum The various corruption scandals associated with • Large informal economy and poorly longer comply with OPEC’s ceiling, and operations relations, after being suspended for ten years, could • Drug traffic related crime wage adopted in the first half of 2017, as well the Brazilian company Oderbrecht are, however, qualified workforce at the new oilfields in the Yusuni national park by bring down the cost of finance, but at the price of as rising fuel and food prices, inflation is likely threatening this equilibrium, and triggering a • Legacy of sovereign default • Wide-spread corruption the national company, Petroamazonas (78% of faster fiscal consolidation. to continue upwards in 2018. The bottom rising tide of popular discontent. With the aim of • State interventionism domestic production). Exports of bananas, shrimps, target range as defined by the Central Bank containing this social restlessness, the president • Credit is expensive and underdeveloped; tinned fish, and flowers will likely benefit from the (4% +/- 0.5%) thus looks set to be reached, replaced the National Police Chief in August 2017 weakness of small banks strong performance of the North American and Pragmatism of the new president, following a number years spent below this target. to revitalise the fight against crime. Lenin Moreno • Low levels of domestic and foreign private European markets. In contrast, cocoa exports In terms of international relations, following a investment will continue to disappoint because of the drop The President and his predecessor Rafael Correa Budget consolidation efforts but current period of serious tensions with Haiti arising from in production and low prices caused by both a fall disagree over policy and are competing for control account deficit deepens the large-scale expulsions of Haitians and trade in quality and disease affecting the cacao trees. of their party, the Allianza Pais (AP). Cutting a softer The initial results of the budget consolidation reprisals (Haitian boycott of Dominican imports), Other sectors (including textiles, chemicals, left-wing image, Lenin Moreno (77% approval rating efforts implemented by the government were the two governments resumed talks in mid-2017. pharmaceuticals, leather, and wood) will continue to in September 2017) plans to hold a referendum seen in 2017, with an increase in public revenues, Institutional weaknesses and a lack of transparency be disadvantaged by their lack of competitiveness in early 2018, aimed at limiting presidential terms thanks to income tax collection improvements, weigh on the business climate, which is already outside the dollar zone. Given that imports will be of office to two years (a return to the pre-2015 and other taxes on goods and services. At the undermined as a result of infrastructure failings overshadowed by weak domestic demand, trade’s position) – thus preventing Correa from standing same time, the government brought the increase (with the exception of telecommunications), contribution to growth will be slightly positive. in 2021 –, at removing civil rights from persons in its spending under control by ending subsidies and the problems in terms of electricity supplies, convicted of corruption, and at reforming the within the transport and energy sectors. The despite some progress being made in these areas. Public debt requires supervision; external Consejo de Participacion Ciudadana y Control Social public deficit is thus expected to shrink slightly in financing is fragile which decides on the appointment of magistrates and is controlled by Correa’s allies. Divisions within 2018, but with the approach of elections in 2020, Lenin Moreno, president since May 2017, has doubts still remain regarding the latest reforms the party and across the political scene weaken the inherited a growing public debt burden, aggravated government. The AP’s number of seats (74 out of for continuing this consolidation. In terms of by the widening deficit. Declining oil revenues have external accounts, manufactured exports should 137) fell in favour of the centre and the right during not been matched by spending cuts, in large part the last 2017 elections. continue growing with the success of the free- due to reconstruction costs following the 2016 trade zones and ongoing moderate growth in the earthquake, the recession, and rising debt interest US economy. The level of export earnings from payments. In October 2017, the country once again

84 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 85 ECUADOR EGYPT

PAYMENT AND COLLECTION PRACTICES IN ECUADOR COFACE ASSESSMENTS Payment and discipline of the judicial function. The judicial is responsible for enforcing judgments and issues system also encompasses subsidiary bodies, a writ of execution ordering the relevant party to B Cheques are still a frequently used means of COUNTRY RISK payment for commercial transactions in Ecuador. such as notaries, auction services, foreclosure comply with the judgment within five working Nevertheless, the use of cheques is declining, due services, legal custodians and other bodies, as days. If the order is not complied with within the determined by law. five-day period, the judge orders the seizure C to a growing preference for electronic payments BUSINESS CLIMATE for transactions of all values. The Código Orgánico General de Procesos of the debtor’s assets in order for them to be auctioned off. Credit transfers are used for both high-value and (COGEP), a new legal code which came into low-value payment transactions. High-value and effect in May 2017, is expected to accelerate the The Ecuadorian Civil Procedure Code sets urgent inter-bank transfers are usually cleared resolution of trials. out the requirements for the enforcement TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) via the Banco Central Ecuatoriano (BCE). Inter- Ordinary proceedings of foreign judgments, in accordance with the GDP growth (%) 4.3 4.1 4.5 4.9 90.2 appropriate treaties, international conventions Exports of goods, as a % of total bank transfers can include capital, money and Under the new legal code, trials can be in the form Inflation (yearly average, %) 10.2 23.9 22.1 14.0 POPULATION foreign exchange market transactions, as well as and Ecuadorian law. The approval procedure Euro Area (millions of persons - 2016) of Executive Judgments or Ordinary Judgments. 23% Budget balance (% GDP)* -12.5 -10.8 -8.8 -7.1 public sector and commercial payments. Transfer begins with a phase of knowledge gathering Executive proceedings are initiated by filing a 3,685 instructions can be submitted via paper-based (for ordinary trials) that is performed in the United Arab Emirates Current account balance (% GDP) -6.0 -5.8 -4.6 -4.0 written complaint with the Court. Supporting 15% GDP PER CAPITA instructions or through online systems such defendant’s domicile court before admitting Public debt (% GDP) 96.6 98.4 88.7 87.9 (US dollars - 2016) documents (such as the pagaré or letra de the execution. Ecuador has signed and United States as SWIFT. 7% * Fiscal years from June to June (f): forecast cambio) should be attached to the claim. Cases ratified a number of international treaties for Cash is frequently used, particularly for low- are assigned to a judge who then has 45 working the recognition and enforcement of foreign United Kingdom value transactions. 6% RISK ASSESSMENT days to decide whether the claim is complete. The judgments, including the Inter-American Saudi Arabia judge then hands down precautionary measures Convention on Extraterritorial Validity of Foreign Debt collection within the following 60 days. The judge orders 5% Increase of growth in 2018 largest expenditure item. Characterised by short Judgments and Arbitral Awards. maturities, the debt remains mainly domestic. It Amicable phase a single audience 90 days later, during which he With the support of the International Monetary delivers judgement. Imports of goods, as a % of total Fund, Egypt embarked on an ambitious economic could therefore be hindered by the tightening of Amicable negotiations are a crucial step in Insolvency proceedings the ECB’s monetary policy. The IMF loan and the successful debt collection management. These Ordinary proceedings are initiated by filing a Euro Area reform programme in 2016. Among the significant There are two phases in Ecuador’s insolvency 23% measures, the liberalisation of the Egyptian pound two global bonds issued in 2017 (USD 7 billion), negotiations are highly detailed and cover written complaint with the Court. The case is then however, contributed to an increase in the portion aspects including the number of instalments, assigned to a judge who has 45 working days to proceedings. China on the foreign exchange market was accompanied 8% by a depreciation of 50% against the US dollar, and denominated in foreign currency. The pursuit of write-offs, guarantees, collateral, grace periods decide whether the claim is complete. The judge a) Conciliatory phase budgetary consolidation in 2018 should lead to a and interest. The objective of this phase is to ensure that the United Arab Emirates led to an increase in foreign exchange reserves then issues a writ ordering the serving of the 6% primary surplus of 0.4% and slightly reduce the written complaint to the debtor. The debtor has debtor company can continue to operate, by of 80% during the year, mainly due to the influx Legal proceedings United States of capital. The depreciation of the currency has trajectory of public debt, which remains high. 90 days to respond with a written defence. The putting into place signed agreements with all of Ecuador’s judicial system comprises courts, 5% increased the competitiveness of exports while The transition to a floating exchange rate allowed judge then orders a single audience during which its recognised creditors. administrative bodies, autonomous bodies Saudi Arabia the rise in the price of imports has raised inflation for a reduction in the external imbalance after he will deliver judgment. and subsidiary bodies. The jurisdictional bodies b) Bankruptcy 5% to more than 30% in 2017. Social transfer policies an adjustment period. Higher exports, tourism responsible for administering justice are the Bankruptcy proceedings entail the sale of the mitigated the effect of price increases on the revenues, and expatriate remittances have resulted National Court, regional courts, law courts, law Enforcement of a legal decision debtor company and its assets, with profits + STRENGTHS poorest households, but consumption slowed. in lower current account deficits. The capital tribunals and Justice of the Peace courts. A domestic judgment becomes final and from the said sales being used to pay its debts to Inflation should gradually decrease in 2018 as account surplus has increased due to an increase The Judicial Council is the governing body enforceable after any appeals have been creditors. • Tourist potential the exchange rate impact is absorbed, but rising in foreign direct investment, in addition to portfolio responsible for the administration, supervision exhausted. The judge of the court of first instance • Manageable foreign debt prices for intermediate goods and services will investment. Private debt in foreign currency, held • Political and financial support of the Gulf continue to cripple the purchasing power of largely by the banking system, has been reduced, monarchies and Western countries average households. The entry into force of the limiting the risk factors associated with external • IMF Support Programme law to promote investment, as well as the respect impacts. Exports are expected to continue to grow • Large gas deposits of the agenda of the reforms initiated with the in 2018. Price competitiveness gains and increased support of the IMF, should reinforce the foreign production of gas and electricity should continue to investors’ confidence. Foreign direct investment is generate a decrease in the current account deficit in - WEAKNESSES expected to reach USD 10 billion in the 2017/2018 2018, via increased exports. fiscal year, focusing on the hydrocarbon sector. • Poverty (40% of the population) and high The increase in gas production following the start 2018 election unemployment of extraction of the giant Zohr deposit (discovered • Recurrence of security issues in Sinai in 2015 by ENI), as well as the start of production The Egyptian presidential election is scheduled for May 2018. President Abdel Fattah Al Sissi has • Twin deficits of BP’s West Nile Delta project, is expected to increase gas production while lowering the cost of announced that he will not seek a third term, as the • Banking system vulnerable to sovereign constitution allows only two successive four-year risk energy bills. Despite a law encouraging industrial development, investment in the industry will likely terms. However, no alternative successor seems to remain constrained by the central bank’s restrictive have emerged, Mr Sissi having eliminated all forms monetary policy, with interest rates rising by of opposition – Islamist as well as both secular 700 basis points in 2017. and liberal. The president’s security regime is often criticised for not respecting human rights, and for the repression of certain figures of the Egyptian Continuation of budgetary consolidation revolution of 2011 in particular Nevertheless, Egypt Budgetary consolidation efforts under the IMF remains a pivotal centre of both regional stability programme should result in a gradual short-term and the fight against terrorism, which enables it to reduction of the public deficit, which fell slightly play a leading role in the Middle East and maintain in 2017/2018 but is expected to decrease more close relations with both Europe and the United significantly in 2018. The increase of VAT from States. Egypt has been the main mediator in the 13% to 14% in July 2017, as well as the rise in political reconciliation between Hamas and the customs taxes, allowed a slight increase in budget Palestinian Authority. The country also sided with revenues. Public spending remained controlled Saudi Arabia, one of its allies, in the Qatar crisis, by the moderation of the wage bill with a de- becoming one of the Arab countries outside the indexation of bonuses for civil servants. Despite Gulf Cooperation Council to boycott the Emirate. a drop in the state’s participation in fuel financing (50% increase in the price of refined oil in June 2017), the elimination of subsidies planned for 2017 has been postponed to 2018, the government having made the choice to absorb the additional cost of the exchange rate impact on regulated and energy products. Although the primary deficit declined in 2017, the depreciation of the Egyptian pound and the rise in domestic interest rates led to an increase in debt service, which remains the third

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COFACE ASSESSMENTS COFACE ASSESSMENTS C E COUNTRY RISK COUNTRY RISK B E BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 2.3 2.4 2.3 2.3 GDP growth (%) 4.8 3.7 3.8 3.4 Exports of goods, as a % of total 6.3 Exports of goods, as a % of total 6.5 Inflation (yearly average, %) -0.7 0.6 0.9 2.3 POPULATION Inflation (yearly average, %) 9.8 11.8 14.0 11.5 POPULATION United States (millions of persons - 2016) China (millions of persons - 2016) 48% Budget balance (% GDP) -3.2 -2.4 -2.5 -3.3 25% Budget balance (% GDP) -14.2 -14.0 -13.8 -12.6 4,227 823 Honduras Current account balance (% GDP) -3.6 -3.4 -3.7 -3.3 United Arab Emirates Current account balance (% GDP) -5.7 -4.7 -3.3 -3.0 14% GDP PER CAPITA 22% GDP PER CAPITA Public debt (%) 58.7 59.9 61.1 62.2 (US dollars - 2016) Public debt (% GDP) 127.1 125.5 127.4 127.9 (US dollars - 2016) Guatemala Euro Area 13% (f): forecast 18% NB: The most recent official data was published in 2006. The availability of reliable economic data is also limited by the absence of relations with international institutions. (f): forecast Nicaragua Brazil 7% RISK ASSESSMENT 8% Costa Rica Turkey RISK ASSESSMENT 5% Weak growth limited, the country’s financial situation will 6% remain precarious. The persistence of the deficit The mining sector is the only island The external accounts are expected to continue In 2018, Salvador’s growth is expected to be of activity to develop in line with exports of mineral Imports of goods, as a % of total the weakest among the countries of Central is a factor in pushing the public debt to above Imports of goods, as a % of total 60% of GDP – a worrying level for a dollarised Growth will likely remain relatively subdued in resources. With base metal prices expected to United States America. Activity will likely continue to be hit by China stabilise, led by those for copper and zinc, export 38% lacklustre US growth, to which the Salvadorian economy. 18% 2018. Weak public resources are expected to continue to mainly benefit the army and will, revenues should hold up. The import bill is set to Guatemala economy is strongly correlated. In addition, low The current account deficit, which widened in United Arab Emirates fall in connection with the drop in demand for 10% levels of national savings and credit growth, as 2017, is not expected to improve significantly. 15% therefore, provide only negligible support for growth. Flows of foreign investments, limited by capital goods needed for the development of China well as the ongoing restrictive fiscal policy, will Dependent on the health of the US economy Euro Area mining projects. 9% impede growth, especially as the positive impact (48.2% of exports), exports will grow less rapidly 15% a very degraded business climate, are unlikely Mexico of the exceptional 2017 harvests dissipates. than imports. Imports will likely continue to rise, Saudi Arabia to offset the public investment deficit. Mineral 8% Despite this, agriculture, like the textile industry, notably with the progression, though moderate, 14% resources (copper, zinc, gold, silver, potash) Isaias Afwerki’s regime still ostracised by Honduras will continue to be one of the key growth sectors. of oil prices. The trade deficit should therefore Turkey are the only attraction for foreign, particularly the international community 6% 6% Chinese, investment. The mining sector is thus Private investment is set to be hit by high crime remain substantial (19% of GDP). The trade deficit Since 1993, power has been concentrated in the will continue to be hit by weak FDI, with foreign almost the only driver of growth. Operations at hands of President Isaias Afwerki, supported by levels and weak household purchasing power. the Koka (gold) mine since 2015 and the start + STRENGTHS Added to this are structural weaknesses (small investors remaining wary of the high crime rate. + STRENGTHS his People’s Front for Democracy and Justice By contrast, remittances from the Salvadorian of production at the Asmara mine (copper, zinc, party - the only legally authorised party. Reports size of the market, income inequalities, poor gold) should help reduce dependency on the • Relative economic diversification natural resources, corruption), which will further diaspora, particularly from the United States, are • Extensive mineral resources from the country suggest that most freedoms (potash, copper, gold, silver, zinc) Bisha mine (copper, zinc, gold), which accounts • Free trade agreements with Central weaken the country’s attractiveness as an expected to remain at high levels (18% of GDP). are suppressed and human rights violations are America and the United States (CAFTA- • Strategic position on the Red Sea for 40% of state revenues. This is especially legion. Eritrean citizens are fleeing forced labour DR), as well as with Mexico and the EU investment destination, especially compared to necessary with the recovery rate of zinc and neighbours such as Costa Rica. Moreover, the Legislative and structural difficulties and also indefinite periods of military service • Financial support from multilateral copper, with the latter expected to decline from introduced since the war against Ethiopia (1998- institutions profitability of small businesses in El Salvador President Cerén, who is expected to remain in 2018 until a scheduled cease in production in suffers from gang extortion rackets, which - WEAKNESSES 2000). Officials from the High Commission for • Growing population power until June 2019, cannot rely on a majority 2021. The Colluli Potash Project could, in future, Refugees thus make up almost 10% of the total reduces their profits and ability to invest. • Large public and external deficits in the National Assembly, which is dominated by take over from the Bisha mine, but it looks population. Consumption, the country’s main growth engine, the opposition. His popularity is falling, giving • Critical level of debt unlikely that production will start in 2018. As a result, relations with the international - WEAKNESSES also suffers from the high crime rates and will rise to fears that he may be defeated at the • Country has become an international Private consumption is set to remain anaemic in be hit by rising inflation despite the stability parliamentary elections planned for March 2018, pariah state community are particularly tense. In particular, a country that is among the poorest countries Eritrea is, accused of supporting armed groups, • High level of criminality and insecurity of oil prices. Finally, the country is one of the as urgent reforms will be needed if poverty and • Worrying human rights record associated with drug trafficking in the world. Despite substantial inflows of such as Al Shabaab in Somalia, and rebel four countries in Latin America that is the most criminality rates are to be reduced in a context of • Very difficult business climate • Lack of natural resources remittances from expatriate workers, household movements on the border with Ethiopia. Still vulnerable to climate and earthquake shocks, but weak growth. income – deriving mainly from rudimentary • Climatic and seismic vulnerability low rates of investment undermine the ability to benefiting from some aid from the European Homicides linked to gangs are declining, agriculture (the sector employs almost 80% of Union and strong relations with China, the • Inadequate infrastructures and investment build the infrastructures needed to limit the notably thanks to the extraordinary measures the workforce) – is low. This income is further consequences. country is not yet completely isolated. The • Dependence on the United States (47% of introduced in 2016 and extended in February eaten up by inflation, which is expected to fall only regime’s collaboration with Pyongyang could, exports, 90% of remittances and FDI) 2017 until 2018 (state of emergency declared slightly. Insufficient agricultural output to meet however, justify tougher UN sanctions. • Structural fragility of public and Worsening fiscal position in seven prisons where gang members are the needs of the population puts pressure on external accounts Although the country is no longer in last place Given the modest growth and low levels of concentrated, deployment of the army in rural food prices. Inflation, exacerbated by a shortage • Significant inequality and poverty areas). Two of the large gangs (MS-13 and Barrio of foreign exchange, which impedes imports, is in the 2017 Doing Business rankings, this is only investment, the government’s ability to mobilise because Somalia now occupies that position. The tax instruments so as to increase revenues is 18) have expressed their willingness to begin broadly responsible for the overvaluation of the negotiations with the government, which has so nafka, pegged to the US dollar. This is reflected in business climate thus remains an impediment to limited. Moreover, political differences between economic development. President Salvador Sánchez Cerén’s government far refused to engage. Salvador is still the world’s a growing gap between the official exchange rate (FMLN, on the left) and the National Assembly, most violent country not at war, and the business and the rate used on the parallel market. dominated by ARENA (Alianza Republicana climate is therefore strongly degraded. Nacionalista, on the right) are blocking the Even though the FMLN has historical links with Twin deficits increase the debt burden reforms needed to reduce the deficit, which is set the radical left-wing regimes in the region, the The military budget, estimated at 25% of public to further deteriorate in 2018. Budget spending president is careful to maintain good relations expenditure, continues to burden the fiscal cuts are likely to remain limited, as almost half of with the United States, the country’s leading balance. The growth in mining income could the budget is devoted to social programmes and trading partner. help to slightly narrow this substantial deficit, pensions, which are cherished by the population. but revenue mobilisation remains broadly The legislative paralysis prevented the inadequate. Financing the deficit by creating government from obtaining the revenues needed money is fuelling inflation. Money creation is to pay the due sums for local pension funds (USD also, at least in part, the reason for the build up 57 million) in April 2017, resulting in the country’s of domestic debt, thus putting public debt at a first default in over twenty years. Payment worrying level. Highly strained relations with was eventually made, but the growing tension donors prevent Eritrea from benefiting from debt between the two political parties is increasing the relief under the HIPC initiative. risks associated with servicing the public debt in 2018. With a deal between the FMLN and ARENA looking unlikely, and with external funding still

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COFACE ASSESSMENTS COFACE ASSESSMENTS A2 C COUNTRY RISK COUNTRY RISK A1 D BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015* 2016* 2017*(e) 2018*(f) GDP growth (%) 1.7 2.1 4.1 3.6 GDP growth (%) 10.4 7.6 9.3 8.2 Exports of goods, as a % of total 1.3 Exports of goods, as a % of total 91.2 Inflation (yearly average, %) 0.1 0.8 3.8 3.3 POPULATION Inflation (yearly average, %)** 10.1 7.3 10.2 14.4 POPULATION Sweden (millions of persons - 2016) Sudan (millions of persons - 2016) 18% Budget balance (% GDP) 0.1 0.3 0.1 -0.7 22% Budget balance (% GDP) -2.0 -2.4 -2.5 -2.6 17,786 795 Finland Current account balance (% GDP) 2.3 1.9 1.7 1.4 Euro Area Current account balance (% GDP) -11.6 -9.9 -8.3 -7.4 16% GDP PER CAPITA 19% GDP PER CAPITA Public debt (% GDP) 10.0 9.4 8.7 8.8 (US dollars - 2016) Public debt (% GDP) 60.0 57.9 59.8 59.0 (US dollars - 2016) Latvia China 9% (f): forecast 10% *Fiscal year, which runs from 8th July to 7th July ** Calendar year (e): estimate (f): forecast Russia Switzerland 7% RISK ASSESSMENT 8% RISK ASSESSMENT Lithuania Somalia 6% Growth sustained by robust internal on Estonian investments abroad. Remittances 7% Rapid growth despite inflation and constrain the growth of imports and support demand from expatriate workers equal those of foreign political risk the competitiveness of exports, especially Imports of goods, as a % of total The lively pace of domestic demand is expected workers in Estonia. European structural funds Imports of goods, as a % of total Despite the obstacles to growth (drought, manufactured goods and foodstuffs. Transfers intended for investment represent an annual by expatriate workers will remain a significant Finland to continue to sustain growth in 2018, thanks China ethno-political tensions), activity remained 13% to rising private consumption – the traditional average of 3% of GDP. The substantial foreign 28% buoyant – and even rebounded – in 2016/2017. positive contribution in the current account. The direct investments are balanced by no less favourable economic situation in Europe and Germany driver of activity – but above all thanks to Euro Area In 2017/2018, it is expected to remain robust 11% strongly expanding (public and private) significant Estonian direct investments and 10% but will likely stagnate, due to the constraints the United States could have a beneficial effect Lithuania investment. Rapid wage growth, higher family portfolio investments made abroad by Estonian Saudi Arabia of inflation and political risk. The price increase on the flows of these transfers. Foreign direct 9% allowances, and pension benefits will encourage pension funds. The external debt represented 10% following the 15% devaluation of the national investment flows, particularly in infrastructure Sweden household consumption. However, the steady 85% of GDP at the end of July 2017, but as the India currency (birr) will likely put pressure on and industry, should help finance the current 8% decline in the workforce appears to be limiting public share is small, the balance is therefore 7% household consumption and weigh on growth. account deficit. Strengthening Ethiopia’s Latvia new gains in terms of jobs. Additionally, wage made up of non-financial private sector debt. In Kuwait Nevertheless, this devaluation should help to external position could help replenish some 8% rises will, in part, be eroded by higher inflation and addition, the debt is more than offset by foreign 5% improve the competitiveness of exports, which foreign exchange reserves, which remain at a higher indirect taxes on alcohol, tobacco, fuel, pension fund assets. was low. Exports should also rebound thanks low level (around two and a half months of import coverage). + STRENGTHS hospitality, and catering. + STRENGTHS to better agricultural production – coffee and With the return of European funding in 2017, A sizeable Russian minority, oleaginous fruits (sesame) in particular – after Debt is still relatively high, but given the still large • Balanced public accounts and low level public infrastructure investment is set to but energy independence • Remarkable track record of growth and being affected by drought conditions in 2016 and share of concessional loans (around 60% of the of debt poverty reduction continue to grow, along with private investment Following a vote of no confidence in November 2017. In addition, the opening of several industrial external debt stock), the associated risk remains • Membership of the euro zone and 2016 after disagreements over economic and • Public investments in infrastructures parks, including those of Hawala and Mekelle, moderate. the OECD in equipment, due to the high production capacity utilisation rate in response to firm external social policy, Taavi Rõivas and the centre-right, • Economy diversification effort should allow the country to increase its leather, • Close trading, financial and cultural links liberal Reform Party, in power since 2001, ceded • Strong hydropower potential footwear, and textile exports, and, thus, begin with Scandinavia demand, which absorbs 70% of industrial The lifting of the state of emergency does output. In addition, businesses are enjoying tax power to a coalition formed around the leader of to realize the country’s goal to position itself not relieve internal tensions • Virtual energy self-sufficiency thanks the Centre Party, Jüri Ratas. This coalition also as a large manufacturing hub. Under Ethiopia’s to oil shale exemption on reinvested profits. Construction The coalition in power, the Ethiopian Peoples’ will likely benefit broadly from an increase in includes the Social Democrats (SDE) and the - WEAKNESSES Growth and Transformation Plan II, public • Expansion of high value-added sectors Revolutionary Democratic Front, led by Prime these investments. conservatives of the Pro Patria and Res Publica investment will also remain strong, particularly (electronics, IT services) • Vulnerability to weather conditions and in the transport, telecommunications and energy Minister Hailemariam Desalegn and dominated Exporters have finally managed to process the Union (IRL), even though they were members of changes in world commodity prices by the minority ethnic Tigrayans, still faces • Very favourable business climate the previous government. This new coalition was sectors with the “Renaissance Dam” project • Digitisation of administrative procedures impact of the Russian recession and counter- • Isolation of the country with a production capacity of 6,000 megawatts. significant ethno-political tensions. The latter sanctions. Dairy products, fish, and alcohol made possible by the change of leadership within have experienced a resurgence since November • Flexible economic policy the Centre Party, the political representation of • Insufficient level of foreign exchange An effort will also be made with respect to social – all popular in Russia – have found substitute reserves 2015, as well as demonstrations by Oromos, the Russian-speaking minority (one quarter of infrastructure (hospitals and schools). On the markets in Scandinavia, and also outside Europe, • On-going difficulties in the business and other hand, the growth of private investment the ethnic majority. In October 2016, protests helped by the depreciation of the euro. Moreover, the population): the previous leader was seen in Amharas, with people demanding more - WEAKNESSES governance environment remain hampered by the persistence of ethno- the Swedish company Ericsson continues to as pro-Russian and anti NATO, and therefore representation and political freedoms, led to unsuitable. Despite the coalition’s small majority, • Unstable regional context political tensions. • Small open economy sensitive to external buy Estonian telecommunications equipment. • Exacerbated ethnic tensions 600 deaths, in large part due to a deadly melee shocks In contrast, rail and road transport has been it is expected to remain in place until the next launched by security forces. Subsequently, the • Decline in the workforce; shortage of hit by the drop in equipment transit to Russia, elections in 2019, given the country’s strong A sustainable fiscal policy, but persistent government declared a state of emergency that skilled labour especially with Russia favouring its own ports. economic performance. external imbalances was not lifted until August 2017. The security • Drop in competitiveness and profitability: The pro-European policy and firmness towards The budget deficit is likely to remain relatively measures led to the arrest, under conditions labour costs rising faster than productivity Excellent public and external accounts Russia is set to remain in place. The country low. The 2017/2018 budget is up almost 10% challenged by human rights associations, of • Lack of land connections with the rest enjoys relative energy independence thanks from the previous fiscal year. This increase is 29,000 individuals, allowing a relative lull in of the European Union Even though higher current spending and steadily to the exploitation of oil shale, of which the mainly directed towards capital expenditures in political unrest amongst the dissident areas • Lack of innovation and high value-added rising defence spending (2.1% of GDP forecast country is the world’s leading producer, and infrastructure projects. Revenues are expected of the Oromia region. However, clashes on the production for 2018) will likely result in a small deficit, public which covers a large part of Estonia’s electricity to increase in line with GDP growth and thus border between the Oromia and Somali regions • Income inequalities and persistent poverty finances are in an excellent position, supported by needs. In addition, although Russian gas meets allow the budget deficit to remain relatively still occur from time to time and continue to rate, especially in the eastern, mostly foreign exchange reserves, which, incidentally, only 10% of the country’s energy needs, the stable. However, the increase in revenues will threaten the stability of the country. Russian-speaking regions exceed debt. Spending will be focused mainly on country is connected with the Lithuanian gas remain constrained by the collection of domestic infrastructure projects, especially those relating The persistence of these ethno-politic issues terminal at Klaipeda, which covers almost 30% receipts, which is still sub-optimal: tax revenues could eventually lead to a deterioration of to transport, and on improving public services of its gas consumption. The business climate is represent less than 14% of the GDP, compared (digitisation, innovation). The government is also relations with its international partners. As one favourable, although the resolution of insolvency with a relatively low average of around 20% in of only two guests from Sub-Saharan Africa at keen to boost its small population base through proceedings can be cumbersome. sub-Saharan Africa. This point has therefore an initiative to attract young talent from abroad. the “One Belt, One Road” Forum (with Kenya), been prioritised by the Ethiopian authorities in Ethiopia has maintained an increasingly close The trade deficit (4.6% of GDP in 2016) is broadly the 2017/2018 budget. The deficit is financed relationship with China. offset by the services surplus, especially in the by foreign loans and grants (about 18% of the information technology, tourism, technology, budget). and freight forwarding sectors (8.2% of GDP). The current account deficit will likely remain Dividend repatriation by Swedish, Finnish, and high in 2017/2018, but the devaluation of the Dutch investors – who are strongly present in birr should reduce the pressure on external the retail, real estate, and finance sectors, as accounts. Indeed, the weaker currency should well as in industry – is slightly above the returns

90 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 91 FINLAND FINLAND

COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN FINLAND Payment Ordinary proceedings For foreign awards, since Finland is part of the A2 Ordinary legal action usually commences European Union (EU), it has adopted enforcement COUNTRY RISK Bills of exchange are not commonly used in Finland because they signal the supplier’s when amicable collection has failed. A written mechanisms applicable to court decisions issued distrust of the buyer. A bill of exchange primarily application for summons must be addressed by other EU members, such as the EU Payment A1 to the registry of the District Court, which then Order and the European Enforcement Order. BUSINESS CLIMATE substantiates a claim and constitutes a valid acknowledgment of debt. serves the debtor with a Writ of Summons. The For judgments issued by non-EU members, the debtor is given approximately two weeks to file issuing country must be part of a bilateral or Cheques, also little used in domestic and a defence. multilateral agreement with Finland. international transactions, but only constitute TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) acknowledgement of debt. However, cheques During the preliminary hearing, the court GDP growth (%) 0.0 1.9 2.8 2.2 5.5 that are uncovered at the time of issue can bases its deliberations on the parties’ written Insolvency proceedings Exports of goods, as a % of total submissions and supporting documentation. Inflation (yearly average, %) -0.2 0.4 0.8 1.1 POPULATION result in the issuers being liable to criminal Out-of-Court proceedings Germany (millions of persons - 2016) penalties. Moreover, as cheque collection takes a The court then convokes the litigants to hear Finnish law provides no specific rules for out- 13% Budget balance (% GDP) -2.7 -1.9 -1.5 -1.2 their arguments and decide on the relevance of 43,482 particularly long time in Finland (twenty days for of-court settlements. Negotiations between Sweden Current account balance (% GDP) -0.6 -1.1 0.4 0.4 domestic cheques or cheques drawn in European the evidence. During this preliminary phase, and creditors and debtors are made informally. If an 11% GDP PER CAPITA Public debt (% GDP) 63.6 63.1 63.3 62.6 (US dollars - 2016) and Mediterranean coastal countries, 70 days for with the judge’s assistance, it is possible for the agreement is reached, it must still be validated by United States litigants to resolve their dispute via mediation 8% (f): forecast cheques drawn outside Europe), this payment the court. method is not recommended. and subsequently protect their business Netherlands relationship. Restructuring proceedings 7% RISK ASSESSMENT Conversely, SWIFT bank transfers are The goal of restructuring is to allow an insolvent Russia increasingly used to settle domestic and Where the dispute remains unresolved after company to remain operational through 6% Dynamic activity sustained by domestic social transfers for the elderly and single-parent international commercial transactions. Finns are this preliminary hearing, plenary proceedings administration, with the view that if the company demand and exports families. In addition, public investment will remain familiar with this efficient method of payment. are held before the court of first instance is able to continue its business, it will be able (Käräjäoikeus) comprising between one and In 2018, activity will slow down slightly, although small, except for public transport. In addition, the When using this instrument, sellers are advised to repay a larger part of its debts than would Imports of goods, as a % of total three presiding judges, depending on the case’s growth will remain above potential. Private country would progress in its decentralization to provide full and accurate bank details to have been possible in the case of bankruptcy Germany complexity. During this hearing, the judge 17% investment, although more moderate in 2018, process, giving more powers to the regions. The facilitate timely payment, while it should not be of the company. The commencement of these examines the submitted evidence and hears the will remain one of the main contributors to increase in expenses would nevertheless be forgotten that the transfer payment order will proceedings triggers an automatic moratorium, Sweden parties’ witnesses. The litigants then state their 16% growth, due to low interest rates, coupled with offset by the increase in revenues, due to the ultimately depend on the buyer’s good faith. providing the company with protection from its final claims, before the judge delivers the ruling – dynamic domestic and external demand. Higher favourable economic situation and the increase Banks in Finland have adopted the SEPA (Single creditors. Russia generally within fourteen days. 11% capacity utilization rate in the forestry and in property tax. Thus, the budget deficit would Euro Payments Area) standards for EUR- The board of directors maintains its power of Netherlands metallurgical industry would foster investment always remain below 3% and public debt will denominated payments. The losing party is liable for all or part of the legal decision but the receiver is entitled to control 9% in these sectors. Investment in research and approach the threshold provided for by the costs (depending on the judgement) incurred certain aspects of the company’s operations, France development will also be more dynamic following European Stability and Growth Pact (60% of Debt collection by the winning party. The average time required including the creation of new debts and 4% GDP). Nevertheless, in the absence of structural for obtaining a writ of execution is about twelve several years of decline due to the deterioration Amicable phase overseeing transfers of ownership. of mobile telephone services. Residential reforms, the rapid ageing of the population would months. Undisputed claims in Finland can threaten the social security system and the The goal of the amicable phase is to reach a normally last from three to six months. Disputed Liquidation + STRENGTHS construction will support activity, due to strong control of public accounts. voluntary settlement between the creditor claims and the subsequent legal proceedings can When debtors are unable to pay their debts housing demand, particularly in the Helsinki and debtor without begin legal proceedings. when due and this inability is not temporary, they • Prudent economic policies take up to a year. area. In addition, the expansion of tourism will The current account balance will remain positive Finnish legislation obliges creditors to begin are placed into liquidation. Upon acceptance of • Skilled workforce and favourable business continue, driven by a growing influx from Russia in 2018 owing to the maintenance of a small trade the amicable phase amicable phase via letters, Commercial cases are generally heard a liquidation petition by the court, the debtor climate and Asia, attracted by preserved natural sites surplus linked to export growth. Nevertheless, followed up as necessary with a final demand for by civil courts, although a Market Court is declared bankrupt. A receiver is appointed, • Cutting-edge industries and the northern lights. the increase in imports would halt the payment by recorded delivery or ordinary mail. (Markkinaoikeus) located in Helsinki has been in and a time limit is established for any creditors • High standard of living Exports will continue to benefit from the improvement observed in the current account, This demand for payment asks the debtor to pay operation as a single entity since 2002, following to present their claims. The receiver then Competitiveness Pact, which reduced unit due to a more dynamic domestic demand and the outstanding principal increased by past-due a merger of the Competition Council and the establishes a proposed distribution scheme, labour costs by 3.7% in 2017, although wages a moderate increase in oil prices (2nd import interest as stipulated in the contract. former Market Court. whilst creditors supervise the selling of the - WEAKNESSES station). are expected to rise again in 2018. In addition, In the absence of an interest rate clause in the estate and the distribution of the sales’ proceeds. strong demand in the main partner countries • High vulnerability to the international agreement, interest automatically accrues from Enforcement of a legal decision situation (Sweden, the United States and Germany), as A government majority that is small the due date of the unpaid invoice at a rate equal A judgment is enforceable for fifteen years as but benefiting from the dynamism • Industrial crisis and loss well as the economic recovery in Russia, would to the Central Bank of Finland’s (Suomen Pankki) soon as it becomes final. If the debtor fails to of competitiveness favour Finnish exports. The dynamism of orders of the economy six-monthly rate, calculated by reference to the comply with the judgment, the creditor may • Dependence of the Finnish banking sector in the shipbuilding industry and the completion In June 2017, the election of Jussi Halla-aho as European Central Bank’s refinancing rate, plus have it enforced by a bailiff, who will try to obtain on the Swedish and Danish financial in 2017 of the country’s largest wood processing the leader of the Finns Party (extreme right), seven percentage points. an instalment agreement with the debtor, or sectors, despite the return of a major plant (paper, resin, bioenergy, etc.), will also resulted in the exclusion of this party from the The Interest Act (Korkolaki) already required enforce it through a seizure of assets. institution in 2017 support exports. Thus, the contribution of trade government coalition, because it was considered • Ageing population to growth will be positive in 2018. debtors to pay up within contractually agreed too strict on immigration issues. The defection of timeframes or become liable to interest Household consumption will be more dynamic, more than half of the members of his party (19 out penalties. driven by a slight rise in wages, in a context of 36) has formed a new coalition government, of moderate inflation, and by decreased led by the Centre Party, also consisting of the Since 2004, the ordinary statute of limitations for unemployment (7.3% in October 2017). Low National Coalition Party (centre-right) and the Finnish contract law is three years. NUMBER OF CORPORATE FAILURES interest rates will also favour consumption, even blue Reform Party, which was born from the split Legal proceedings if the weight of the debt (129% of disposable of the Finns Party. The ministerial posts remained Fast-track proceedings Total Estimate (e) / Forecast (f) Yearly growth income) will still weigh on the financial situation unchanged as all the members of the Finns Party For clear and uncontested claims, creditors may 3,500 10% of households. government had already joined the Blue Reform. use the fast-track procedure, resulting in an In addition, the new coalition government seems injunction to pay (suppea haastehakemus). This is 3,129 2,948 2,961 5.7% 2,985 more fragile since it has a smaller majority than a simple written procedure based on submission 3,000 2,863 Conservative fiscal policy and small current 5% account surplus the previous government (106 seats out of 200, of whatever documents substantiate the claim 3.0% 2,573 instead of 124). However, the good economic (invoices, bills of exchange, acknowledgement 2,500 2,407 The government’s priority in 2018 will remain performance should allow the government to of debt, etc.). The court sets a time limit of 2,106 2,026 0% the reduction of unemployment and the control 2,000 remain in place until the next parliamentary approximately two weeks to permit the 0.4% of public spending, although many efforts have elections in April 2019. defendant to either respond to or oppose the -3.8% already been made in these areas. In addition, The business environment remains very petition. In addition, this fast track procedure 1,500 the government should continue lowering -6.5% -5% th can also be initiated electronically for cases of -4.6% income tax (mainly for low income), which was favourable as the country ranks 13 out of 190 in the 2018 Doing Business report published by undisputed claims. The presence of a lawyer, 1,000 the counterpart of the austerity measures of the although commonplace, is not required for this the World Bank, with particularly remarkable -10% Competitiveness Pact. The latter includes the type of action. extension of the annual working time, a transfer performance in insolvency settlement. 500 of part of the employer’s contributions to the In addition, the dynamism of activity has -12.6% -13.8% -12.5% employee contributions and a wage freeze. The contributed to the reduction in the number of 0 -15% 2018 budget also provides for an increase in business bankruptcies since 2016. 2010 2011 2012 2013 2014 2015 2016 2017(e) 2018(f) retirement pensions, as well as an increase in Source: Statistics Finland, Coface

92 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 93 FRANCE FRANCE

COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN FRANCE Payment present nor represented during the hearing, a rendered by non-EU members can be recognised A2 default judgment can be issued. The court then and enforced, provided that the issuing country is COUNTRY RISK Bank cards are now the most commonly-used form of payment in France, although cheques are still renders a decision, typically within seven to party to a bilateral or multilateral agreement with widely used. In value terms, cheques and transfers fourteen days (though same-day decisions are France. In the absence of an agreement, claimants A1 possible). The jurisdiction is limited to debts which are obliged to use the French exequatur procedure. BUSINESS CLIMATE are still the most popular forms of payment. If a cheque remains unpaid for more than 30 days cannot be materially contested. If serious questions from the date of first presentation, the beneficiary arise over the extent of the debt, the summary Insolvency proceedings can immediately obtain an enforcement order judge has no jurisdiction to render a favourable decision. Judgments can be immediately executed, Court-Assisted proceedings TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2017(f) (without need for further procedures or costs). even if the debtor issues an appeal. These can be either mandated Ad Hoc or GDP growth (%) 1.1 1.2 1.8 1.8 64.6 This is based on a certificate of non-payment conciliation proceedings. Both are informal, Exports of goods, as a % of total provided by the creditor’s bank, following a second If a claim proves to be litigious, the judge ruled Inflation (yearly average, %) 0.1 0.3 1.1 1.2 POPULATION amicable proceedings, where creditors cannot Germany (millions of persons - 2016) unsuccessful attempt to present the cheque for competent to preside (juge des référés) over urgent be forced into a restructuring agreement and the 16% Budget balance (% GDP) * -3.6 -3.4 -2.9 -2.8 payment and when the debtor has not provided matters evaluates whether the claim is well- 38,178 company’s management continues to run the Spain Current account balance (% GDP) -0.4 -0.9 -1.3 -1.1 proof of payment within fifteen days of receipt founded. If appropriate, the judge can subsequently business. These negotiations are governed by 8% GDP PER CAPITA Public debt (% GDP) 95.8 96.5 96.8 96.8 (US dollars - 2016) of a formal notice to pay served by a bailiff (article decide to declare himself incompetent to rule on contractual law throughout their duration. The United States L. 131‑73 of the monetary and financial code). the case. Based on his assessment of whether the proceedings are conducted under the supervision 7% (f): forecast Bills of exchange, a much less frequently used case is valid, he can then invite the plaintiff to seek a of a court-appointed practitioner (a mandataire Italy ruling through formal court procedures. 7% RISK ASSESSMENT payment method, are steadily becoming rarer ad hoc, or a conciliator) in order to help the debtor Ordinary proceedings reach an agreement with its creditors. Both of United Kingdom in terms of number of operations – although 7% Internal demand will continue to drive Heavy debt burden fuelled by twin deficits in terms of total value they remain important. Formal procedures of this kind enable the validity these types of proceedings are confidential but Bills of exchange are still an attractive solution of a claim to be recognised by the court. This is a conciliation can eventually be made public if growth The balance of goods runs a structural deficit, as for companies, as they can be discounted or relatively lengthy process which can last a year or the debtor has the approval of the commercial Imports of goods, as a % of total Growth picked up in 2017, in particular thanks to France is a net energy importer. In contrast, the transferred and therefore provide a valuable source more, due to the emphasis placed on the adversarial court. Nevertheless, the terms and conditions of accelerating business investment and a rebound balance of services is in surplus thanks to tourism Germany of short-term financing. Moreover, they can be nature of proceedings and the numerous phases agreements remain confidential and can only be 19% in electricity exports and tourism. While household revenues. Since 2015, the goods and services used by creditors to pursue legal proceedings in involved. These phases include the submission of disclosed to signatory parties. consumption slowed in 2017, following exceptional balance excluding energy has become negative, Belgium respect of “exchange law” (droit cambiaire) and are supporting documents, written submissions from 11% favourable events in 2016 – a particularly cold as the manufactured products deficit has steadily Court-Controlled proceedings particularly suitable for payment by instalments. the litigants, the examination of evidence, various The four types of court-controlled proceedings Netherlands winter (heating, clothes purchases); the Euro widened due to the delocalisation of automotive recesses for deliberations and, finally, the hearing 8% Bank transfers for domestic or international are judicial reorganisation, judicial liquidation, football championship –, it is expected to bounce production and of investments in machines. This for oral pleadings (audience de plaidoirie). Italy back in 2018 thanks to higher purchasing power. deficit is partially offset by the income surplus payments can be made via the SWIFT electronic sauvegarde, and Accelerated Financial Sauvegarde 8% Real wages are expected to rise, because of (dividends of French subsidiaries abroad). The network used by the French banking system. Proceedings are issued through a Writ of Summons proceedings (AFS). Spain incipient labour market tensions (growing current account deficit is mainly financed by the SWIFT offers a reliable platform for fast payments, (Assignation) which is served on the debtor In all four proceedings, any pre-filed claims are 7% number of companies declaring difficulties with issuance of debt securities held by non-residents. but requires mutual confidence between suppliers fifteen days before the first procedural hearing. automatically stayed. Creditors must file proof and their customers. France is also part of the SEPA During this hearing, the court sets a time period for recruitment). While job creation in the commercial Due to the limited leeway on the budget, although of their claims within two months of publication network. the exchange of pleadings and discovery. Decisions + STRENGTHS sector (+300,000 in the first half of 2017 year- the 2018 finance law contains several tax cuts of the opening judgment, or four months for on-year) is expected to remain dynamic, the cut rendered do not necessarily have the possibility of creditors located outside France. Debts which arise (30% flat-rate tax on financial income, replacement immediate execution. In order to be executed, they • High-quality infrastructure and public to one third of assisted jobs (-110,000 between of net worth tax by a property tax, removal of Debt collection after proceedings commence are given priority services must first be served on the debtor. They are also 2017 and 2018) will slow the downward trend of the employee contributions, cuts to council tax), these Unless otherwise stated in the general sales over debts incurred beforehand. Certain types of • Skilled and productive workforce, dynamic unemployment rate, which will remain at about 9%. subject to appeal. transactions can be set aside by the court, if they demographics will be offset by a 1.7 percentage point rise in the conditions, or agreed between the parties, High levels of confidence and particularly favourable CSG (General Social Security Contribution) and payment periods are set at thirty days from were entered into by the debtor during a hardening • Powerful tourism industry credit conditions will continue to drive robust spending cuts totalling EUR 15 billion (housing, the date of receipt of goods or performance of Enforcement of a legal decision period (before a judgment opening a judicial • Competitive international groups household consumption and investment, which health, local authorities, assisted jobs). As a result, services requested. Interest rates and conditions Unless the court decision is temporarily reorganisation or a judicial liquidation). (aerospace, energy, environment, will specifically benefit sectors such as automotive, the public deficit should remain below the 3% of application must be stipulated in the contract – enforceable, enforcement can only commence if With Court-Controlled proceedings there can pharmaceuticals, luxury goods, agrifood, retail, and construction (building permits up by retail) threshold in 2018, but the public debt - one of the otherwise the applicable interest rate is that applied no appeal is lodged within one month and must be variations in the extent of involvement of the 12% year-on-year at end October 2017). These • Global agricultural leader highest in the eurozone - will remain one of the few by the European Central Bank in its most recent occur within ten years of notification of the court-appointed conciliator. The sauvegarde same factors will encourage business investment, not to decline. court’s decision. Compulsory enforcement can and AFS procedures are debtor-in-possession • High level of savings refinancing operations. Throughout the first half which should therefore remain dynamic in of the year in question, the rate applicable is that in be requested if the debtor does not comply with proceedings, but with judicial reorganisation, 2018. Competitiveness and Employment Tax Continuation of reform agenda in 2018 force on the 1st January and for the second half year the judgment. Obligations to pay can be enforced the court can decide whether to set aside the Credit (CICE) and low energy costs have helped in question, the rate applicable is that in force on the through attachment (of bank accounts or assets) company’s managers. The role of management - WEAKNESSES President Emmanuel Macron, elected in May 2017, manufacturing companies to rebuild their 1st July. or through a third party which owes money to the is particularly reduced in cases of judicial has an absolute majority in the National Assembly • Insufficient number of exporting margins (35.3% in 2016, highest level since 2002). debtor (garnishment). liquidation, as the debtor company usually ceases Nevertheless, as investment is conducted largely via his party, La République En Marche!. During the Amicable phase companies, loss of competitiveness France has adopted enforcement mechanisms for to conduct business. Nevertheless, the court and market share through credit, corporate debt will continue to rise first months of his term, President Macron passed During this phase, the creditor and the debtor try to reach an amicable solution via direct contact, decisions rendered by other EU member countries. can decide for a business to continue operating, • Weakening level of product sophistication, (72% of GDP in Q2, +2 percentage points year-on- the aforementioned fiscal measures, as well as a under a court-appointed liquidator. insufficient focus on innovation year). Insolvencies will continue to decline in 2018 reform aimed at making the labour market more in order to avoid legal procedures. All documents These mechanisms include the Payment Order signed between the parties (such as contracts and under the European Enforcement Order. Decisions • Low employment rate among younger and (-2% after -2.6% in 2016 and -8% year-on-year flexible. Although the government announced older workers in November 2017) and business creation will grow reforms to unemployment insurance for 2018 and invoices) are analysed. Where possible, the debtor can be granted an extended time period to pay his • Room for improvement in public spending (+6% year-on-year in November 2017). to vocational training, these will be much less far- NUMBER OF CORPORATE FAILURES reaching than the texts already passed. In contrast, debts, with the period’s length negotiated as part of • High level of public debt, private debt on The external contribution is likely to be less the amicable settlement. Total Estimate (e) / Forecast (f) Yearly growth upward trend negative in 2018, thanks to accelerating exports in a reform of the pension system (removal of special regimes), which is due to be launched in 2018, could context of strong demand from partners and cost/ Legal proceedings 64,000 62,946 4% 2.6% 62,919 competitiveness gains recorded in recent years. lead to significant union protests. Nevertheless, Order for payment (injonction de payer) 62,694 SECTOR RISK ASSESSMENT With the effects of the terrorist attacks of 2015 President Macron enjoys fairly high popularity When a debt claim results from a contractual 62,000 3.1% 2% ratings and strong legitimacy following his victories 61,041 and 2016 fading, tourism rebounded in 2017, and is undertaking and is both liquid and undisputable, 0.4% in the presidential and parliamentary elections, 60,193 expected to accelerate further in 2018. Hotel stays creditors can use the injunction-to-pay procedure 60,000 0% while the main opposition parties (Socialist Party 59,484 grew 4.8% year-on-year over the first nine months (injonction de payer). This flexible system uses pre- -1.7% on the left and Les Républicains on the right) are printed forms and does not require the applicants -0.4% 58,093 of 2017, thanks to the return of foreign tourists 58,000 -2% (+8.1%), a trend which should be confirmed in 2018. undergoing a period of rebuilding. Although one of to argue their case before a civil court (tribunal -1.2% President Macron’s commitments was to boost the d’instance) or a competent commercial court (with At the same time, imports will continue to be driven 56,000 -4% by capital goods needed for corporate investment building of Europe, any progress will depend on the jurisdiction over the district where the debtor’s and by higher oil barrel prices, which should political situation in Germany. registered offices are located). 54,000 -6% nonetheless be offset by the slight appreciation of By using this procedure, creditors can rapidly obtain -5.1% 53,446 the euro. a court order which is then served by a bailiff. The 52,537 52,000 defendant then has a period of one month in which -8% Despite the fading effects of lower energy prices, -7.7% -8.0% inflation is expected to remain low, notably because to dispute the case. 50,000 -10% of lower telecommunications prices (increased Fast-track proceedings 2010 2011 2012 2013 2014 2015 2016 2017(e) 2018(f) competition). Référé-provision provides creditors with a rapid means of debt collection. If the debtor is neither Source: Banque de France, Coface

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COFACE ASSESSMENTS COFACE ASSESSMENTS C B COUNTRY RISK COUNTRY RISK C B BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 3,9 2,1 0,8 2,7 GDP growth (%) 2.9 2.7 4.0 4.5 Exports of goods, as a % of total 1.9 Exports of goods, as a % of total 3.7 Inflation (yearly average, %) -0,1 2,1 2,5 2,5 POPULATION Inflation (yearly average, %) 4.0 2.1 5.7 2.5 POPULATION United States (millions of persons - 2016) Euro Area (millions of persons - 2016) 46% Budget balance (% GDP) -1,1 -6,6 -3,6 -2,3 16% Budget balance (% GDP) -3.7 -4.2 -4.0 -3.5 7,453 3,872 Euro Area Current account balance (% GDP) -5,7 -10,2 -9,3 -6,7 Russia Current account balance (% GDP) -12.0 -13.5 -12.0 -12.0 20% GDP PER CAPITA 10% GDP PER CAPITA Public debt (% GDP) 44,7 64,2 59,0 59,0 (US dollars - 2016) Public debt (% GDP) 52.3 55.5 57.0 58.0 (US dollars - 2016) China Turkey 15% (f): forecast 8% (f): forecast South Korea China 7% RISK ASSESSMENT 8% RISK ASSESSMENT Australia Azerbaijan 4% Fragile recovery in 2018 due to slow financial markets rise, following a downgrade 7% Investment and exports are strengthening imports of capital goods, and the low valuation progress on diversification in its sovereign debt rating. In November 2017 growth of exported products. Tourism revenue, Azeri Imports of goods, as a % of total Activity slowed in 2017 because of lower prices Gabon issued CFA 100 billion (USD 180 million) in Imports of goods, as a % of total Domestic and foreign investment, both in hydrocarbon transit revenue, and immigrant bonds at a yield of 6.5% on the regional financial workers’ remittances ultimately limit the current Euro Area for oil, on which the Gabon economy strongly Euro Area infrastructure and in other areas, should progress 48% depends, and because of poor performance in market of the Central African Economic and 22% even more quickly. Private players are supported account deficit to 12% of GDP. The financing of Monetary Community (CAEMC) to finance its this deficit is ensured by foreign investment (12% China the tertiary sector. Cash liabilities, as well as an Canada by European Union Association Agreements and 13% unfavourable economic picture, have weakened PRE projects. 19% FTAs, as well as by the USD 285 million three- of GDP), particularly in transport, real estate, Australia the banking sector, which has issued less credit. Following a modest increase in the oil price, Turkey year Extended Credit Facility granted by the IMF in telecommunications, and finance, as well as by 7% The economy will remain delicate in 2018, even exports (79% dependent on black gold) are 14% April 2017. Public investment programmes aimed foreign debt. Foreign debt represented 108% United States if recovery is likely following the increase in expected to increase in 2018. Against this, Russia at modernising and developing the country’s of GDP at the end of 2016, roughly evenly split 4% crude oil prices. The non-oil share of GDP is the import volumes are growing because of 7% infrastructure, such as the deep-water port on the between public and private debtors. Thailand expected to grow, particularly that of the mining, equipment and manufactured goods needed for China Black Sea coast, are continuing. Exports (copper, 4% agri‑food and timber sectors. The authorities’ investments under the EGSP. The trade balance, 6% wine, spirits, mineral water, ferroalloys, nuts, Ties with Russia, which is supporting the goal under the Emerging Gabon Strategic Plan in surplus until 2015, will therefore remain in medicine) will benefit from the upturn expected in secessionist regions, and a decent business + STRENGTHS (EGSP) is to focus on the country’s dependence deficit as will the balance of services. The current + STRENGTHS Russia and other countries in the region. Tourism climate on commodities, especially oil (27% of GDP in account deficit will be financed by FDIs (about 5% revenue is expected to grow even further with the Tensions remain at the borders of the regions, • 5th largest oil producer in Sub-Saharan 2016). Under a public/private partnership, in 2017 of GDP) and new concessional loans. • Good resistance to the regional economic increased number of Russian visitors. Performance nd supported by Russia, that have unilaterally declared Africa; 2 largest African producer of the Singaporean company, Olam, opened the crisis (2014-2016) could be increased if an agreement is reached on timber; world’s leading producer of highly their independence (Abkhazia and South Ossetia, world’s largest palm oil factory. The production of Relative political stability following • Agricultural, mineral, hydroelectric, and the establishment of trade corridors with Russia with 160,000 and 50,000 inhabitants respectively). coveted manganese tourism potential manganese will remain dynamic due to sustained the serious post‑electoral crisis of 2016 across the secessionist regions of Abkhazia and However, Georgia and Russia have resumed trade • Drive to diversify the economy undertaken • International support, notably from the EU under the Emerging Gabon Strategic Plan demand, while the iron and cement sectors could South Ossetia. Household consumption is expected relations, the former being an important source rebound after the drop in orders in 2017. A special The contested re-election of Ali Bongo in August and the IMF to grow moderately, while households are expected • Stable CFA franc 2016 sparked violence between supporters of of beverages for the latter, and the latter being economic zone was created in Nkok to provide • Strategic geographic position (transit point to benefit from the increase in immigrant workers’ the source of significant immigrant workers’ the opposition candidate, Jean Ping, who declared for oil and gas from the Caspian Sea) tax incentives for economic development and remittances (10% of GDP) – approximately 60% of remittances and tourism revenue for the former. to attract FDIs. It is located close to the port himself the victor, and the security forces (two • Democratic political system which come from Russia – and a drop in inflation - WEAKNESSES On the other hand, poor relations with the two of Olam at Owendo, which was inaugurated in days of riots, deaths and hundreds of arrests). linked to the rise in the local currency, the lari. In The parliamentary elections, initially planned for secessionist regions are hindering land relations • Economy highly dependent on oil sector October 2017 (EUR 276 million). A loan from the addition, credit is expected to experience continued with Russia and complicating the management AfDB in late 2017 for EUR 100 million will support July 2017, have been postponed until April 2018 by - WEAKNESSES favourable growth. Banks report only 4% non- • High cost of production factors, linked the Constitutional Court and could be postponed of the Enguri hydroelectric power station, with its to inadequate infrastructure (transport continued progress under the agricultural • Structural trade deficit, low diversification performing loans and held up well against sharp dammed lake in Georgia and the plant in Abkhazia. and electricity) programme, GRAINE, to reduce Gabon’s food again. The argument put forward, qualified as depreciation in the lari, despite strong dollarization force majeure, is that the reforms discussed and valuation of exports At the national level, Georgian Dream (RG), the • Informal sector representing 40-50% imports. • Significant poverty due to unemployment, (60% of loans and 70% of deposits). Even so, the of GDP as part of the national dialogue after the authorities have embarked on the subsidisation party of President Guiorgui Margvelashvili elected in demonstrations of 2016, have been delayed. The under-employment, and inadequate 2013, won the legislative elections of October 2016 • High unemployment and endemic poverty Ongoing fiscal consolidation in 2018 training of the conversion of dollar loans at a favourable project, which includes the review of 40 articles exchange rate. with 115 seats out of 150, far ahead of his former • Degraded political context, rampant The public accounts surplus fell gradually after of the Constitution, was presented to the Council • Low productivity of agriculture: half of partners in the previous coalition government and corruption assets, but less than 10% of added value 2009, because of increased public investment of Ministers on 28 September 2017. Jean Ping the United National Movement (UNM) of former • Accumulation of domestic and external associated with the implementation of the refused to take part of it. The measures comprise • Poor transport infrastructures Start of fiscal consolidation, but ongoing president Mikheil Saakashvili (27 seats). This clear arrears EGSP. State revenues are, thus, closely linked to greater powers for the National Assembly • Low levels of education and innovation massive current account deficit result may be favourable to the progress of reforms oil revenues (59% of tax receipts) and the fall in compared to the Senate, as well as a two-round • Relations with Russia weakened by the The entry into a new agreement with the IMF is and cooperation with NATO and the EU. However, crude oil prices only pushed up the government’s process for the national, parliamentary and situation in Abkhazia and South Ossetia expected to be accompanied by fiscal consolidation. the concentration of power within one party may financing needs. Under the Economic Stimulus presidential elections (compared with one round However, reducing the public deficit will still raise fears of abuse, as former Prime Minister and Plan (PRE, 2017-2019), the government’s currently). Some amendments were rejected require considerable effort. Even though current multi-billionaire Bidzina Ivanishvili remains very objective is to bring the deficit down below by the opposition on grounds that they would expenditure should be better controlled, public influential, even when compared to the current the 3% threshold. It is in this context that fiscal extend the president’s powers. Nevertheless, investment (electrical network, roads, sanitation, Prime Minister Giorgi Kvirikashvili. The draft of the consolidation has helped reduce the public the opposition is unlikely to be in a position to water supply, irrigation) remains a priority and will new constitution has been criticised, as well as the deficit from 2017 and this should continue in 2018 prevent the adoption of constitutional reform continue to grow (partially financed by multilateral draft electoral law intended to make more room for despite higher spending, specifically through by the parliament, as Ali Bongo’s Gabonese loans). Nevertheless, the increase in the domestic proportional representation, but which would not investment in infrastructure for transport, Democratic Party (PDG) has a majority in the product and the rise in the lari should limit the apply until 2024. A proposed ban on the purchase water and electricity supply, and Internet access. house. In August 2017 the President announced increase in debt, 83% of which (46.1% of GDP at of agricultural land by foreigners could deter many Income is expected to rise with the strengthening the formation of a government which includes the end of 2016) is held by foreign creditors, mainly foreign banks from lending to the agricultural of measures to mobilise tax receipts and members of the opposition. public, multilateral and bilateral, at a fixed rate, in US sector. According to the World Bank, governance customs revenues and the desire to integrate Despite the reforms, the business climate dollars or SDR. Due to the concessional terms, the is poor with regard to rule of law and accountability certain activities in the formal sector. Financing remains fragile (167th in the Doing Business annual service of the foreign public debt represents of the authorities, but average for the fight the deficit is mainly through concessional loans, 2018 rankings) because of infrastructure only 5% of GDP. against corruption, the quality of regulation, the notably via the IMF, which granted a 3-year shortcomings, corruption, and difficulty in The current account deficit will remain high in effectiveness of public authorities, and the handling Extended Credit Facility (USD 642 million, 4% of conducting business. 2018. This is explained by the massive trade of insolvency. GDP) and the World Bank, which released USD deficit in goods (26% of GDP in 2016) related 200 million to clear the country’s trade arrears. to the narrowness of the productive base, Gabon has seen its borrowing costs on the

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COFACE ASSESSMENTS PAYMENT & COLLECTION PRACTICES IN GERMANY Payment Ordinary proceedings Insolvency proceedings A1 During ordinary proceedings, the court COUNTRY RISK Bank transfer (Überweisung) remains the Out-of Court proceedings prevalent means of payment. All leading German may instruct the parties or their lawyers to Debtors may attempt to renegotiate their debts banks are connected to the SWIFT network substantiate their claim, which the court alone with their creditors, which helps to protect A1 is then authorised to assess. Each litigant is also BUSINESS CLIMATE which enables them to provide a quick and debtors from early payment requests. However, efficient funds transfer service. SEPA Direct requested to submit a pleading memorandum the procedure is in the creditors’ interest as it can Debit Core Scheme and the SEPA Direct Debit outlining their expectations, within the specified be faster and tends to be less expensive than B2B are the new forms of direct debit. time limit. formal insolvency. TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) Bills of exchange and cheques are not used very Once the claim has been properly examined, a Sustainable restructuring GDP growth (%) 1.5 1.9 2.5 2.1 82.5 widely in Germany as payment instruments. public hearing is held at which the court passes Following a petition filed before insolvency court Exports of goods, as a % of total an informed judgement (begründetes Urteil). Inflation (yearly average, %) 0.1 0.4 1.6 1.5 POPULATION For Germans, a bill of exchange implies a critical on the basis of illiquidity or over-indebtedness, United States (millions of persons - 2016) financial position or distrust in the supplier. The losing party will customarily bear all court the court may open preliminary insolvency 9% Budget balance (% GDP) 0.6 0.8 0.7 0.8 42,177 Cheques are not considered as payment as such, costs, including the lawyer’s fees of the winning proceedings, where it appoints a preliminary France Current account balance (% GDP) 8.5 8.3 8.1 7.7 party to the extent that those fees are in administration aimed at exploring the chances of 8% GDP PER CAPITA but as a «payment attempt»: as German law Public debt (% GDP) 70.9 68.1 65.0 61.8 (US dollars - 2016) conformity with the Official Fees Schedule (the restructuring the company. If the administration United Kingdom ignores the principle of certified cheques, the 7% (f): forecast issuer may cancel payment at any time and on Rechtanwaltsvergütungsgesetz / RVG). In the authorizes this restructuration, it then case of partial success, fees and expenses are initiates formal proceedings and nominates an Netherlands any grounds. In addition, banks are able to reject 7% RISK ASSESSMENT payments when the issuing account contains borne by each party on a pro rata basis. Ordinary administrator in charge of continuing the debtor’s China insufficient funds. Bounced cheques are fairly proceedings can take from three months to a business whilst preserving its assets. 6% Dynamic growth will continue in 2018 Public and external accounts in surplus common. year, while claims brought to the federal Supreme Liquidation Court can reach up to six years. The German economy had a very good year in Despite slight fiscal loosening against As a general rule, bills of exchange and cheques Liquidation may be initiated upon demand of Imports of goods, as a % of total 2017, and the outlook remains positive for 2018. a background of expected tax relief for are not considered as effective payment An appeal (Berufung) may be brought against either the debtor or the creditor provided that the decision of the Court of First Instance if the the debtor is unable to settle its debts as they Netherlands Economic growth is expected to remain above households, higher pension obligations, and instruments, even though they entitle creditors 13% estimates for potential growth (approximately higher spending on transport, energy and to access a “fast track” procedure for debt objected amount in dispute exceeds EUR 600. An fall due. Once recognized through a liquidation China 1.5%). As a consequence, Germany is expected to early childhood services, the public balance will collection in case of non-payment. appeal will also be admitted by the Court of First decision and once the company has been 7% experience an upswing for the ninth consecutive continue to show a small surplus, due to ongoing Instance if a case involves a question of principle removed from the register, the creditors must or necessitates revision of the law in order to file their claims with the liquidation administrator France year. Economic growth is especially driven by strong growth in taxes and social contributions. Debt collection 7% internal demand. The maintenance of a significant primary surplus ensure ’consistent jurisprudence’. within three months of the publication. Belgium (i.e. excluding debt interest) and of a positive Amicable Phase Retention of title 6% One of the key factor’s to this success is the The amicable collection is an essential step to strength of the labour market, which has seen differential between growth and the average Enforcement of a legal decision Retention of title is a written clause in the Italy interest rate should result in another reduction the success of collection management. The contract in which the supplier will retain the 5% increasing employment and dynamic gains Enforcement may commence once a final in the debt burden. Although slightly lower, the collection process generally begins with the ownership over the delivered goods until the in incomes. In late 2017, the amount of open debtor being sent a final demand for payment, via judgement is made. If debtors fail to respect a positions stood at 1.1 million: an all-time high. current account balance is set to remain broadly judgment, their bank accounts may be closed buyer has made full payment of the price. There in surplus thanks to a massive trade surplus. The ordinary or registered mail, reminding the debtor are three versions of this retention: + STRENGTHS Labour demand is especially high in the trade, of their payment obligations. and/or a local bailiff can proceed with the seizure education, and health sectors, accompanied balance of services traditionally posts a deficit, and sale of their property. • Simple Retention: the supplier will retain the • Solid industrial base (more than 20% of GDP) especially due to tourism. The income balance According to the “Law for the acceleration of by high levels of demand in manufacturing For foreign awards, in order to obtain an ownership over the goods supplied until full • Low structural unemployment; well- industries and for part-time workers. Therefore, is expected to remain in surplus with income due payments” (Gesetz zur Beschleunigung developed apprenticeship system exequatur, the creditor needs a notarized payment is made by the buyer. by the end of 2018, the threshold of 45 million from investments abroad, which are increasing fälliger Zahlungen) a debtor is deemed to be in • Geographic diversification of exports German translation of the decision which also has • Expanded Retention: the retention is expended people in employment could be reached for the due to recurring current surpluses, exceeding default if a debt remains unpaid within 30 days • Strong competitiveness remittances sent overseas by emigrants of the due payment date and after receipt of an to be recognized, an enforcement order of this to further sale of the subsequent goods; the first time ever, with the unemployment rate set judgment, and an execution clause. Judgments of buyer will assign to the initial supplier the claims • Importance of family-owned exporting to continue its downward trend towards 5%. In and investors. invoice or equivalent request for payment, unless SMEs (Mittelstand) courts of member states of the European Union issued form the resale to a third party. addition to this, export growth picked up in 2017 the parties have agreed to a different payment • Integration of Central and Eastern Europe in are recognized without further procedure – and will likely remain dynamic in 2018 as well, Political uncertainty period in the purchase contract. In addition, the • Extended Retention: the retention is extended production process debtor is liable for default interest and reminder unless certain restrictions arising from European to the goods processed into a new product and due to the broad-based upswing in the world After general elections in September 2017, the • Importance of the ports of Hamburg, fees upon expiry of this period. law are applicable. the initial supplier remains the owner or the co- Bremerhaven and Kiel economy. Germans have been faced with the longest owner up to the value of his delivery. • Institutional system promoting Growth in public consumption will likely slow negotiations to forming a new government since Debt collection is recommendable and common representativeness and consensus with a drop in the number of refugees taken the Second World War (WWII). After the failure of practice in Germany. in, but public investment in social housing exploratory talks between the two conservative Legal proceedings - WEAKNESSES and infrastructure will probably continue, parties – the Liberal Party, and the Green Party – Fast-track proceeding accompanied by a probable strong growth in new talks began at the start of 2018 between Provided the claim is undisputed, the creditor • Ageing infrastructure the construction of private homes. In contrast, the Conservatives and the Social-Democrats may seek order to pay (Mahnbescheid) through • Demographic decline, partially offset business investment in equipment and buildings to again form a Grand Coalition. If inconclusive, a simplified and cost-efficient procedure. The by immigration is set to pick up very gradually, despite the high new elections could take place in the spring. creditor describes the details of their claim • Shortage of engineers and venture capital rate of production capacity utilisation, against The weak election results of the conservative and is subsequently able to obtain a writ of • Highly dependent on world, especially a background of continued uncertainties, parties and widespread political tendencies in execution fairly quickly via the Online-Dunning European, markets especially from the external environment (e.g. the new parliament have significantly weakened Service (Mahnportal), direct interfaces or (only • Prominence of automotive and mechanical NUMBER OF CORPORATE FAILURES engineering industries Brexit, because the UK is among Germany’s top- Chancellor Angela Merkel’s position. Far- for private individuals) pre-printed forms. Such reaching reforms, also in the area of economic • Persistent but reducing backwardness five trade partners). Given the much stronger automated and centralized (for each Bundesland, Total Estimate (e) / Forecast (f) Yearly growth in Eastern Länder import growth linked to lively domestic demand policy, are unlikely to take place, as room for federal state) procedures are available all over 35,000 0% • Weak productivity of services and the stabilisation of trade terms, trade’s consensus-building will be contained – even Germany. 31,998 • Low start-up activity contribution to growth is expected to be close after new elections. Due to sound public This type of action falls within the competence 30,098 -1% to zero. In this environment, German businesses’ finances, there is some room for tax relief and 30,000 -2.1% 28,296 of the local court (Amtsgericht) for the region -2% payment behaviour will likely remain generally higher expenditures. Nevertheless, the next 25,994 SECTOR RISK ASSESSMENT in which the applicant’s residence or business 24,084 good. The number of insolvencies is expected government – which could even be a minority 25,000 23,124 -3% is located. For foreign creditors, the competent -4.0% to fall by about 5% (after a drop of more than 7% one for the first time in Germany’s history after -4.0% 21,517 court is the Amtsgericht Wedding (in Berlin). 19,925 -4% in 2017). WWII – could be quite fragile. Legal representation is not mandatory. 20,000 19,128 -5% The debtor is given two weeks after notification -6.0% 15,000 to pay their debts or to contest the payment -6% -5.9% order (Widerspruch). If the debtor does not object -7% within this timeframe, the creditor can apply for a 10,000 writ of execution (Vollstreckungsbescheid). -7.3% -6.9% -7.4% -8% 5,000 -8.1% -9% 0 -10% 2010 2011 2012 2013 2014 2015 2016 2017(e) 2018 (f) Source: Destatis, Coface

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COFACE ASSESSMENTS COFACE ASSESSMENTS B B COUNTRY RISK COUNTRY RISK B A4 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 3.9 3.6 7.3 6.8 GDP growth (%) -0.3 -0.2 1.4 2.0 Exports of goods, as a % of total 27.6 Exports of goods, as a % of total 10.8 Inflation (yearly average, %) 17.2 17.5 12.3 9.8 POPULATION Inflation (yearly average, %) -1.1 0.0 1.2 1.8 POPULATION Switzerland (millions of persons - 2016) Italy (millions of persons - 2016) 18% Budget balance (% GDP) -6.9 -8.7 -6.3 -5.4 11% Budget balance (% GDP) -5.7 0.5 -0.9 -0.1 1,551 18,049 India Current account balance (% GDP) -7.7 -6.7 -6.1 -5.4 Germany Current account balance (% GDP) -0.2 -1.1 0.4 0.4 15% GDP PER CAPITA 8% GDP PER CAPITA Public debt (% GDP) 72.2 72.5 70.5 68.1 (US dollars - 2016) Public debt (% GDP) 176.8 180.8 177.9 172.8 (US dollars - 2016) United Arab Emirates Cyprus 13% (f): forecast 6% (f): forecast Euro Area Turkey 12% RISK ASSESSMENT 5% RISK ASSESSMENT China Bulgaria 9% Hydrocarbons, driving the rebound in debt ratio (about 55% of the total debt stock), 5% Tentative recovery in growth and gradual thanks to a stronger economic recovery, but the Greek growth have increased very rapidly since the country consolidation of the banking system government’s estimates are based on an optimistic Imports of goods, as a % of total After posting a solid rebound in 2017, thanks to benefited from the Multilateral Debt Relief Imports of goods, as a % of total Activity resumed after several years of recession. scenario. The IMF’s primary surplus forecast is more Initiative (MDRI) in 2006. The development of a pessimistic. The international institution agreed in Euro Area the hydrocarbon sector, growth is expected to Germany Household and business confidence strengthened 20% consolidate in 2018. Increased production at the domestic capital market should, in particular, help 11% during the year, especially with the agreement principle in July 2017, has an assistance programme reduce the use of external borrowings. of EUR 1.6 billion, contingent upon European lenders China TEN (oil) and Sankofa (gas) hydrocarbon fields, Italy reached in June 2017 with international creditors. 17% which became operational in August 2016 and The country’s external position is expected 9% participating in a debt relief scheme. The views of the The recovery is set to be more marked in 2018. IMF and European creditors differ on the sustainability United Kingdom May 2017 respectively, will lift growth further. to continue to improve in 2016, thanks to China Household consumption is expected to strengthen 10% 7% of Greek debt, which is close to 179% of GDP. The Exploitation of the Jubilee oil field, hampered the gradual reduction in the trade deficit. thanks to improvements in the labour market. The United States by several technical incidents in 2016, should Hydrocarbon production, in particular, enabled Russia option of debt relief in the form of reprofiling European 8% 6% unemployment rate is set to gradually drop to 20%, loans via the ESM has been discussed without a final start to benefit from the development work Ghana to become a net oil exporter in 2017: a but wage growth will remain weak. Gross fixed capital India undertaken in 2017. Meanwhile, although still trend likely to be confirmed in 2018. In contrast, Netherlands agreement between the different parties (IMF ECB, 5% 6% formation should improve as a result of confidence COM, ESM and the Greek Government). The validation impeded by weak credit growth and fiscal technical services for the oil and gas sectors are building and better financing conditions. This recovery consolidation, non-hydrocarbon growth is likely to cause the balance of services deficit of the second valuation review also allowed Greece to in investment could however be limited by the risk that return to international markets with a bond issue of + STRENGTHS expected to gradually regain momentum. The to widen and profit repatriation by foreign + STRENGTHS still weighs on the banking system. Access to bank Bank of Ghana’s accommodative monetary companies will widen the income balance deficit. EUR 3 billion over five years at a rate between 4.875% financing has increased, but the high level of bad loans and 4.75%. In 2018, the government intends to repeat • Significant mining and agricultural stance and the decline in inflationary pressures The contribution of expatriate remittances to • Support from the international financial continues to limit its contribution to economic activity. resources (gold, cocoa), as well as oil and community and possibility of debt relief the experiment and will proceed with several issues will sustain household consumption as well the transfer balance will remain significant. The question of bad debts is all the more crucial as the gas resources as services (telecommunications, financial Capital flows and FDIs will further help finance • World leader in maritime transport of Greek treasury bills to lay the groundwork for the • Established democracy ECB, after rejecting the IMF’s request for a new asset mandatory refinancing of the country on the markets services). Moreover, the improvements the current account deficit. Although the • Tourist destination quality review, has postponed the date of its stress • Attractive business climate, favourable observed in electricity supply should help the foreign exchange reserves, which cover about after the end of the assistance program, while rating for FDIs tests to the first half of 2018. Greek banks were well agencies have positively re-evaluated Greece’s industrial sector. In contrast, given the budgetary 3.5 months of imports, are being rebuilt, Ghana re‑capitalised in December 2015, but the quality of • International financial support sovereign rating. constraints, it will be difficult to implement the remains vulnerable to capital flight. - WEAKNESSES their assets remains uncertain. Under the impetus of nearly 200 projects selected for 2018 under The current account is expected to remain slightly in • Very high level of public debt the Greek central bank, major banking institutions will the One District, One Factory industrialisation Democracy favours political changeovers be forced to accelerate the cleaning up of their balance surplus in 2018. Tourism revenue and the export trend - WEAKNESSES • Very poor quality of bank portfolio programme, especially in agri-industry. Although sheet. The gradual stabilising of the banking system will more than offset the increase in the energy bill. Winner of the December 2016 general • Weak public institutions, strong • High level of public debt on an upward trend, private investment is should favour a more sustained recovery of bank unlikely to focus on these activities while the elections, President Nana Akufo-Addo and tax evasion • Infrastructure gaps (energy, transport) his New Patriotic Party (NPP) succeeded the deposits, the growth of which has remained slow (+7% Alexis Tsipras: Between austerity and waning outlook for the primary sector remains mixed. • Limited industrial base, low-technology in 2017). The normalisation of the financial situation government popularity • Dependent on commodity prices In particular, the drop in the price of cocoa and in National Democratic Congress (NDC) led by exports (food, chemicals, metals, (gold, oil, cocoa) former president John Mahama (2012-2016). refined oil) should, moreover, favour the gradual lifting of the Since the parliamentary elections of September 2015, the quality of beans from Ghana will continue to capital control whose measures have been lightened • Weak public banks which affects entire weigh on the agricultural sector. The relatively peaceful political changeover • Social tensions fuelled by fiscal austerity the Syriza radical left coalition government led by banking sector at the end of 2016 has, in particular, helped and mass unemployment for companies, but remain restrictive for households. Alexis Tsipras has been leading the country. Founded Despite the recent easing by the central bank, confirm Ghana’s democratic credibility. The on a weak coalition with nationalists, the government, monetary policy - which is still fairly tight - is country’s stability is not especially threatened A primary surplus in line with its objectives, revamped in 2016 and under pressure from expected to support disinflationary trends in by the rivalry, sometimes hostile, between but a very heavy debt international donors, had to implement an austerity 2018. Higher domestic demand is nonetheless the two main parties. After several years of The fiscal consolidation started in 2015, as part policy that is gradually reducing its popularity among expected to keep inflation at the top of the Bank economic slowdown, the population still has voters. The gamble seems to have been a successful of Ghana’s target range (between 6 and 10%). of the third financial assistance programme for high expectations of President Akufo-Addo. Greece, should continue under the supervision one, however, as the country prepares for the end of Established as priorities during the campaign, the of the European Stability Mechanism (ESM). The the third European financial assistance programme Falling twin deficits objectives of reducing poverty and social help for programme, which will end on 20 August 2018, in 2018. Despite some redistributive measures made In 2018, the fiscal consolidation efforts the most vulnerable are now being put under the has made EUR 86 billion available in exchange for possible by the primary surpluses generated in undertaken by the government following microscope. significant tax and economic reforms, avoiding the 2016 and 2017 (EUR 617 million in measures aimed budget slippage in 2016 are expected to be Although the infrastructure deficit and a degree country’s payment default and the bankruptcy of at the most disadvantaged households in 2017 and continued and, accordingly, enable renewed of red tape still impedes the development of the the banking system. Since 2015, parliament has EUR 1.4 billion in 2017), Syriza has secured second deficit reduction. Efforts will continue to focus private sector, Ghana is well placed as regards the approved a number of reforms, the application of place in the polls since early 2016 after the New on rationalising current spending so as to protect business climate and governance compared to which will run until 2019, the most important being the Democracy party, which is the main opposition. While capital investment spending. Tax administration its competitors in the region and sub-region. So, controversial pension reform, the direct and indirect the reconfiguration of the political chessboard is reforms should help broaden the tax base. according to the Doing Business 2018 rankings, taxation overhaul (reform of VAT, anti-tax evasion taking shape for the 2019 legislative elections, early Revenue generated by the oil and gas bonanza Ghana still enjoys the most favourable business rules, broadening of the tax base). The objective is, elections are not excluded. should increase gradually and also contribute climate in West Africa, but, with stagnation in ultimately, to reach a primary surplus of 3.5% as of to higher receipts. Initially due to expire in April all the areas assessed, has dropped 12 places 2018 against 1.75% set in 2017. The fragile recovery 2018, the IMF’s ECF has been extended until compared with the 2017 Index. It has therefore and significant reduction in public spending resulted December 2018 and its objectives have been seen the gap between itself and its competitors in a primary surplus of 2.1%, above the ESM target. In reviewed. The IMF programme and the fiscal - Ivory Coast and Senegal - narrow. addition, in September 2017 the European Union (EU) adjustment are aimed at restoring a primary symbolically announced the closure of the excessive surplus so as to bring the debt path back under deficit procedure opened since 2009. The 2018 control. The debt ratios, especially the external budget plans to increase the primary surplus to 3.75%

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PAYMENT AND COLLECTION PRACTICES IN GREECE COFACE ASSESSMENTS Payment The recovery process commences with the Enforcement of a legal decision debtor being sent a final demand for payment via C Bills of exchange, as well as promissory letters, Enforcement of a domestic decision may COUNTRY RISK are used by Greek companies in domestic a registered letter, reminding him of his payment commence once it is final. If the debtor fails to and international transactions. In the event obligations, including any interest penalties as satisfy the judgment, the latter is enforceable may have been contractually agreed – or, failing C of payment default, a protest certifying the directly through the attachment of the debtor’s BUSINESS CLIMATE dishonoured bill must be drawn up by a public this, those accruing at the legal rate of interest. assets. notary within two working days of the due date. Interest is due from the day following the date of payment stipulated in the invoice or commercial For foreign awards rendered in an European Similarly, cheques are still widely used in Union member state, Greece has adopted agreement at a rate, unless the parties agree TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) international transactions. In the domestic otherwise, equal to the European Central Bank’s advantageous enforcement conditions such business environment, however, cheques as the EU Payment Orders or the European GDP growth (%) 4.1 3.1 3.2 3.4 refinancing rate, plus seven percentage points. Exports of goods, as a % of total 16.6 are customarily used less as an instrument Enforcement Order. For decisions rendered by Inflation (yearly average, %) 2.4 4.4 4.4 3.5 POPULATION of payment, and more as a credit instrument, Legal proceedings non EU countries, they will be automatically United States (millions of persons - 2016) Fast track proceedings 33% Budget balance (% GDP) -1.4 -1.1 -1.5 -1.8 making it possible to create successive enforced according to reciprocal enforcement 4,070 payment due dates. It is therefore a common Creditors may seek an injunction to pay (diataghi treaties. In the absence of an agreement, El Salvador Current account balance (% GDP) -0.3 0.9 0.5 -0.2 11% GDP PER CAPITA and widespread practice for several creditors pliromis) from the court via a lawyer under a fast- exequatur proceedings will take place. Public debt (% GDP) 24.2 24.5 24.6 24 .9 (US dollars - 2016) track procedure that generally takes one month Honduras to endorse post-dated. Furthermore, issuers 8% (f): forecast of dishonoured cheques may be liable to from the date of lodging the petition. To engage Insolvency proceedings Euro Area prosecution provided a complaint is lodged. such a procedure, the creditor must possess a written document substantiating the claim Restructuring proceedings 8% RISK ASSESSMENT Promissory letters (hyposhetiki epistoli) are underlying his lawsuit, such as an accepted and This procedure aims to help the debtor restore Nicaragua 6% Activity driven by external trade and private Regarding external accounts, higher fuel prices another means of payment used by Greek protested bill, an unpaid promissory letter or its credibility and viability, and continue its consumption will push up imports, while the appreciation companies in international transactions. They are promissory note, an acknowledgement of debt operations beyond bankruptcy. The debtor of the Guatemalan quetzal will make textiles a written acknowledgement of an obligation to established by private deed, or an original invoice negotiates an agreement with its creditors. Imports of goods, as a % of total In 2018, growth is expected to remain moderate, less competitive against production from Asia. pay issued to the creditor by the customer’s bank summarising the goods sold and bearing the During this procedure, claims and enforcement driven, in particular, by robust external trade and United States The increased trade deficit is unlikely to be fully committing the originator to pay the creditor at buyer’s signature and stamp certifying receipt actions against the debtor may be stayed 38% private consumption. The latter should increase offset by higher remittances from expatriate a contractually fixed date. Although promissory of delivery or the original delivery slip signed by but the court will appoint an administrator to Mexico thanks to higher remittances from expatriate workers; the current account balance is letters are a sufficiently effective instrument, in the buyer. control the debtor’s assets and performances. 11% workers, boosted by US growth. For the same that they constitute a clear acknowledgement reason, manufacturing exports (especially therefore expected to dip into the red in 2018. The ruling issued by the judge allows immediate The reorganization process starts with the China of debt on the part of the buyer, they are not 10% textiles) are expected to climb, benefitting from execution subject to the right granted to the debtor’s submission of a plan to the court made deemed a bill of exchange and so fall outside the Euro Area preferential access to the US market. Inflation A very tense political climate against defendant to lodge an objection within fifteen by specialists, which conducts a judicial review scope of the “exchange law”. 7% should be weaker in 2018, with an expected hike a background of corruption days. To obtain suspension of execution, the of the proposed plan whilst a court-appointed SWIFT bank transfers, well established in Greek mediator assesses the creditors’ expectations. El Salvador in the central bank’s key rates reversing the trend debtor must petition the court accordingly. 5% 2017 was marked by an explosion of corruption banking circles, are used to settle a growing The plan can only be validated upon approval by in place since 2013. inquiries involving President Jimmy Morales, Based on current competence thresholds, proportion of transactions and offer a quick and creditors representing 60% of the total debt. The political climate, marked by large-scale elected under the slogan “Neither corrupt, nor a a “justice of the peace” (Eirinodikeio) hears secure method of payment. SEPA bank transfers (60% is not always applicable, depending on the + STRENGTHS corruption scandals, could put pressure on thief”, and several members of the Guatemalan claims up to EUR 20,000. Above that amount, a are also becoming more popular as they are fast, case and approval by the bank) investments. The first signs of this can already political class. In September 2017, the parliament court of first instance presided by a single judge secured and supported by a more developed • Financial support from the United States be observed in the suspension of many public rejected calls to lift the immunity of President (Monomeles Protodikeio) hears claims from Liquidation and multilateral lenders banking network. infrastructure projects due to corruption Morales, and in October 2017, the Supreme EUR 20,000 to EUR 250,000. Claims over EUR The procedure commences with an insolvency • Free trade agreements with the United allegations and frequently postponed or Court ruled against investigating the president In 2015, Greece imposed restrictions on flows 250,000 are reviewed by a panel of three judges petition either by the debtor or the creditor. States and the EU unsuccessful (lack of interested parties) calls for receiving a bonus from the armed forces. of capital outside the country. All payments (Polymeles Protodikeio). The court appoints an administrator as soon • Geographic proximity to the United States Institutional risk appears to be contained at the directed abroad follow a specific procedure, and as the debts are verified. In addition a Pool of and Mexico for tender. The cessation at the end of 2017 are monitored by the banks and the Ministry of Ordinary proceedings Creditors (three members representing each of gold mining activities at the Marlin mine moment, but President Morales’s attempt to Where creditors do not have written and clear • High potential for tourism, agriculture, oust Iván Velásquez, the head of the UN Anti- Finance, with restrictions placed on the amount class of creditors) will be given the responsibility mining, hydroelectric and geothermal (Goldcorp), after many years of protest by and nature of the transfer. acknowledgement of non-payment from the of overseeing the proceedings, which terminate energy local Mayan communities, will trigger a drop in corruption Commission, triggered huge protests. debtor, or where the claim is disputed, the only once the proceeds of the sale of the business’ gold production in the absence of other large- As a result, the Supreme Court invalidated the remaining alternative is to obtain a summons Debt collection assets are distributed. scale projects. Meanwhile, the suspension of president’s decision, allowing M.Velásquez to under ordinary proceedings. The creditor files - WEAKNESSES activity by the Canadian company Tahoe at the continue his work. Popular pressure remains Amicable phase a claim with the court, who serves the debtor Escobal silver mine, following a judgement by strong and President Morales’s future as leader Before initiating proceedings in front of the within 60 days. The hearing would be set at • Social and political instability the Supreme Court for failing to respect the of the country is still very uncertain, strongly competent court, an alternative method to least eighteen months later. Greek law allows • Poor infrastructure right of indigenous people to be consulted, will increasing political risk in the country. recover a debt is to try to agree with the debtor the court to render a default judgment if the • Vulnerable to external shocks (natural reduce silver production. Uncertainty as to Meanwhile, the Guatemalan parliament is very on a settlement plan. Reaching the most respondent fails to file a defence. Since 2016, the disasters and commodity prices) whether activity will recover is likely to affect the fragmented. The president’s party has only beneficial arrangement can usually be achieved lawsuit procedure has been changed, and is now • Low fiscal revenues business climate in general, and the country will 11 seats out of 158 and the other parties are by means of a negotiating process. based exclusively on documentation provided to • Rural poverty, inequalities, under- be less attractive as a result. Rising silver prices numerous and small in size. In this context, it support the claim. employment, informal economy, internationally should, however, encourage is impossible to get a parliamentary majority, ethnic divisions the government to come to an agreement making any large-scale reform very unlikely. with Tahoe. Finally, Guatemala is characterised by very high crime rates. This – on top of ineffective Fiscal revenues still too weak in the absence institutions, lack of reforms and high levels of of reforms corruption – puts considerable pressure on the Guatemala’s tax system is characterised by business climate. the lowest rates of the entire Latin American continent, restricting the resources available for public spending. The political context makes tax reforms in the immediate future unlikely. The cautious fiscal policy has been temporarily relaxed in a context of strong social protests. Social and capital spending is being prioritised to finance health and education infrastructures as is security spending to combat the high levels of crime. The public debt, on the weak side in relation to GDP, is substantial when compared to fiscal revenues, which represented only 11% of GDP in 2016.

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COFACE ASSESSMENTS COFACE ASSESSMENTS C D COUNTRY RISK COUNTRY RISK D C BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 4,5 6,6 6,7 6,9 GDP growth (%) 3.1 3.3 3.5 3.6 Exports of goods, as a % of total 12.7 Exports of goods, as a % of total 0.8 Inflation (yearly average, %) 8,2 8,2 8,5 8,1 POPULATION Inflation (yearly average, %) -0.9 1.5 2.6 2.7 POPULATION China (millions of persons - 2016) Canada (millions of persons - 2016) 24% Budget balance (% GDP) -8,9 -1,0 -1,8 -1,6 31% Budget balance (% GDP) -1,2 -4,4 -5,0 -4.9 670 4,475 Ghana Current account balance (% GDP) -15,1 -16,3 -15,1 -15,0 United States Current account balance (% GDP) -5.7 0.4 -2.0 -1.0 19% GDP PER CAPITA 21% GDP PER CAPITA Public debt (% GDP) 53,0 52,6 50,3 49,1 (US dollars - 2016) Public debt (% GDP) 47.9 48.3 53.3 56.4 (US dollars - 2016) Euro Area Trinidad & Tobago 16% (f): forecast 11% (f): forecast Switzerland Euro Area 10% RISK ASSESSMENT 11% RISK ASSESSMENT United Arab Emirates United Kingdom 8% Private investment in the mining sector and The current account deficit is expected to remain 4% Activity dependent on gold and agricultural country’s gold output reached a historic high public investment in the agricultural sector stable in 2018. Good export performance, thanks output while waiting for oil development during the first nine months of 2017), will continue Imports of goods, as a % of total will encourage steady growth to higher bauxite output and aluminium prices, will Imports of goods, as a % of total In 2018, GDP growth will stabilise at a to grow. Remittances from Guyanese workers be offset by higher imports, triggered by the slight abroad (9.6% of GDP in 2016), the main source of Euro Area After the shocks of the Ebola epidemic and the Trinidad & Tobago comfortable level, driven by public investment 36% collapse in commodity prices, economic growth rise in energy prices, the significance of capital 29% (almost 17% of GDP). The main sectors concerned incoming foreign exchange, could be affected by investments and the slight increase in private the new 2% tax on money transfers introduced in China rebounded in 2016 and will reach 6.9% of GDP in United States are transport (48% of loans from the Inter- 13% 2018. The mining sector, especially the extraction consumption. The services deficit will remain high 28% American Development Bank in Guyana) and 2017 in the United States (almost 300,000 people India of bauxite and gold, will sustain growth thanks to because of elevated costs associated with imports, China energy. The Minister of Public Infrastructure of Guyanese origin live there, representing 40% 12% the stronger world demand, despite the Chinese transport and insurance and growing demand for 7% completed his Public Sector Investment of Guyana’s population). The current account United Arab Emirates economic slowdown, and a 50% rise in bauxite technical services (know-how, technology, R&D). Suriname Programme (PSIP) in late 2017, with a total deficit, which is small, will help maintain foreign 5% production in 2017 (propelling Guinea to fourth Meanwhile, the primary account deficit will worsen 5% investment of 10 million Guyanese dollars (EUR exchange reserves at a level equal to about Singapore place in the world). The sector is also expected as a direct consequence of increased dividend Euro Area 41 million), which represents 2.5% of GDP. The four months of imports in 2017. The monetary 5% to benefit from international investment: the repatriation by mining companies. All in all, the 3% project includes the building of roads, electrical authorities will continue with their generally Chinese Simandou project, which gives access deficit is also explained by worsening terms of trade installations, an international airport and a prison. flexible exchange rate policy, thus increasing the since 2016. local currency’s resistance to external shocks. + STRENGTHS to one of the largest untapped deposits of high + STRENGTHS The private sector has not been left behind, quality iron oxide in the world, and the Emirates benefiting from a huge operating contract with • One third of the world’s bauxite reserves (EGA) and UK (Alufer) projects aimed at boosting Relatively stable political climate • Significant investment in infrastructure and investments estimated at USD 4.4 million (130% Difficult political reforms against a telecommunications • Largely untapped deposits of iron, gold, bauxite mine production. Meanwhile, agriculture 2017 was marked by a degree of political of GDP), between the State and a large US oil background of ethnic and border tensions diamonds, uranium and oil and the manufacturing sector will continue instability. One of the government coalition • Attractive prospects for investors in mining, company following the discovery of the Liza After over twenty years in power, the Indo- hydroelectric power and agriculture • Significant hydroelectric potential as pillars of the country’s economic activity. parties joined the opposition in protest against oilfield off the Guyanese coast. The country will Guyanese People’s Progressive Party/Civic • Gradual improvement in the business Public investment will also help boost growth delays in the organisation of local elections, • Exploitation of oil reserves off the coast become an oil exporter by 2020 (120,000 barrels (PPP/C) gave way to the multi-ethnic coalition of Guyana from 2020 climate thanks to reform efforts momentum. In November 2017 under the 2016- leaving Alpha Condé without a parliamentary a day). The search for and exploratory drilling of led by the Afro-Guyanese Party A Partnership 2020 five-year plan, the National Economic and majority. The president finally managed to rally • Member of CARICOM (Caribbean potential oil fields will continue in 2018 at Liza II, for National Unity and Alliance for Change during Community and Common Market) Social Development Plan (PNDES), President another party by offering its leader a position Payara and Snoek. With much of the economy the 2015 general elections. The coalition won 50% - WEAKNESSES Condé succeeded in raising USD 20 billion of as presidential adviser. This reconfiguration and devoted to agriculture (30% of GDP in 2016) and of the votes cast which gives them a very small finance from other countries, notably China, mining, economic momentum still depends on • Reliance on prices of mining products and the splits within the opposition are expected - WEAKNESSES majority of one seat in Parliament. The coalition energy international development banks and private to guarantee victory for Alpha Condé in weather conditions. After recovering in 2017, candidate, David Granger, won the presidential investors. The IMF supports the initiative via rice production will climb modestly while sugar • Inadequate infrastructure, especially in the parliamentary elections scheduled for • Reliance on exploitation of gold, bauxite, elections. Ethnic tensions remain and the PPP/C the electricity sector an Extended Credit Facility. The State has plans September 2018. Meanwhile, with 55% of the sugar, rice and timber production will decline further in 2018. More is expected to continue its policy of blocking to develop infrastructure (roads, Conakry- favourable weather conditions will encourage the • Difficult business climate population living below the poverty threshold, • Shortcomings in infrastructure, transport, constitution and institutional reforms with the Bamako-Bobo Dioulasso railway line), to increase daily power outages triggered social unrest and education and health expansion of gold production, which is destined aim of winning the 2020 elections. Nonetheless, electricity generation by constructing dams and riots at the end of 2017. • Sensitive to weather events (region exclusively for export. the outlook for positive change is to be noted, to boost agricultural productivity, as well as to strongly affected by hurricanes) Inflation, which remains dependent on with the holding of the first local elections in expand the processing industries. These projects The president has committed to a process of reforms aimed at achieving inclusive double‑digit • Territorial dispute with Venezuela agricultural and oil commodity prices, is expected 2016 and constitutional reforms planned aimed will help create jobs and therefore stimulate • Reliance on international creditors to stabilise at a moderate level. at ending a political system with proportional consumption, which will, however, continue to be growth by 2020. The aim is to seize more added • Expansion of the informal economy representation based on ethnic origins. Despite hit by weak purchasing power further squeezed value from the processing of Guinea’s abundant raw materials. The State intends to improve • High crime rate linked to drug trafficking Fiscal reforms in the government’s sights some progress, Guyana’s business climate by inflation. Inflation is largely imported because th the business climate by reforming the mining against a background of poverty remains difficult (126 out of 190 countries in the of the strong depreciation of the Guinean franc in and corruption The government is expected to introduce major 2018 World Bank’s Doing Business rankings). 2016, but also because of rising food prices, which and forest codes, as well as introducing new fiscal reforms in 2018, consisting in the removal represent 38% of the consumer price index. legislation on public/private partnerships and of exemptions for several industries, even if Despite an international ruling fixing the anti-corruption measures. In 2017, Guinea weak institutions and lobbying by businesses current borders, Nicolas Maduro, President of jumped ten places in the Doing Business benefitting from these advantages could slow Venezuela decided unilaterally in 2015 to affirm Stable public and current account deficits th rankings and is now in 150 place. Having been this process. Tax collection should increase Venezuela’s sovereignty over almost two thirds The fiscal deficit is expected to reduce slightly in Chairperson of the African Union in 2017, Alpha thanks to oil drilling. Over 900 million Guyanese of Guyana’s territory and maritime borders 2018 thanks to improved tax collection, higher Condé pushed through a wave of reforms dollars generated by the oil industry were with the publication of an official decree. This VAT and tax receipts generated by the mining to economic governance and transparency collected during the first half of 2017 and this came one week after the announcement of the sector. However, public revenues will struggle across the continent. Finally, the president is income should continue to grow. On the other discovery of an oilfield off the coast of Guyana, to reach 15% of GDP. The search for finance and establishing diplomatic and commercial ties with hand, spending will also rise with the weight in the area disputed by Venezuela and rekindled a public/private partnerships to assure public the Persian Gulf States and China, underpinned of subsidies in the budget, especially those for controversy that dates back over a century. The investment will effectively limit this deficit. by a series of Chinese and Emirates investments the state-owned sugar producer, GuySuCo. UN accordingly agreed to give the two countries The debt burden is thus expected to dip due to particularly in the mining sector. Austerity will no longer be relevant to the time to negotiate (until end 2017). Following the fiscal consolidation. Nevertheless, the risk of government, as it wants to increase spending in failure of these negotiations, the dispute will over‑indebtedness still needs to be watched anticipation of future oil income. return to the International Court of Justice (ICJ) because of the country’s vulnerability to external in 2018. shocks, especially their effect on commodities. With regard to the external accounts, imports, mainly of oil, will fall in the medium term as the exploitation of offshore hydrocarbon fields materialises. Exports, mainly of gold (the

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COFACE ASSESSMENTS COFACE ASSESSMENTS D C COUNTRY RISK COUNTRY RISK E C BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main Economic Indicators 2015* 2016* 2017*(f) 2018*(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 1.2 1.4 1.0 3.0 GDP growth (%) 3.6 3.6 4.0 3.6 Exports of goods, as a % of total 10.8 Exports of goods, as a % of total 8.2 Inflation (yearly average, %) 7.5 13.4 13.1 6.4 POPULATION Inflation (yearly average, %) 3.2 2.7 4.0 4.2 POPULATION United States (millions of persons - 2016) United States (millions of persons - 2016) 81% Budget balance (% GDP)** -2.5 0 -2.6 -1.1 38% Budget balance (% GDP)* -1.0 -0.5 -1.2 -1.2 759 2,609 Dominican Republic Current account balance (% GDP)** -3.1 -0.9 -2.6 -2.4 Euro Area Current account balance (% GDP) -5.5 -3.8 -4.1 -4.3 5% GDP PER CAPITA 22% GDP PER CAPITA Public debt (% GDP) 30.2 33.5 33.9 34.6 (US dollars - 2016) Public debt (% GDP) 41.2 42.5 43.0 44.1 (US dollars - 2016) Euro Area El Salvador 3% *Fiscal year from October 1st to September 30th ** Including grants (f): forecast 9% * entire non-financial public sector (f): forecast Albania Guatemala 3% 6% RISK ASSESSMENT Mexico RISK ASSESSMENT Nicaragua 3% 6% Activity remains resilient The current account deficit will slightly increase Improved growth prospects of food and inputs for textile production are Growth posted a good performance in 2017, in 2018, as a result of the large trade deficit, expected to increase, reflecting the challenges Growth is expected to increase substantially, supported mainly by private consumption due to significant imports of capital goods and Imports of goods, as a % of total the country faces in trying to diversify Imports of goods, as a % of total thanks to the recovery of the agricultural and exports (sustained demand for tropical food products (cereals), the repatriation of United States production. Moreover, Venezuela provides United States 20% sector and a rise in remittances from expatriate 35% agricultural products). Growth drivers are dividends by foreign investors, and payments the country with cheap oil, but the economic workers. Nevertheless, it will still be impacted by expected to be the same in 2018. In particular, to overseas service providers. Transfers of China and political situation in Venezuela raises fears China 20% political instability and high inflation. Even though 12% domestic demand is set to remain vigorous in emigrated Hondurans, the main source of foreign that this preferential regime will be stopped, inflation is falling, it will stay strong because of a rather expansive budgetary context, as the exchange (20% of the GDP), and tourist revenues Netherlands Antilles increasing the cost of imports. The current Guatemala 15% the gourde’s depreciation, and will continue to 10% budget provides for a 9% increase in spending – limited by a high crime rate that makes the account balance is, therefore, unlikely to improve Indonesia affect consumers’ purchasing power. Moreover, Mexico (health, education, road infrastructure, country less attractive – make it possible to significantly. 10% private consumption will still suffer from 7% electricity, etc.) in real terms. Household limit the deficit considerably. This is comfortably Euro Area inequalities and poverty, with the population still Euro Area consumption should once again benefit from the financed by the reinvestment of profits made 7% suffering from food insecurity, the consequences The new government faces numerous 6% dynamism of expatriate worker transfers. These by foreign companies, as well as by the use of of the 2010 earthquake and Hurricane Matthew threats transfers would likely be reduced in the event of indebtedness with international donors and in 2016, and the cholera epidemic that killed markets, facilitating the increase of foreign + STRENGTHS The election of Jovenel Moise as President, chosen + STRENGTHS a non-renewal of the TPS (Temporary Protected 10,000 people and infected over 800,000. by the former Head of State, Michel Martelly, to Status, implemented in 1998 in the aftermath exchange reserves, which represent five months • Development and reconstruction In addition, these natural disasters destroyed succeed him as head of the Haitian Tet Kale (PHTK) • Privileged relations with the United States of Hurricane Mitch to allow for Hondurans to of imports. In 2018, the increase in agricultural programmes agreed with donors many of the country’s infrastructures. Industrial Party, has admittedly reduced the level of political (preferential trade agreements) legally stay in the US) by the US government exports (coffee, tropical fruits) and textiles (from • Membership of several regional output will remain very weak, as manufacturing uncertainty since his investiture in February 2017, • Agricultural, mining and tourism resources in 2018 (six-month renewal in October 2017). maquila companies, manufacturers in special organisations (Association of Caribbean capacity is drastically reduced. Domestic but it has not brought an end to instability. Accused • IMF agreement Consumption is unlikely to be significantly economic zones) – particularly to the United States, Organisation of American States, investment, both private and public, will remain States, which is by far the largest market –, as CARICOM, CARIFORUM) of having been elected thanks to “dirty money”, affected by the moderate inflation accompanying low, and foreign investment will continue to be President Moise has little legitimacy, especially the regular depreciation of the lempira (the well as that of funds sent by expatriates, should discouraged by the political risk, internal unrest, as the turnout for his election was only 21.7%. - WEAKNESSES national currency), the upward trend of oil prices, offset the increase in the oil debt. and corruption. The textile sector will still be - WEAKNESSES Nevertheless, the PHTK won the parliamentary and recurring distribution problems. Public the main beneficiary of any investments, but a elections that followed the February 2017 elections, • Reliance on the US economy (exports, FDI investment should continue to grow, notably in Return of political tensions number of foreign companies have threatened and expatriate remittances) • Low level of development and extreme giving Jovenel Moise 31 seats out of 119 in the road infrastructure and with the construction of The November 2017 presidential election was poverty (ranked 163rd out of 188 on HDI) to leave the country since the strikes called by • Dependency on imports of fuels and Chamber of Deputies and 11 out of 30 in the Senate. the new Palmerola International Airport. Exports followed by violent protests, making the security workers in the sector in May 2017. cereals (corn is the staple food) • Highly vulnerable to natural disasters This does not give him a majority and the reforms from the agricultural and manufacturing sectors situation more uncertain, despite the progress (earthquakes, hurricanes, etc.) • Strong crime and corruption against a needed, notably to revitalise agriculture and background of poverty; drug trafficking are likely to remain relatively strong thanks made (homicide rate lowered from 75 to 37 cases • Fall-off in international aid since the 2010 Ongoing twin deficits tourism, will be difficult to implement. to continued growth in the United States and • High informality of the economy, affecting per 100,000 inhabitants since 2014). The earthquake (from 16.5% of GDP in 2011 development of the productive system. The to 5.6% in 2015) The IMF monitored a new aid programme Social tensions will continue to be significant, with 70% of active workers two finalists, Juan Orlando Hernandez (National Honduras 2020 plan, while slow to implement, Party, whose candidature to the election was • Inadequate infrastructures between June and December 2017, aimed at 2017 marked by a resurgence in confrontations helping the new government of Jovenel Moise between armed gangs. The government would is stimulating investment in the manufacturing highly disputed) and Salvador Nasralla (Opposition • Political instability and insecurity to implement its economic programme aimed at like to create a new army during the year with sector (textiles, agri-food), tourism, industry, Alliance against Dictatorship), both announced • Energy dependency stimulating growth, in particular through better the mandate of United Nations Stabilisation real estate and call centres. their victory. The Electoral Tribunal officially • Reliance on remittances from migrant management of government revenues so as Mission in Haiti (Minustah) – already extended announced Mr Hernandez’s victory after several workers abroad and on international aid to fund public investment. The government’s several times to facilitate the process of political Healthy budget situation and balanced unofficial proclamations, which had been highly • Poor governance and difficult business agenda is focused on reconstructing the transition and reconstruction – expiring in trade deficit with expatriate remittances criticized by international observers, with the climate centre of the capital city, Port-au-Prince, and October 2017. It will be replaced by the UN Mission Since 2014, in the framework of the financial OAS denouncing the lack of guarantees and its airport, and on implementing an effective for Justice Support in Haiti (Minujusth), made up agreement with the IMF, the state has made transparency in the process. Mr Nasralla has healthcare system. Funding for these projects of police rather than soldiers. significant efforts (efficiency of taxation and refused to accept the results despite US pressures, is still uncertain, but should be obtained through Diplomatically, Haiti opposed the suspension of control of expenditure), without sacrificing calling for protests, while the violence has already public/private partnerships and international Venezuela from the Organisation of American social development and infrastructure. The tax claimed several victims. In this context, Honduras aid. However, international funds allocated to States (OAS). This political move pits the country liability law approved in 2016 sets a ceiling for remains characterized by high poverty (39% of the island’s reconstruction are expected to against the United States, its main donor and the non-financial public sector deficit: 1% of the households living in extreme poverty; 25% with decline further due to poor management. The investor, and against the other countries in the GDP by 2020. The government should achieve access to social security), significant violence budget is expected to continue to show a deficit OAS. Relations with the Dominican Republic are the 2017 target of a 1.4% deficit. An extension associated with drug trafficking (the maras), as well in 2018 given the weak government revenues. expected to remain tense, despite a resumption of the agreement with the IMF after its deadline as corruption (e.g. the Rosenthal family scandal in Effectively, the fiscal position remains very of talks following the election of President Noise. of December 2017 could be envisaged, and 2015 for narcotic money laundering) – all of which complex, as budgets are rarely adopted by the would guarantee the maintenance of budgetary limit the country’s development. The improvement Parliament, and when they are, the process is rigour. Restructuration of the struggling national of the business environment (strengthening of the incomplete or comes too late. The public debt is electric company ENEE is ongoing, including the PPP legal framework, public arrears auditing) is expected to continue to rise. issuance of a USD 700 million bond in March 2017 nonetheless recognised by international creditors. Trade agreements with the United States will to bail out the company, as well as the reduction continue to boost the country’s exports, which of the wage bill and tariffs adjustments. This will will benefit the textile sector in particular through weigh on public external debt service. the HOPE agreement (Hemispheric Opportunity Through Partnership Encouragement). Imports

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COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN HONG KONG Payment Ordinance. Decisions issued in a country with Liquidation A2 which Hong Kong has signed a reciprocal treaty Liquidation can be voluntary or compulsory. COUNTRY RISK Bank transfers are one of the most popular payment instruments for international and (such as France or Malaysia) only need to be It involves selling the debtors’ assets in order A1 domestic payments in Hong Kong, thanks to the registered and then become automatically to redistribute the proceeds to creditors and territory’s highly developed banking network. enforceable. Where no such treaty is in place with dissolve the company. Voluntary liquidation can BUSINESS CLIMATE a country, enforcement can be requested before be either a member’s voluntary liquidation (MVL), Standby Letters of Credit also constitute the court, via an exequatur procedure. or a creditors’ voluntary liquidation (CVL). In both reliable payment methods, as the issuing bank An “Arrangement on Reciprocal Recognition cases, company directors lose control and a guarantees the debtor’s credit rating and court-supervised liquidator is appointed. TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) repayment abilities. Irrevocable and confirmed and Enforcement of judgments in Civil and GDP growth (%) 2.4 1.5 3.3 2.4 7.4 documentary letters of credit are also widely Commercial Matters” (REJA) was concluded Creditors can initiate a compulsory liquidation Exports of goods, as a % of total with the People’s Republic of China in 2006. This by filing a winding-up petition with the courts on Inflation (yearly average, %) 3.0 2.5 1.9 2.4 POPULATION used, as the debtor guarantees that a certain sum China (millions of persons - 2016) of funds will be made available to the beneficiary makes judgments rendered in Mainland China or the grounds of insolvency. An MVL is a solvent 54% Budget balance (% GDP)* 0.6 1.5 1.5 1.3 in Hong Kong automatically enforceable by the liquidation process whereby all creditors are to 43,561 via a bank, once specific terms agreed by the United States Current account balance (% GDP) 3.1 3.3 3.6 3.2 courts of the other contracting party. be paid in full and any surplus distributed among 9% GDP PER CAPITA parties are met. Public debt (% GDP) 0.1 0.1 0.1 0.1 (US dollars - 2016) the company’s shareholders. CVLs are insolvent Euro Area Cheques and Bills of Exchange are also frequently Insolvency proceedings liquidations. 7% * 2018 fiscal year: 1 April 2018 – 31 March 2019 (f): forecast used in Hong Kong. Regulatory Update on Insolvency regime Japan The only formal insolvency procedure under the 3% RISK ASSESSMENT Companies Ordinance Act is liquidation. The Hong Kong Government Gazette’s Debt collection Companies (Winding Up and Miscellaneous India Amicable phase Out-of court proceedings Provisions) Ordinance 2016 (“Amendment 3% Activity will slow down in 2018 possible to transition from a trade deficit in goods The law does not provide for formal procedures to the current account surplus. In this context, During the amicable phase, the creditor sends Ordinance”) entered into force on the 2017 was the year of the strongest growth in one or more notice letters (summons) to the for restructuring company debts. Restructuring 13th February 2017. These updates have been Imports of goods, as a % of total six years, thanks to exports to Chinese and the level of foreign exchange reserves will remain proceedings therefore need to take place satisfactory at 8.5 months of imports. debtor, in an attempt to persuade them to pay introduced in order to increase protection China European markets, as well as domestic demand. the due debts. through informal “workouts” or a scheme of for creditors and to streamline and improve 46% Household consumption was the main driver, Banks should remain strong, even if the real Arrangement. The Practice Directions on Mediation, introduced regulations under Hong Kong’s corporate Taiwan supported by a wealth effect due to the excellent estate bubble bursts, thanks to household debt A workout is an out-of-court agreement made winding-up regime. 7% health of the stock market. However, activity will limits and regular stress tests by supervisory in 2010, set out voluntary processes that involve trained and impartial third party mediators. This between a debtor company and its major Singapore slow down in 2018. The slowdown in the Chinese authorities. The offshore non-resident yuan creditors for the rescheduling of its debts. 6% economy and new trade barriers in key markets, market is generating an offshore yuan bond helps both parties involved in a dispute to reach an amicable agreement for repayment. Debtors This proceeding can be initiated at any time. Japan such as the United States, will negatively affect market, which is expected to remain buoyant Restructuring plans are usually recommended by 6% and creditors are usually urged to pursue this the exports of goods and services (200% of in 2018, making Hong Kong the world’s financial a committee which is chaired by a lead creditor. United States GDP, more than 50% of which goes to mainland centre for xeno-yuan. In addition, the connection process before resorting to legal action. 5% The courts are not involved and the process China), especially tourism (Chinese representing between the Hong Kong and Shanghai stock Legal proceedings is entirely voluntary. Once a plan has been over 75% of visitors). The Hong Kong dollar will exchanges since 2014 allows investors on the Ordinary proceedings agreed, the company continues to operate and + STRENGTHS remain anchored to the US dollar. The key rates island to exchange listed securities in Shanghai The judicial system in Hong Kong comprises three is managed under the terms of the arrangement. have been adjusted to reinforce the anchoring. and vice versa. distinct courts: This procedure does not provide legal protection • Flexibility of the economy This will continue to weigh on competitiveness. • The Small Claims Tribunal handles relatively from creditors. • High-quality infrastructures In addition, China’s anti-corruption policy and The new head of the executive power small cases (of up to HKD 50,000) in a fast and entry quotas initiated by the island will lead some A scheme of Arrangement is a statutory, binding • First-rate financial centre, airlock between embodies continuity efficient manner. The rules of procedure are less compromise reached between a debtor and China and the rest of the world Chinese tourists to focus on other destinations strict than in those of other types of courts and and spend less. In addition, Hong Kong port In March 2017, Carrie Lam, former chief its creditors. It must be accepted by all classes • Healthy banking system secretary of the Administration, was elected, no legal representation is permitted. of creditors. A court reviews the plan, before • Favourable business climate activity, a hub of Chinese trade is expected to continue to suffer from increasing competition for five years, head of the executive power by • The District Court has jurisdiction over more sanctioning the convening of separate meetings • Anchoring of the currency to the US dollar from mainland China ports. However, the growth the Electoral College, in which the pro-Chinese substantial financial claims, ranging from with creditors. The scheme must be approved • Maintaining the “one country, of financial services will remain dynamic. are the majority. She won against two other HKD 51,000 to HKD 1,000,000. by the court, at least 50% of creditors in terms two systems” principle between mainland candidates, also from the upper administration • The High Court deals with much larger legal of number and 75% of creditors in terms of China and Hong Kong In addition, even if real estate prices and rents of the SAR and selected by a committee set up by value of debts. An administrator is appointed to hinder growth, consumption will remain well disputes and is additionally charged with Beijing. Her previous duties suggest that there handling claims of over HKD 1,000,000. implement the scheme. oriented thanks to the increase in disposable will be no major change in political leadership. - WEAKNESSES incomes and to an easing of the pressure on The main challenges will be the management of Hong Kong’s District court and High Court allow import prices through a depreciation of the legal representation. Cases in these courts • Vulnerability to the slowdown of popular discontent, relations with the opposition the economy in mainland China renminbi against the Hong Kong dollar. It will be and the Chinese central government. She will are initiated by issuing a Writ of Summons to very vigorous in the luxury sectors (fashion, the debtor, who then has fourteen days to file • Exposure to the US economy via the avoid the political controversies related to US dollar anchoring cosmetics and electronics) because of the Chinese interference and the limits of the “one a defence. The creditor is also required to file concentration of income among the wealthy a notarised Statement of Claim. If the debtor • Industries fully relocated in mainland China country, two systems” principle, focusing on classes. However, the low unemployment rate the economy. She intends to integrate young responds to the Writ and requests a payment • High exposure to real estate conditions – 3.1%, close to full employment –, regular wage plan, the creditor has two weeks to reply. If characterised by lack of housing people into civic life and introduce educational growth and increased redistributive spending for reforms. The “Umbrella Revolution” of 2014 and the parties find it impossible to enter into an • Rise of inequalities NUMBER OF CORPORATE FAILURES the poorest and the elderly will help stimulate the rejection in 2015 by the pro-democracy agreement, a hearing will be called for by the • Lack of transparency of financial other sectors. Confident and attracted by a judge, during which a judgment is normally information parliamentarians of the voting system Total Estimate (e) / Forecast (f) Yearly growth further 8.25% reduction in corporate taxes, considered a “sham democracy”, with Beijing made. If the debtor does not respond, a default 140% foreign investors will finance projects in the retaining control over the candidates, confirm judgment can be rendered. 140,000 new technology, transportation and real estate that identity and political tensions subsist. A free 123,551 120% sectors. The latter, will remain a significant risk trade agreement between ASEAN and Hong Enforcement of a legal decision 120,000 114.1% factor in 2018, despite measures to contain prices 100% Kong is under negotiation. Finally, despite a lack A domestic judgment is enforceable once it and prevent the bursting of a housing bubble. of transparency of financial information, Hong 100,000 92,555 94,431 becomes final (if no appeal is lodged within 80% Kong enjoys a very favourable business climate. 28 days). If the debtor fails to comply with Solid financial system the judgment, the creditor can request an 80,000 60% The budget balance will remain in surplus in enforcement order from the court. This usually 62,266 57,719 40% 2018; the budgetary situation of the Special entails either a garnishee order (allowing the 60,000 56,078 55,968 48,491 Administrative Region (SAR) is solid in view of creditor to obtain payment of the debt from a 15.6% 20% large reserves, representing almost 23 months third party which owes money to the debtor), 40,000 of expenditure. The public debt will remain a Fieri Facias order (which enables a bailiff to 11.0% 0% -18.8% virtually non-existent. Despite a slight decrease seize and sell the debtor’s tradable goods), or 20,000 0.1% 3.1% due to the increased imbalance in the trade a charging order (for seizing and selling the -10.1% -20% balance, the current balance will remain largely debtor’s property to satisfy the debt). 0 -25.1% -40% in surplus. The significance of resident and Foreign judgments are enforced under the 2010 2011 2012 2013 2014 2015 2016 2017* company foreign investment income makes it Foreign Judgments (Reciprocal Enforcement) Source: Census and Statistics Department - Hong Kong, Coface * 12 months ending in September

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COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN HUNGARY Payment When the debtor has assets in other European the different measures necessary to enforce A3 Union (EU) member states, a European Payment compliance (from seizure of bank accounts to COUNTRY RISK Bills of exchange and cheques are not commonly used since their validity depends on compliance Order procedure facilitating the recovery of foreclosing real estate). A3 with several formal issuing requirements. undisputed debts may be triggered. Regarding foreign decisions, those rendered BUSINESS CLIMATE Nevertheless, both forms of payment, when This type of legal action has become mandatory in an EU country will benefit from special dishonoured or duly protested, allow creditors for all claims up to one million Hungarian forints enforcement conditions such as the European recourse to a summary procedure to obtain an (HUF) – about EUR 3,400– and is conducted Enforcement Order when the claim is undisputed. injunction to pay. digitally from beginning to end as of 2010. As a Nevertheless, for decisions rendered in a non-EU TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) The promissory note “in blanco” (üres átruházás, result, ordinary proceedings cannot be started if country, Hungarian law provides for a reciprocity GDP growth (%) 3.1 2.0 3.9 3.6 9.8 a blank promissory note) – which constitute an the claim is purely monetary and inferior to this principle: the issuing country must be part of a Exports of goods, as a % of total EUR 3,400 limit. bilateral or multilateral agreement with Hungary. Inflation (yearly average, %) 0.1 0.4 2.9 3.2 POPULATION incomplete payment deed when issued – is not Germany (millions of persons - 2016) widely used in Hungary. This is because it qualifies Since 2010, the injunction to pay is carried out by 28% Budget balance (% GDP) -1.6 -1.8 -2.4 -2.5 12,652 as a negotiable document (securities), which may public notaries in order to reduce the workload Insolvency proceedings Romania Current account balance (% GDP) 3.1 5.0 3.5 2.8 be transferred by endorsement plus transfer of of the courts. Although not mandatory, the 5% GDP PER CAPITA Out-of-court proceedings Public debt (% GDP) 74.7 74.1 72.6 71.4 (US dollars - 2016) possession of the document (subsequent to a presence of a lawyer is advisable for this type of Slovakia Even though Hungarian law does not provide 5% (f): forecast blank endorsement, only delivery is needed). procedure. formal out-of-court proceedings, private Austria Bank transfers are by far the most common Legal proceedings and informal negotiations are held between 5% RISK ASSESSMENT payment method. After successive phases Ordinary proceedings creditors and debtors in order to avoid judicial France of privatisation and concentration, the main In case of objection by the debtor, the case is insolvency proceedings. This constitutes a 5% Consumption and investments take a lead Budget deficit widens on further spending Hungarian banks are now connected to the treated as a dispute and transferred to ordinary practical approach in order to avoid liquidation. on growth The budget has been consolidated over last SWIFT network, which provides low cost, court proceedings. The parties will then be If an agreement is reached, they can request Imports of goods, as a % of total Hungary experienced a significant contraction of years. However, since 2015, the general flexible, and speedy processing of domestic and summoned to one or more hearings to plead their the suspension of a judicial proceeding until the international payments. Furthermore, SEPA respective cases. agreement is respected. Germany investments in 2016 when, similar to other CEE government deficit increased, reaching 1.8% in 27% countries, the economy suffered from a lower 2016. On the one hand, investment expenditures transfers are also a popular mean of payment Ordinary proceedings are partly in writing – with Restructuring the debt Austria absorption of EU funds due to switching to the decreased and revenues benefited from growth because of the developing banking network. the parties or their attorneys filing submissions Under Hungarian law, restructuring is not 6% new European budget. However, an improvement of wage-related tax receipts, but on the other, accompanied by all supporting case documents formally regulated, even though the Hungarian China was already seen in the first half of 2017, with a government spending increased due to capital Debt collection (original or certified copies) – and partly oral, with Bankruptcy Act regulates all insolvency 6% surge of fixed asset investments. These were transfers and the public wage bill. Tax cuts and Amicable phase the litigants and their witnesses presenting their processes, including specific deadlines, legal Poland mostly fuelled by a boost in EU co-financed a further increase of expenditures, as elections cases during the main hearing. requirements, and rights and obligations for 5% Where possible, it is advisable to avoid taking projects, but other investments increased as approach, made the public deficit higher: it is legal action locally due to the formalism of As of 2011, cases exceeding a value of HUF 400 participants. Instead, both bankruptcy and Slovakia well, including manufacturing industries (e.g. expected to reach 2.4% of GDP in 2017 and then liquidation proceedings offer a debtor company 5% legal procedures and rather lengthy court million (approximately EUR 1.6 million) must be automotive, IT equipment). Further capacity 2.5% of GDP in 2018. The deficit level is subject proceedings: it takes one to two years to obtain swiftly handled by the courts via shortened legal a chance of survival by restructuring its debt in a upgrades are expected to be conducted. to the pace of inflow of funds from the EU, a writ of execution. processes. At any stage of such proceedings composition agreement in a ninety-day stay. It is predominantly used for infrastructure building extremely rare to conclude a liquidation process + STRENGTHS On the consumer side, household spending Since 2014, interest is due from the day after and where possible, the judge may attempt to continues to benefit from rising employment projects and other programmes. Spending on achieve conciliation between the opponents. with a surviving company, as the aim of the • Diversified economy investments could be reduced as a result of the payment date stipulated in the commercial proceedings is by nature not one of restructuring. and higher wages. The unemployment rate contract and, unless otherwise agreed by the It is relatively common practice to immediately • High quality infrastructures thanks to dropped below 4% last year, and wages have delays in implementation, therefore making the From this point onwards, the acts of the European funds deficit lower than expected. Elections scheduled parties, the applicable rate will be the base issue a winding up petition against the debtor increased, partly thanks to increases of both rate of the issuer in force on the first day of the so as to prompt a speedier reaction or payment. debtor are overseen by an administrator. The • Integrated within the European production minimum wage and guaranteed minimum wages for April 2018 contribute to a higher generosity reorganization agreement must be validated by chain reference half-year period, plus 8%. This practice was sanctioned by the 2007 for skilled workers. The stimulus for wage rises of government with rising public sector wages, a majority of creditors and the court must also • Trained workforce increased spending on infrastructure, and It is advisable to seek an amicable settlement amendment to the Hungarian bankruptcy law, comes from a tight labour market. Labour which authorised creditors to issue a winding up approve the plan. If a compromise is not reached, • Low corporate taxation expenditure on tighter border security to curb based on a payment schedule drawn up by a public shortages have become an important constraint petition against a debtor only in they received no the court will terminate the proceedings and • Generally positive payment behaviour for many companies, particularly regarding unauthorised immigration. notary, who includes an enforcement clause that declare the debtor insolvent. allows creditors, in case of default by the debtor, response nor payment from the debtor within skilled employees, with skill mismatches still Liquidation Fidesz is expected to win the next to proceed directly to the enforcement stage; 20 days of sending a formal notice.. In practice, present on the Hungarian labour market. An however, it is simple to request the liquidation of Proceedings may be initiated upon demand of - WEAKNESSES parliamentary election subject to acknowledgement by the court of the expected further tightening of labour market will a debtor, and creditors regularly use this as a tool either the debtor or the creditor, and a liquidator trigger the ongoing rise of wages, and its pace payment agreement’s binding nature. • Ageing population, low birth rate, Prime Minister Viktor Orbán and his conservative in the negotiation process is subsequently appointed. Creditors must lodge is likely to exceed both productivity growth and Fidesz-Hungarian Civic Union (Fidesz) party From 2009, considering trade companies, a and high emigration Commercial disputes are heard either by their claim within 40 days of the commencement Hungary’s GDP growth. Despite this, the country were re-elected for a second four-year term mediation to solve an out-of-court settlement • Regional disparities; lack of mobility the district courts (járásbíróság), set up in of the proceedings in order to be listed in the still benefits from lower labour costs levels in the 2014 elections. Facing competition must be held by the parties prior to commencing • Shortfalls in vocational education commercial chambers, or by legal tribunals table of creditors and consequently receive a than in Western Europe, and attracts foreign from the far right Jobbik party, in third place legal proceedings. and training (törvényszék), depending on the size of the claim. part of the proceeds. The liquidator will then investments. Rising wages increase inflationary behind the Socialist party, Fidesz maintains a • Poor levels of innovation and R&D Injunction of payment and European Injunction Payment claims up to HUF 30 million belong to assess the debtor’s economic situation together pressure and the central bank will likely become nationalist policy that includes opposition to the of Payment district courts on first instance; above this rate, with the claims, and then provide the court with • Limited room for manoeuvre in terms less expansive. European Union on the dispersal of migrants. The of the budget When in possession of a due and payable debt regional courts are the first instance for these recommendations on how the assets should be The increase of compensations is partly offset by government implemented a number of sectorial instrument (acknowledgement of debt, unpaid distributed. • High debt level of companies, although cases. Insolvency procedures and enforcement taxes, which are expected to remain in place. falling the reduction of corporate tax to 9%: the lowest bill of exchange, dishonoured cheque, etc.), belong to regional courts at first instance All insolvency procedures are validated by rate in Europe. This measure mainly benefits mid- Fidesz has led in the latest public opinion polls creditors may obtain an injunction to pay (fizetési • Fragility of the banking sector (public and by default. court, but there are very few checks in place private) sized Hungarian and foreign-owned companies (October 2017), bolstering the party’s position meghagyás), using a pre-printed form. This more that prevent creditors from liquidating their with more than EUR 2 million in revenue. Tax as the favourite to win the next parliamentary efficient and less expensive summary procedure • Energy dependence: 50% of needs Enforcement of a legal decision companies, which makes it a very easy and imported; 40% from Russia alone rates for large foreign multinationals in Hungary, election, due in April 2018. Therefore, it is most now allows the notary – if he considers the common practice for failed businesses, hence especially German carmakers, had been already likely that Fidesz will be elected for a third petition justified – to grant an injunction, without When all appeal venues have been exhausted, the relatively high number of insolvencies in heavily reduced by subsidies and tax concessions. consecutive four-year term. The party has been hearing the defendant. The defendant is then a domestic judgment becomes enforceable. Hungary. Small firms already benefited from a lower tax targeting its core voter base with a fresh anti- instructed to pay both the principal and legal It the debtor fails to satisfy the judgment, the rate of 10%. Exports benefit from favourable immigrant campaign. The outlook for Fidesz costs within fifteen days of the serving of the creditor can either request an enforcement order perspectives of main trade partners, and the high has improved further with the decision of ruling (or within three days for an unpaid bill of from the court, or for a specific performance share of the automotive industry in total exports Laszlo Botka – the prime ministerial candidate exchange). (payment) through a bailiff, who will implement is expected to strengthen, thanks to further of the main centre-left opposition force, the improvements in manufacturing capacities. Hungarian Socialist Party (MSZP) – to withdraw his candidacy in October 2017. Jobbik remains a distant second in terms of popularity.

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COFACE ASSESSMENTS COFACE ASSESSMENTS A2 A4 COUNTRY RISK COUNTRY RISK A1 B BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015* 2016* 2017*(f) 2018*(f) GDP growth (%) 4.1 7.2 5.2 3.4 GDP growth** (%) 7.6 6.9 7.0 7.5 Exports of goods, as a % of total 0.3 Exports of goods, as a % of total 1,299.8 Inflation (yearly average, %) 1.6 1.7 1.8 2.5 POPULATION Inflation (yearly average, %) 4.9 5.5 4.0 4.5 POPULATION Euro Area (millions of persons - 2016) United States (millions of persons - 2016) 56% Budget balance (% GDP) -0.8 12.4 0.8 1.3 16% Budget balance*** (% GDP) -6.9 -6.7 -6.4 -6.0 59,629 1,742 United Kingdom Current account balance (% GDP) 5.3 6.0 7.0 5.7 Euro Area Current account balance (% GDP) -1.1 -0.5 -0.5 -1.0 11% GDP PER CAPITA 13% GDP PER CAPITA Public debt (% GDP) 68.1 54.0 41.2 37.0 (US dollars - 2016) Public debt*** (% GDP) 69.6 69.5 67.8 66.5 (US dollars - 2016) United States United Arab Emirates 8% (f): forecast 12% *Fiscal year 2018: April 2018 - March 2019 **Changes to the methodology in February 2015 Norway Hong Kong ***Includes Central government debt and State governments debt (f): forecast 4% RISK ASSESSMENT 5% Denmark United Kingdom RISK ASSESSMENT 2% Growth slowing in line with a more The current account surplus is expected to remain 3% sustainable pace of tourism solid in 2018, thanks to the surplus in services (11.1% Growth is expected to rebound The current account deficit is expected to increase Imports of goods, as a % of total Activity in 2018 is expected to slow but remain of GDP in 2016), linked with the tourism boom. The Imports of goods, as a % of total slightly. The increase in imports is partly due to the goods balance will continue with its large deficit Real GDP is expected to grow quicker in 2018, Euro Area strong. This decline is mainly due to a more China supported by strong performance in the services rising demand for gold after demonetisation. Deficits 32% moderate growth in the key driving force in Icelandic (5.1%), reflecting the vitality of domestic demand, 17% in the trade balance and income balance are likely to which will not be offset by the growth in exports. sector, after a slight slowdown at the end of FY United States economic activity since 2013: tourism. The sector Euro Area 2016/17 due to the demonetisation decision of Modi’s worsen, and the services surplus should also reduce. 10% 9% suffered in 2017 because of the appreciation of the In mid-August 2016, the Minister of Finance administration in November 2016 (withdrawal of the The rupee is expected to remain relatively stable in Norway Icelandic krona, increasing the cost of local services announced the gradual lifting of all capital control United States 500 and 1000 rupee notes). Household consumption 2018, but like other emerging currencies, it remains 9% 6% for foreign tourists. Whilst the trend has been one restrictions that had been imposed in response to was negatively affected by this measure, and its vulnerable to a rise in global risk aversion and a faster- China of depreciation since mid-2017, prices will remain the crisis in 2008. This liberalisation was completed United Arab Emirates 7% 5% impact on the informal sector, although difficult to than-expected rate of monetary policy tightening in high for tourists, especially as the increase in VAT mid-March 2017, with the removal of the final quantify, has been significant.. However, improved the United States. Foreign exchange reserves are set Denmark on tourist-related services (from 10% to 12%) will in restrictions on incoming and outgoing capital flows. Saudi Arabia 6% 5% financial integration of the poorest households should to remain at comfortable levels (nearly ten months of large part offset this depreciation. At the same time, The country is not expected to experience major support demand in the long term. Inflation reached imports in 2017), and FDI and portfolio investments are although the numbers of tourists will continue to capital outflows in so far as it remains attractive a record low on June 2017, and remains below the on an upward trend. increase, the actual rate of increase will likely slow, thanks to higher interest rates (key interest + STRENGTHS + STRENGTHS central bank’s target of 4%. A combination of lower and the average spend per tourist will drop slightly. rate at 4.25%) compared with other developed commodity prices and a dip in key agricultural products • Stabilised banking sector Investments in the tourism sector will, however, economies. The central bank’s policy of monetary • Diversified growth drivers Narendra Modi supported by regional contributed to this decline, enabling the central bank elections • Gradual decrease in public debt continue at a sustained level in order to make up relaxation is unlikely to change this situation, • High levels of savings and investment to lower rates in July. However, it is expected that Narendra Modi’s party, the BJP (Bharatiya Janata • Abundant renewable energy (geothermal, for accommodation shortages. In addition, public unless any larger-than-expected interest rate cuts • Efficient private sector in services inflation will increase in 2018, as the federal VAT hydroelectric) investment will help alleviate the inadequacies of take place. In addition, the large current account Party), won the regional elections in March 2017, • Moderate level of external debt and system (Goods and Services Tax, GST), which was • Oil and gas reserves the transport infrastructures resulting from the surplus will allow further reductions in the external comfortable foreign exchange reserves implemented on July, exerts upside pressure on prices. gaining 312 out of the 403 seats in the lower house in • Strong tourism potential rapid rise in visitor numbers since 2013. Residential debt (95% of GDP in 2017) and the building of Uttar Pradesh. This is the most populated state and so construction will also experience growth, thanks currency reserves, which will remain at a high level The private sector should continue to benefit from is often considered a “popularity barometer” for the • Large currency reserves the impact the Modi government’s reforms, aimed to the rise in property prices, improving credit (nine months of imports), ensuring a stable return - WEAKNESSES government. The victory helps to further strengthen • Strong household consumption conditions and the reduction in household debt. to the liberalisation of the capital account. at boosting India’s manufacturing sector, attracting Modi’s position, two years ahead of the next national The fishing and aluminium sectors are still major • Lack of infrastructure and shortcomings FDI, and reducing constraints burdening the economy. elections. Demonetisation seems to have weighed on India jumped 30 spots to 100 in this year’s “Ease of elements in the economy, and account for almost Formation of a heteroclite government in the education system household consumption, but was eventually perceived - WEAKNESSES 75% of the country’s exports. These will benefit • Bureaucratic red tape and persistent Doing Business” ranking by the World Bank. However, as a commitment to his campaign proposal to combat Following the withdrawal of the Bright Future (BF) political tensions non-performing loans in the banking system • Small economy from the depreciation of the krona and the inequality and root out corruption. However, as the upwards trend in external demand. However, the party from the governing coalition in September • Net importer of energy resources have impacted the monetary policy transmission Congress Party continues to dominate the Upper • Volcanic risks 2017, early elections were called for the following Russian embargo (fifth largest trading partner) • Rising level of private firm indebtedness mechanism by keeping borrowing costs high. This House, the reforms long-awaited by the business • Limited supervision of banking system month. Whilst the Independence Party (centre- has hindered domestic companies’ willingness to will continue to have a negative impact on exports • Weak public finances community are delayed. in a context of capital inflows and rising right) received the most votes at 25.3% (16 seats borrow money and invest. Reforms aimed at cleaning property prices of fishing products, even though the producers out of 63), President Johannesson asked the • Persistent uncertainties over the Kashmir up the banking system have been put in place, but Kashmir remains a source of tensions between have managed to find substitute market outlets issue • Volatility of activity due to dependence on Green Party, in second place (11 seats), to form these take time and could impact the supply of credit, India, Pakistan and the separatists of the region. tourist numbers since 2015. a government. They were initially unable to despite the Reserve Bank of India’s loose stance. Diplomatic talks were suspended after an attack • Risks associated with lifting of capital Household consumption will remain as one of the agree on a coalition with the Social Democrats, Higher government expenditures in infrastructure on an Indian base in Punjab on January 2016, controls and household debt SECTOR RISK ASSESSMENT growth drivers in Iceland’s economic growth thanks the Pirate Party, and the Progressive Party. The (transport infrastructure and utilities) should offset and relations between the two countries have • High foreign debt to the rapid rise in wages, in a context of moderate coalition that was finally formed was somewhat this weakness. deteriorated in recent months. New tensions • Concentration of production and exports inflation. In addition, the low level of unemployment unusual, consisting of the Green Party, the have emerged after the Indian army shot the (aluminium and seafood) (3.3% in July 2017) and increasing immigration will leader of the main insurgent movement, Sabzar Independence Party and the Progressive Party. The Willingness to improve public finances • Russian embargo against Icelandic also help to further boost it. new government will be led by Katrín Jakobsdóttir, Ahled Bhat, in Kashmir on May 2017. However, seafood of the Green Party, with the strategic ministries Fiscal deficit and public debt levels remain high, but an escalation of violence is unlikely as Pakistan A slight budget surplus and liberalisation being allocated to the two other parties. The the country has initiated plans to reduce them. The and India both have an interest in maintaining the of the capital account coalition is, however, looking slightly precarious, most notable of these initiatives is the introduction status quo. of the GST, which aims to boost fiscal revenues and The budget surplus should increase slightly in given how narrow its parliamentary majority is (35 seats out of 63) and bearing in mind the areas make the economy more competitive in the long term, 2018. The growth in tax receipts, as a result of the despite some disruption in the short term (higher favourable economic performance and higher VAT of potential disagreement, in particular on fiscal and environmental matters. There has also been further prices). Fiscal consolidation efforts are facilitated by on tourist related businesses, will continue to be low energy prices, which remain subdued in line with allocated to improving public services and reducing political fragmentation with the Centre Party’s entry into parliament, taking the number of political global oil prices (India is a net importer). In addition, the debt. These additional receipts will also finance measures to demonetise a portion of outstanding the planned infrastructure projects (hospitals, roads, parties to eight. This fragmentation translates into a high degree of ministerial instability, in a country bank notes should improve budget revenue by ports, etc.), as well as increased social transfer to reducing the weight of the informal economy. single people, pensioners, and young parents. The that has already had three new Prime Ministers government is also expected to continue its efforts since April 2016. in terms of the environment through the protection of natural sites and increased taxes on carbon dioxide emissions.

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PAYMENT AND COLLECTION PRACTICES IN INDIA COFACE ASSESSMENTS declared as NPAs by the banks. This deteriorating Insolvency proceedings Payment asset quality has hit the profitability of banks and A4 The Insolvency and Bankruptcy Code, introduced COUNTRY RISK Due to the increasingly developed banking eroded their capital, thereby curbing their ability in 2016, proposes two independent stages: network in India, SWIFT bank transfers are to grant much-needed loans to industries for becoming more popular for both international their restructuring and revitalisation. Insolvency resolution process (IRP) B and domestic transactions. The IRP provides a collective mechanism for BUSINESS CLIMATE Legal proceedings creditors to deal with distressed debtors. A Standby Letters of Credit constitute a reliable Indian companies have a preference for amicable financial creditor (for a financial debt), or an means of payment, as a bank guarantees the recovery methods, as the country’s judicial operational creditor (for an unpaid operational debtor’s credit quality and repayment abilities. system is both expensive and slow. There is no debt) can initiate an IRP against a debtor at the TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) Confirmed Documentary Letters of Credit are fixed period for court cases, while the average National Company Law tribunal (NCLT). The Court GDP growth (%) 4.9 5.0 5.2 5.3 258.7 also recognised, although these can be more length is from two to four years. The statute Exports of goods, as a % of total appoints a Resolution professional to administer Inflation (yearly average, %) 6.4 3.5 3.7 3.6 POPULATION expensive, as the debtor guarantees that a of limitations is three years from the due date the IRP. The Resolution professional takes over China (millions of persons - 2016) certain amount of money is available to the of an invoice. The statute of limitations can be 12% Budget balance (% GDP) -2.5 -2.5 -2.7 -2.5 the management of the corporate debtor and 3,604 beneficiary via a bank. extended for an additional three years, if the United States Current account balance (% GDP) -2.0 -1.8 -1.7 -1.9 continues to operate its business. It identifies 11% GDP PER CAPITA Post-dated cheques, a valid method of payment, debtor acknowledges the debt in writing or the financial creditors and holds a creditors Public debt (% GDP) 26.9 27.9 28.7 29.2 (US dollars - 2016) also act as a debt recognition title. They allow for makes partial payment of the debt. Japan committee. Operational creditors above a certain 11% (f): forecast the initiation of legal and insolvency proceedings Legal proceedings are recommended after threshold are also allowed to attend meetings, Euro Area in cases of outstanding payments. the amicable phase, if debtor is still operating but they do not have voting power. Each decision 8% RISK ASSESSMENT and in good financial health, is wilfully resisting requires a 75% majority vote. The committee Singapore Debt collection payment, disputing the claim for insignificant considers proposals for the revival of the debtor 8% Growth buoyed by internal demand spending cuts. In this context of a controlled reasons, not honouring payment plans or not and must decide whether to proceed with a Amicable phase Growth is expected to remain lively in 2018, public deficit, the public debt is expected to providing documentary evidence. revival plan, or to liquidate, within 180 days. The practice of amicably settling trade Imports of goods, as a % of total driven by dynamic internal and external remain low with interest rates falling after the Type of proceedings Liquidation three main rating agencies raised Indonesia’s receivables has proven to be one of the most China demand. Private consumption (57% of GDP in productive solutions, as it allows the parties Arbitration: Arbitration can be initiated if A debtor may be put into liquidation if a 75% 23% 2016), the main source of economic growth, is credit rating to Investment Grade. From the perspective of the current account, the trade involved to deal with the underlying issues of mentioned in the sales contract - otherwise the majority of the creditors’ committee resolves to Singapore stimulated by a growing population, ever growing the settlement in a more efficient and cost- case can be sent to the National Company Law liquidate it during the IRP, if the committee does 11% urbanisation and a rise in per capita GDP enabling balance shows a surplus (at 1.6% of GDP in 2016), effective manner. Average payment collection Tribunal (the NCLT) for registered companies. not approve a resolution plan within 180 days, or Japan the emergence of a middle class. The moderation thanks to the lowering of the oil bill, with oil periods vary between 30 to 90 days following the Recovery Suits: Recovery suits tend to become a if the NCLT rejects the resolution plan submitted 10% of inflation, now in the lower tranche of the making up 14% of imports in 2016. The balance of establishment of contact with the debtor. Local long, drawn-out battle and are usually regarded on technical grounds. Upon liquidation, secured Euro Area central bank target of 4±1%, should sustain this services shows a small deficit (-0.8% of GDP) but working practices mean that debtors pay directly as best avoided. creditors can choose to realise their securities 6% private demand. Meanwhile, the infrastructure the main cause of the current account deficit lies to the creditor, rather than to a collection agency. and receive proceeds from the sale of the Thailand in the income deficit (-3.3% of GDP), associated National Company Law Tribunal: The NCLT was development programme launched by President Indian law does not regulates late payments, secured assets as a priority. 6% with the repatriation of dividends and debt created on 1st June, 2016. It has jurisdiction over Widowo’s government in 2016 (225 priority or provide for a legal enforceable late payment interest payments. This current account deficit all aspects of company law concerning registered Under the current Insolvency and Bankruptcy infrastructure projects), as well as recent interest rates. In practice, debtors do not pay is largely financed by FDI flows (1.7% of GDP) and companies. Its advantages are that it can hear Code, the highest priority is given to insolvency + STRENGTHS reforms to simplify administrative procedures, interest on overdue amounts. resolution process and liquidation costs. are expected to boost investment (32% of GDP). portfolio investments (2.0% of GDP), allowing the all company affairs in one centralised location Indonesian Central bank to accumulate reserves. Major issues in the country currently mean that Thereafter, proceeds are then allocated to • Diverse natural resources (agriculture, These reforms, aimed at improving the still poor and that it offers speedy processes (taking a energy, mining) The latter conducts a monetary easing policy debtors are facing huge financial difficulties. The maximum of 180 days). It also reduces the work employee compensation and secured creditors, business climate, have enabled Indonesia to jump • Highly competitive thanks to low as illustrated by the surprise cut in the key rate situation has deteriorated since demonetisation load of the High Courts. The NCLT recently followed by unsecured and government dues. 19 places in the Doing Business 2018 Index to labour costs nd in August 2017 to stimulate activity. The rupiah in November 2016 and the introduction of the enacted a new Insolvency and Bankruptcy occupy 72 place. However, there is still a long • Dynamic tourism industry remains dependent on the influx of short-term GST unified tax structure (the Goods & Service Code. Decisions of the NCLT may be appealed way to go on the path to reform and conclusion • Huge internal market of the projects remains uncertain (only capital, with 39.5% of rupiah-denominated Tax), in July 2017. The other main reason for to the National Company Law Appellate Tribunal sovereign bonds held abroad. payment delays is the complexity of payment (NCLAT). The NCLAT acts as the appellate forum • Strong banking sector 20 projects completed out of 225 in July 2017) procedures and approvals by banks for the and hears all appeals from the NCLT. Appeals • Sovereign bonds rated “Investment Grade” for administrative reasons and because of a lack restructuring plans of major players in the by the three main rating agencies of finance (only half the projects were financed Joko Widowo put to the test by religious and from the NCLAT are heard by the Supreme Court ethnic tensions manufacturing sector. India is faced with a severe of India. in autumn 2017). In addition, growth will remain problem of bad loans and most of them have been constrained by a sluggish mining sector, which In power since 2014, Joko Widowo, known as - WEAKNESSES is yet to recover, despite the lifting of the ban on Jokowi, enjoys great popularity thanks to the exporting unrefined ore in January 2017 (in place economic progress made since the start of his • Low investment rate since 2014). This is partially explained by unrest term in office. However, his re-election at the next • Exports of commodities increasingly at the Grasberg gold and copper mine in Papua. presidential election in 2019 is not yet assured, dependent on Chinese demand In conflict with the Indonesian government over due to growing challenge from the opposition • Infrastructure shortcomings the terms of a mining licence, the US company candidate, Prabowo Subianto (Gerindra Party), • Persistent corruption and lack of Freeport faced protests lasting over four months supported by ultra-conservative Muslims. transparency in 2017, then security threats from separatist The municipal elections in Jakarta in April 2017 • Very extensive archipelago with rebels – 2 police officers killed in autumn 2017 - highlighted the country’s worsening religious and numerous islands and diverse ethnic some of the many factors affecting production. groups and religions ethnic tensions. Basuka Tjahja Purnama (known Finally, exports (19% of GDP) of commodities as Ahok), the candidate supported by Jokowi • High unemployment and poverty rates sharpening inter-ethnic tensions (oil and gas, palm oil, copra, lignite, and copper), and from the Chinese Christian population, was as well as of electrical and IT components, accused of blasphemy by the ultra-conservative automotives, paper, clothing, and jewellery Muslims, strongly discrediting him in favour of are dynamic, but are offset by imports to meet his rival Anis Basedwan, supported by Prabowo internal demand. Subianto, who ultimately won through. The June 2018 local elections will be a new test for the Deficits under control president in regions accounting for 43% of the total population. Based on local issues, these Constrained by a constitutional limit of 3% of the elections are crucial for the political parties in annual deficit, the Indonesian government has the run-up to the presidential elections, with embarked on tax reforms aimed at controlling support for the “right” candidate determining expenditure and increasing revenues. Subsidies voters’ future loyalty. Finally, Indonesia’s political (particularly on energy) have been cut so as landscape is dominated by a hardening anti- to redirect public spending to infrastructure terror policy aimed at curtailing the spread of investments. On the income side, the increase religious fundamentalism in the country. associated with the repatriation of funds following the tax amnesty introduced in 2016 (+3.6% of income between 2015 and 2016) is unlikely to enable the government to achieve its aims. This shortage of income could lead to

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PAYMENT AND COLLECTION PRACTICES IN INDONESIA COFACE ASSESSMENTS Payment Ordinary proceedings therefore be re-litigated in the competent Ordinary legal action may commence when the Indonesian courts. In such a case, the foreign E Standby Letters of Credit constitute a reliable COUNTRY RISK means of payment because a bank guarantees parties have been unable to reach a compromise court judgment may serve as evidence, but this the debtor’s quality and repayment abilities. during the amicable phase. The creditor may file a is subject to certain exceptions as regulated by claim with the District Court, who is subsequently other Indonesian regulations. D Furthermore, the Confirmed Documentary BUSINESS CLIMATE Letters of Credit are also considered reliable, as responsible for serving the debtor with a Writ a certain amount of money is made available to a of Summons. If the debtor fails to appear at the Insolvency proceedings hearing to lodge a statement of defence, the beneficiary through a bank. There are two main procedures for companies court has discretion to organize a second hearing TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) SWIFT bank transfers are becoming more or to release a default judgment (Verstekvonnis). who are experiencing financial difficulties: popular as an instrument of payment for both GDP growth (%) -1.5 13.4 3.3 3.8 80.5 Prior to considering the debtor’s defence, as Suspension of payments proceedings Exports of goods, as a % of total international and domestic transactions due This procedure is aimed at companies that are Inflation (yearly average, %) 11.9 9.0 11.5 10.9 POPULATION to the well-developed banking network in previously mentioned, the court must first China (millions of persons - 2016) verify whether the parties have tried to reach facing temporary liquidity problems and are 30% Budget balance (% GDP)* -1.8 -2.2 -2.1 -2.2 Indonesia. unable to pay their debts, but may be able to do 5,027 an agreement or amicable settlement through India Current account balance (% GDP) 2.3 3.9 4.1 4.0 so at some point in the future. It provides debtors 17% GDP PER CAPITA mediation). If the parties have undergone the Public debt (% GDP) 42.3 34.5 32.1 30.8 (US dollars - 2016) Debt collection mediation process, the panel of judges will with the temporary relief to reorganize and Euro Area * Iranian calendar year from March to March (f): forecast Amicable phase continue the hearings and the parties’ evidence continue their business, and to ultimately satisfy 11% The first step to recovering a debt is to negotiate will be examined. The judge will render a their creditors’ claims. The company continues South Korea the issue with the debtor to attempt to resolve decision and may award remedies in the form of its business activities under the management of 10% RISK ASSESSMENT the issue amicably. There is an inherent compensatory or punitive damages. its directors, accompanied by a court-appointed Turkey administrator under the supervision of a judge. 9% Catch-up effect wanes The rise in oil and gas exports seen in 2016 helped Indonesian culture and ideology (Pancasila) District Court will usually take from six months The company must submit a composition plan for The catch-up effect that followed the lifting of consolidate the current account surplus. Imports where amicable settlement is encouraged. to a year before rendering a decision in the first the creditors’ approval and for ratification by the international sanctions in 2016 gradually faded in remain limited under the shadow of possible Creditors usually issue a summon/warning instance. The proceedings may take longer when Imports of goods, as a % of total court. The rejection of the plan by the creditors or 2017. Despite favoured treatment by OPEC, the sanctions hanging over foreign, – especially letter to the debtor, which outlines a statement a case involves a foreign party. United Arab Emirates concerning the debtor’s breach of commitment. the court will result in the debtor’s liquidation. 27% increase in oil and gas exports was lower than in the European – banks. The restrictions on the use of dollars for trade transactions are also a The letter also calls for a discussion to determine Liquidation China preceding year. Growth was, however, maintained by whether the dispute should be settled through Enforcement of a legal decision The objective of liquidation is to impose a general 13% the vitality of non-oil and gas activity – notably the limiting factor on any expansion in trade and the court system. If the amicable phrase does When all appeal venues have been exhausted, attachment over the assets of bankrupt debtors Euro Area manufacturing sector – and despite the continuing these restrictions could be made stricter. The not result in a settlement, the parties may trigger a domestic judgment becomes final and for the purpose of satisfying the claims of their 11% negative performances of the construction sector. government’s cooperation, policy however, remains legal action. enforceable. If the debtor does not comply with creditors. It can be initiated by either the debtor Turkey This latter is nevertheless slowing less quickly, but extremely dynamic. The government, with the 8% aim of diversifying its trading partners, is signing a Legal proceedings the judge decision, the creditor may request the or its creditors before the Commercial Court. is holding back investment growth, which made a District Court to commend execution by way Following the submission of the petition, the South Korea negative contribution to activity. range of cooperation agreements with countries in The Indonesian judicial system comprises 4% Eastern Europe and in Asia. several types of courts under the oversight of of attachment and sale of the debtor’s assets court will summon the debtor and its creditors The stabilisation of inflation has helped to sustain the Supreme Court. Most disputes appear before through public action. to attend a court hearing. Once bankruptcy the level of household consumption, alongside the courts of general jurisdiction, with the Court Indonesia is not part to any treaty concerning has been declared, the directors of the debtor + STRENGTHS increasing levels of employment. Growth is Popular uprising in Iran and risk of First Instance being the State Court. Appeals reciprocal enforcement of judgments, making company lose the power to manage the company, expected to increase slightly in 2018, driven by of US sanctions which is transferred to the court-appointed • Large gas and oil reserves (respectively domestic consumption and investment, while President Hassan Rohani was re-elected for a from these courts are heard before the High it highly difficult to enforce foreign judgments second and fourth largest in the world) Court (a district court of appeal). Appeal from the in Indonesia, or to enforce Indonesian court receiver who then manage the bankruptcy inward foreign investment will fall. The decision second term of office in the presidential elections • Very low level of external debt High Court, and in some instances from the State decisions abroad. Because foreign judgements estate and the settlement of the debts. The by the US administration concerning the Iranian held in May 2017. The electoral campaign was Court, may be made to the Supreme Court. cannot be enforced by Indonesian courts within debtor’s assets will be sold by way of public • Strategic location in the sub-region nuclear agreement and any sanctions that might mainly focused on economic challenges. It found the territory of Indonesia, foreign cases must auction by the appointed receiver. be imposed as a result could limit FDI. The measures its post-justification in the large protest movement applied by the Central Bank to restore the health of that started in the city of Mashhad in December - WEAKNESSES the banking system will help the recovery in credit 2017. Despite improved economic momentum • High inflation which has benefited from the cuts in interest rates driven by rural and working-class citizens who in 2017. However, the level of uncertainty could weakly benefited from the economic recovery, • Social tensions result in the limiting of Central Bank support of the rallies denouncing fiscal austerity, the high cost of • Unfavourable business climate economic activity in order to halt the depreciation living, and corruption have multiplied throughout of the Iranian rial. In addition, the planned the country, and have been followed by a wave realignment of the official exchange rate with the of arrests. In a context of slowing activity, the market rate in 2018 would be postponed. Oil and government’s position has been weakened, and gas production is expected to stabilise, with Iran it is also torn between a repressive response committed to limiting any increase in its production characteristic of the regime and respect for the to 90 thousand b/d. The rise in the price per barrel moderate electorate that brought Mr Rohani in 2018 will however benefit its export earnings. to power. The protests against the President should also strengthen the position of some An ambitious budget for 2018 conservatives opposed to the nuclear deal and weaken the moderate fringes of the political The public accounts deficit continued in 2017. Oil and spectrum, especially as the latest statements of gas receipts were higher, but were still lower than Ayatollah Ali Khamenei are in line with a growing had been expected by the government. Increased mistrust of the outside world. By asserting that it subsidies were also a burden on expenditure. The wants to withdraw from the joint action plan, the government’s aim of balancing the budget in 2018 US also threatens the permanence of the nuclear seems achievable, given that it was based on a agreement. Finally, the indirect confrontation with growth hypothesis of 6%. The public accounts are Saudi Arabia is expected to have an impact on most likely to remain in deficit through 2018. Oil domestic and foreign policy, because an upsurge and gas revenues will continue to reflect rising oil in tensions would pose an increased risk to the prices but the contribution from the non-oil and gas stability of the entire region. receipts will remain limited. Expenditure is expected to remain at a similar level to that of last year but will be allocated as a priority to the continuing restructuring of the banking sector and to a lesser extent to social transfers. The public deficit will be financed using Iranian Treasury Bonds issued on the domestic market. While the level of public debt remains low, the size of the total public debt, (including the debts of publicly owned companies), has not been defined, and could be larger than the amounts as stated by the government.

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COFACE ASSESSMENTS COFACE ASSESSMENTS E A3 COUNTRY RISK COUNTRY RISK E A1 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 4.8 11.0 -0.4 2.9 37.9 GDP growth (%) 25.6 5.1 4.9 3.9 Exports of goods, as a % of total Exports of goods, as a % of total 4.7 Inflation (yearly average, %) 1.4 0.4 2.0 2.0 POPULATION Inflation (yearly average, %) 0.0 0.2 0.3 0.7 POPULATION China (millions of persons - 2016) United States (millions of persons - 2016) 22% Budget balance (% GDP) -12.3 -14.1 -5.1 -4.7 26% Budget balance (% GDP) -1.9 -0.7 -0.4 -0.2 4,533 64,782 Euro Area Current account balance (% GDP) -6.5 -8.7 -6.3 -6.7 United Kingdom Current account balance (% GDP) 10.9 3.3 2.9 2.5 21% GDP PER CAPITA 13% GDP PER CAPITA Public debt (% GDP) 55.4 66.7 63.8 65.3 (US dollars - 2016) Public debt (% GDP) 76.9 72.8 69.9 69.1 (US dollars - 2016) India Belgium 20% (f): forecast 13% (f): forecast United States Germany 12% RISK ASSESSMENT 7% RISK ASSESSMENT South Korea Switzerland 10% Growth stimulated by the improving The sustainability of the debt would seem to have 5% Consolidation of growth in 2018 The contraction in the public deficit is expected to security situation increased thanks to a reduction in the bond yield Irish economic activity is expected to remain continue in 2018 despite the expansionist budgetary Imports of goods, as a % of total Following a contraction in 2017, growth should rate (8.7% in July 2017 against 14% in February Imports of goods, as a % of total dynamic in 2018, despite a slight slowing. The purely policy. The favourable economic situation which will 2016) as oil prices recover and thanks to recent help boost budget revenues and the raising of certain China return to the positive in 2018, driven by a United Kingdom domestic market should gradually pick up the slack 27% slight increase in oil and gas production and fiscal adjustments. Following the second IMF 29% from the activity of the multinational firms that have taxes (commercial properties and sugar) will offset Review in August 2017, the government carried the slight reduction in income taxes and higher public Turkey an expansion in the non-oil and gas GDP. The United States domiciled some of their operations in Ireland in order 27% recovery in oil prices, as well as the payment out a bond issue of USD 1 billion, without the 16% to benefit from low corporate tax rates (maximum of spending. This increased spending will be focused on Euro Area of part of the arrears by the State to the need for an international guarantee. In terms France 12.5%). Growth could, however, suffer as a result of education and housing, with a specific allocation of 10% international oil companies, is expected to of the current account, the trade balance is in 13% the uncertainties arising from the United Kingdom’s EUR 1.83 Bn for the construction of social housing. South Korea encourage a slight increase in oil production, surplus (0.7% of GDP, 2017 estimate), thanks to Germany exit from the European Union. Domestic demand will The structural surplus will drop to 0.5% of GDP in 5% to around 4.776 million barrels per day (mbpd) increased oil exports, whilst the services balance 10% remain the main driving force for the economy. 2018, in line with European recommendations. United States is in deficit (6.8% of GDP), as well as the income Netherlands The public debt will continue to shrink but will compared with 4.556 mbpd in 2017. The Household consumption, which grew at a slower rate 4% occupation by government forces of the oil fields balance (0.9% of GDP, linked with the servicing 5% remain large. of the debt). This deficit is partly financed by FDI than had been expected in 2017, will be bolstered by in the Kirkuk province, until then controlled by the wage growth and increasing employment. Inflation, Kurds, should also enable a better control over (1% of GDP), as well as multilateral (USD 1.4 billion At the heart of Brexit negotiations + STRENGTHS loan from the World Bank at the end of 2016) and + STRENGTHS which was up slightly in 2017, continues to be kept production. This will however remain subject low by falling prices for goods imported from the Following the long awaited resignation of Enda • World’s fourth largest proven oil reserves to limits because of the lack of investment in bilateral loans. The funding deficit nevertheless • Flexible labour and goods markets th amounted to 0.9% of GDP in 2017, financed from UK. This will rise gradually through 2018, driven by Kenny, the leader of Fine Gael, on the 17 May 2017, • Low oil extraction costs the sector and the OPEC agreement on the • Favourable business climate, attractive tax rising housing prices and the increase in the cost the Minister for Social Protection, Leo Varadkar, was th currency reserves (6.2 months of imports in • International financial support (IMF and 30 November 2017 to reduce production, very regime of labour. Investment, which made a significant elected to take over as leader of the party and as bilateral loans) likely to be extended in April 2018. The non-oil 2017 against 10.8 in 2013). Finally, the downwards • Presence of multinationals, in particular pressure on the Iraqi dinar is expected to weaken contribution to activity in 2017, will continue to Prime Minister. His minority coalition government and gas sector should benefit from the improved from the USA, providing a quarter of jobs, benefit from the solid health of the construction remains precarious. It includes members of his security situation following the territorial gains as the security situation improves and with rising 15% of wages and 60% of non-finance oil prices, enabling the Central Bank to maintain market activity sector. The catch-up effect that began in 2016 party and Independents. It relies essentially on - WEAKNESSES from Daesh. The agricultural sector is also will continue into 2018, with the rise in disposable an agreement with the second-largest party in expected to benefit significantly following the the peg with the dollar. • Presence (through multinationals) in high added value sectors (including household incomes helping to consolidate the Parliament, Fianna Fail, which has agreed to abstain • Undiversified economy and high liberation of the country’s most productive dependence on oil and gas sector pharmaceuticals, computing, medical demand for housing. Following weak growth in 2017, on votes until the end of 2018. In December 2017, a provinces in the northeast. The improved Parliamentary elections scheduled in a equipment) manufacturing investment is expected to stand scandal involving Deputy Prime Minister Frances • Severe tensions between the Shiite security and political context that remains majority holding power and the rest of security situation, together with the payment of still, while R&D investment will remain dependent Fitzgerald almost brought down the coalition. It the population USD 824.8 million by the IMF, as part of the USD tense on activity levels of multinational companies. The survived with Ms Fitzgerald’s resignation, thereby • Tensions with autonomous Kurdistan and 5.4 bn Stand-By Arrangement signed in July 2017 saw the recapture of Mosul by Iraqi national - WEAKNESSES high levels of company indebtedness and non- avoiding the collapse of the government and fresh major contributor to the oil and gas sector 2016, should help reassure investors. In addition forces, with the support of the international performing loans still on the banks’ balance sheets elections just as the Brexit negotiations are taking the construction sector should benefit from • Level of dependence on multinationals • Cost of reconstruction and aid to victims coalition, Kurdish forces and various militias, in terms of GDP, jobs and foreign trade: (15% of their portfolio, concentrated in mortgages place. Early elections (normally due to be held following armed conflicts the reconstruction effort in the newly liberated and the defeat of Daesh in most of Iraq. The offshore activities, mainly in the form of and loans to the SME sector) will continue to impact in 2021) cannot be ruled out in 2018, but would • Small size of non-oil and gas private territories. In terms of demand, the easing of the independence referendum (92% yes) in the contracted out foreign fabrication, account on credit, for SMEs in particular. In terms of supply, probably again result in a fragmented parliament. sector in GDP security risks and the low rate of inflation should Kurdistan autonomous region which contains a for ¼ of GDP the weak performances in the manufacturing sector encourage household consumption, whilst The border with Northern Ireland, one of the two land • Weak and limited banking sector major portion of Iraqi oil reserves, was harshly • Dependence on the economic situation will continue to be offset by the strength of activity borders between the EU and the UK, has become a infrastructures investments will drive up public and tax regimes in USA and Europe, in • Failings in the education, healthcare and dealt with by the Iraq government. It responded in the services sector – most notably information spending. Finally, external demand is expected to particular the United Kingdom critical element in the Brexit negotiations and has social protection system with the annexation of the Kirkuk region, held by technology and communications. highlighted the tensions between the UK, the EU make a positive contribution to growth, thanks to the Kurds since 2014 and whose oil reserves are • Vulnerability to changes in the strategies the volume and price effects of oil exports (94% of foreign companies and Ireland. If the United Kingdom left the common vital for the financing of an independent state. Near budgetary equilibrium and current market and the customs’ union, this would imply of exports in 2016). This handling of the Kurdish crisis and the victory • Continuing high levels of public and private debt account surplus the reinstatement of border controls. Beyond the over Daesh have strengthened the position economic implications of such an eventuality, with Persistent current account and public deficits of the Shiite Prime Minister, Haider al-Abadi, • Banking sector remains vulnerable In 2017, the boost to service exports was largely to shocks counterbalanced by the slowdown in goods exports. more than 30% of exports from Northern Ireland With 90% of budget revenues coming from oil, and his likelihood of winning the parliamentary going to Ireland and 30,000 people crossing the elections in May 2018, over his rival Nouri el • Uncertainties on Brexit terms and future The first impact of Brexit on the external accounts the rise in oil prices, together with the structural relations with the United Kingdom, was in the form of an increase in imports under the border every day, the Irish question potentially adjustment covered by the agreement with the Maliki. The support of Osama al-Nujaifi, the specifically Northern Ireland imperils the 1998 peace agreement that brought to highly influential Sunni leader in the Mosul region, combined impetus of strong domestic demand and IMF, should help to reduce the public deficit in the depreciation of the British pound. The current an end 30 years of civil war. Supported by the EU, 2018. Budgetary reforms, including a reduction in for H. el-Abadi further increases his chances Dublin rejects the reinstatement of a hard border and of winning. Nevertheless the situation in Iraq account surplus recorded in 2017 is expected to expenditure, in particular in terms of government continue in 2018, but recent movements in exchange wants a special status that allows Northern Ireland employee wages (40% of public spending), with remains riven by ethnic and religious rivalries, to remain in the customs union. This puts the United with denominational militias continuing to hold rates are likely to affect the competitiveness of Irish the curtailing on non-wage benefits and the goods exports. However, the slowing in shipments Kingdom in a difficult position. Whilst the Northern non-replacement of retiring staff, together sway in certain regions. There are more than 5 Irish Republicans would seem to favour Dublin’s million refugees and internal displaced persons to the United Kingdom will be made up for by higher with an increase in revenues (higher indirect levels of demand from its other trading partners, proposed solution, the Unionists (DUP) upon whom taxes). A drive to reduce payment arrears (5.5% and the threat of terrorist attacks is a constant the government of Theresa May is dependent, are reality, with a large number of attacks. Finally, the such as the European Union and the United States of GDP at the end of 2016, 68% domestic) has where demand remains strong. firmly opposed. been launched but remains constrained by weak business climate remains very poor, marked by a revenues. The public deficit is financed through high level of corruption. multilateral loans, which are driving up the public debt (66.7% of GDP in 2016 against 31% in 2013).

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PAYMENT AND COLLECTION PRACTICES IN IRELAND COFACE ASSESSMENTS Payment fixes a hearing date. The case is heard before a provides a maximum 100 day period in which a judge, who decides whether to issue an order for court appointed official (the examiner) seeks to A2 Cheques are generally used for both domestic COUNTRY RISK and international commercial transactions. judgment (a Decree). take control of the company and manage it so However, for international transactions, the use Circuit Court: amounts from EUR 6,349 EUR to that the company may continue to trade. The procedure may be initiated by the company, A2 of bills of exchange is preferred, together with EUR 38,092 BUSINESS CLIMATE letters of credit. In this case, a civil bill is served on the debtor, its directors, or one of its creditors. Once the who, in turn, will enter an Appearance (a formal examiner has been appointed, no proceedings Bank transfers are common, with SWIFT may be commenced against the company. transfers being utilised regularly. These are often document indicating that the debtor intends to answer the claim). A notice for particulars is Its functions are to examine the affairs of the TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) seen as a quick and efficient method of payment. company and to formulate proposals for its then also filed by the debtor, in which he seeks GDP growth (%) 2.6 4.0 3.1 3.5 8.5 Direct Debits and standing orders are also further information about the claim to which the survival. The examiner must formulate proposals Exports of goods, as a % of total becoming more recognised as an effective for a compromise or scheme of arrangement Inflation (yearly average, %) -0.6 -0.5 0.2 0.8 POPULATION creditor sends replies. The debtor must deliver a United States (millions of persons - 2016) method of making payment for regular and defence within a prescribed period. The creditor to facilitate the survival of the relevant body as 29% Budget balance (% GDP) -2.1 -2.1 -1.8 -2.7 expected financial transactions, and are 37,192 then serves the defendant with a formal notice a going concern. They can be accepted by the Euro Area Current account balance (% GDP) 4.9 3.5 3.0 2.4 particularly useful for domestic transactions. creditors but they must be validated by the court. 18% GDP PER CAPITA advising of hearing date. Each side presents its Public debt (% GDP) 64.1 62.3 62.2 62.2 (US dollars - 2016) Assignment of invoice is accepted both pre-and case and the judge makes a decision. Receivership Hong Kong 7% (f): forecast post-supply of goods and/or services. High Court: amounts over EUR 38,093 The procedure arises in the context of secured creditors and provides a framework in which they United Kingdom In front of the High Court, a summary summons 7% RISK ASSESSMENT Debt collection is served on the debtor, who then files an may act so as to enforce their security interest. A receiver is appointed to a company by either a China Amicable phase Appearance. The creditor makes an application 6% Private consumption and investment The current account balance is expected to debenture holder or the court to take control of The debt collection process usually begins to the Master of the High Court for judgment by driving lively growth continue to show a surplus in 2018, despite a way of motion and grounded by sworn affidavit. the assets of a company, with a view to ensure with the debtor being sent a demand for After slowing in 2017, mainly because of an worsening balance of goods. Imports, particularly The debtor can reply to the claim by sworn the repayment of the debt owed to the debenture Imports of goods, as a % of total payment, followed by a series of further written unfavourable base effect, activity should maintain of fuel and capital goods, are expected to rise affidavit. If the Master is satisfied that the debt is holder, either through receiving income or Euro Area correspondence, telephone calls, and personal 32% its solid performance in 2018. Growth will be driven more strongly than exports. The latter, having due and owing, liberty to enter final judgment is realising the value of the charged asset. visits, and debtor meetings. If the two parties by robust private consumption, which accounts for been hit by the appreciation of the shekel, should granted. However, if the Master is satisfied that Liquidation United States are unable to reach an amicable settlement, the 12% 55% of GDP. With a very low unemployment rate continue their modest recovery. The income the debtor has a genuine dispute, the case is sent The terminal process by which a company creditor may begin legal proceedings. (about 4%), rising participation in the labour market balance is also likely to remain in deficit due for a plenary hearing. During the plenary hearing, is wound up and dissolved, this process is China Where there is no specific interest clause, 9% and real wages on the up, household confidence to payments made to non-resident, notably the merits of the case are heard either as oral conducted by a liquidator who takes possession the rate applicable to commercial contracts Switzerland is on a high. Moreover, with higher tax receipts Palestinian, workers. Nevertheless, the balance evidence or affidavit. A High Court hears the case of assets and distributes the proceeds from their concluded after the 7th August 2002 (Regulation 6% in 2017 and in the run-up to the parliamentary of services, thanks to tourism, and the balance and makes a determination. sale in accordance with the priority of repayment. number 388 of 2002) is the benchmark rate, i.e. United Kingdom elections (2019), fiscal policy is likely to be more of remittances, from the United States and The liquidator is also required to investigate the the European Central Bank’s refinancing rate, in In 2004, a commercial court – a special division 6% expansionary in 2018. As a result public investment the diaspora in particular, will push the current conduct of the directors of the company and force before 1st January or 1st July of the relevant of the High Court – was created. The commercial is expected to grow. In addition to social security account balance into positive territory. prepare a report for the Office of the Director of year, marked up by seven percentage points court is competent to hear commercial disputes and health spending, infrastructure investment Corporate Enforcement (ODCE). Dependent of its + STRENGTHS and applied to the contracts via a percentage exceeding EUR 1 million, included in a commercial linked to the start of production at the offshore gas The status of Jerusalem threatens to view, the liquidator may also be required to bring calculated per day past due date. list or cases concerning intellectual property, • Industry dominated by high-tech products field Leviathan, in late 2019, will boost growth. To reignite the Israeli-Palestinian conflict and is able to provide a suitable and rapid restriction proceedings against one or more of For claims exceeding EUR 1,270, debtors may be • Highly skilled workforce tackle the housing shortage, public policies could Reappointed as Prime Minister following the examination of the cases submitted. At the the directors. The procedure can be started by a threatened with a “statutory demand” for the • Political and financial support from also be introduced to support the construction parliamentary elections won by the Likud Party discretion of the commercial judge, proceedings competent court (court liquidation), the creditors winding-up (closure) of their business if they fail the United States and the diaspora sector. The outlook for private investment in 2015, Benjamin Netanyahu leads a coalition may be adjourned for up to 28 days to enable the (creditors’ voluntary liquidation) or the debtors to make payment or come to acceptable terms • Natural gas production since mid-2013 remains positive, particularly thanks to the central government made up of six parties. Directly or parties to refer to alternative dispute resolution (members’ voluntary liquidation). within three weeks after they receive a statutory from significant offshore reserves bank’s accommodative stance. The sector could indirectly the target of several investigations practices, such as conciliation or mediation. demand for payment (a “21-day notice”). benefit from opportunities offered under the over allegations of corruption and conflict of Normally, obtaining a decision may take a year. USD 28 billion infrastructure modernisation plan, Legal proceedings interests, the Prime Minister’s position could be However, this timeframe may be doubled if - WEAKNESSES especially concerning transport, presented by If a defendant fails to respond within the allotted weakened in the run-up to the 2019 elections. compulsory enforcement is required. Appeal the government in September 2017. On the other time to a court summons (either a plenary or • Political fragmentation and fragile Moreover, the issue of military service for the claims brought before the Supreme Court may hand, higher imports and modest export growth in summary summons before the High Court, a civil government coalitions orthodox community, currently exempted, could take an additional three years. pharmaceuticals, innovation (ICT, electronics) and bill before the Circuit Court, or a civil summons • Peace talks between Israel and the create turmoil between the religious and secular Palestinian Territories are at a standstill chemicals are expected to limit the contribution of parties in the coalition, after the Supreme Court before the District Court), the creditor may external trade to growth. Indeed, a strong shekel is Enforcement of a legal decision • Fairly high public debt ruled in September 2017 that the Knesset (Israeli obtain a judgement by default based on the likely weigh on export recovery. submission of an affidavit of debt without a court A judgment is enforceable as soon as it becomes Parliament) had one year to pass legislation to hearing. final. If the debtor fails to satisfy the judgment, Robust internal demand, given rising wages ensure that the principle of equality was being the creditor can request the competent court and higher prices for imported goods, energy in respected. In addition, an international effort, An affidavit of debt is a sworn statement that particular, will contribute to positive, but weak, led by the Trump administration, to restart substantiates the outstanding amount and cause to order execution by way of attachment and sale of the debtor’s assets by the Sheriff. There inflation. the Israeli-Palestinian peace process, could of the claim. It bears a signature attested by a reawaken internal friction within a weak and notary or an Irish consular office. is also the possibility to obtain payment of a debt through a third party owing money to the debtor Expansionary fiscal policy will widen disparate majority. The conclusion of a peace The claim amount at stake will determine the (garnishee order). the deficit deal seems a very distant prospect, especially competent court: the District Court, then the after the US decision, in late 2017, to recognise Circuit Court, and, for claims exceeding EUR For foreign awards, enforcement depends on After reducing in 2017, in connection with an Jerusalem as the capital. This decision, rapidly 38,092.14, the High Court in Dublin, which has whether the decision is issued in a European exceptional increase in revenues, the fiscal followed by a call for Intifada by Hamas, threatens unlimited jurisdiction to hear civil and criminal Union (EU) member state or a country outside deficit will widen in 2018. This deficit increase can to escalate the Israeli-Palestinian conflict. cases and to assess, in the first instance, the the EU. For the former, Ireland has adopted be put down to higher public spending. The areas Apart from the conflict, diplomatic relations are constitutionality of laws enacted by Parliament enforcement mechanisms; such as the EU of social security, healthcare and education are likely to be enlivened by convergence with the (Oireachtais). Payment Order, or the European Enforcement likely to receive a greater emphasis in the run- United States and Saudi Arabia over concerns Order when the claim is undisputed. up to the elections. Infrastructure spending, about Iran’s ambitions in the Middle East. Fast-track procedure especially on public transport and the electricity In any of the three courts, if the debt is certain Nevertheless, relations with Jordan, with whom Insolvency proceedings distribution system, will also contribute to the a peace agreement was signed in 1994, are tense and undisputed, it is alternatively possible to rise in the deficit. The one percentage point request a fast-track summary judgment from Out-of-court proceedings following a deadly incident at the Israeli embassy cut in corporation tax, bringing it down to 23%, in Amman in July 2017. the competent court. Informal negotiations may take place, and any together with the cut in income tax is expected District Court: amounts up to EUR 6,348 agreement must be unanimously adopted by all to slow the growth in revenues. This deficit For contested debts, a civil summons is served creditors. increase should stop the downward trend of the on the debtor, with the originating court Examinership public debt observed over the past ten years. proceedings setting out the claim and amount Examinership is an Irish legal process whereby However, this should not threaten the country’s alleged owed. The debtor then files a Notice of court protection is obtained to assist the capacity to borrow at relatively low rates on both Intention to Defend, indicating that he intends survival of a company; The company may then the domestic and external market. to contest the case, at which point the court restructure with the High Court’s approval. It

120 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 121 ITALY ITALY

COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN ITALY Payment served by a bailiff, preliminary to attachment of For foreign awards, decisions rendered from a A3 the debtor’s moveable and immoveable property country in the European Union (EU) will benefit from COUNTRY RISK Trade notes (cambiali) are available in the form of bills of exchange or promissory notes. Cambiali (barring receipt of actual payment within the special procedures such as the EU Payment Order must be duly accepted by the drawee and stamped allotted timeframe). The resulting auction proceeds or the European Enforcement Order. Judgment A2 are used to discharge outstanding claims. from a non EU country will have to be recognized BUSINESS CLIMATE locally at 12/1000 of their value, being issued and payable in the country. They are stamped Creditors can obtain an injunction to pay (decreto and enforced on a reciprocity basis, meaning that locally at 9/1000, being issued in the country and ingiuntivo) if they can produce, in addition to copies the issuing country must be part of a bilateral or payable abroad, and finally stamped at 6/1000 in of invoices, written proof of the claim’s existence multilateral agreement with Italy. TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) the country if stamped beforehand abroad, with a by whatever means or a notarized statement Insolvency proceedings GDP growth (%) 0.9 1.1 1.5 1.3 60.7 minimum value of EUR 0.50. of account. A forty-day period is granted to the Exports of goods, as a % of total In case of default, they constitute de facto defendant to lodge an objection. Inflation (yearly average, %) 0.1 -0.1 1.4 1.2 POPULATION Out-of court proceedings Germany (millions of persons - 2016) enforcement orders as the courts automatically Ordinary summary proceedings (procedimento The 2012 legal reform allows a debtor to file 13% Budget balance (% GDP) -2.6 -2.5 -2.1 -1.8 admit them as a writ of execution (ezecuzione 30,507 sommario di cognizione), introduced in 2009, are an application for composition by anticipation. France Current account balance (% GDP) 1.5 2.6 2.5 2.5 forzata) against the debtor. used for uncomplicated disputes which can be Negotiation on an agreement commences 60 to 11% GDP PER CAPITA Public debt (% GDP) 131.5 132.0 132.1 130.8 (US dollars - 2016) Signed bills of exchange are a reasonably secure settled upon simple presentation of evidence. 120 days prior to the initiation of judicial debt United States Sitting with a single judge, the court determines a restructuration proceedings. The debtor retains 9% (f): forecast means of payment, but are rarely used due to a high stamp duty, the somewhat lengthy cashing hearing for appearance of the parties, and delivers control over the company’s assets and activities. United Kingdom 5% RISK ASSESSMENT period, and the drawee’s fear of damage to his a provisionally executory ruling if it acknowledges A new pre-agreed composition plan may be agreed the merits of the claim; the debtor however has 30 with the approval of creditors representing 60% of Spain reputation caused by the recording and publication 5% Consolidation of the recovery in 2018 compared with 1.2% fixed under the Stability of contested unpaid bills at the Chambers of days to lodge an appeal. the debtor company’s debt. Commerce. Italy’s economic recovery was confirmed in 2017, Programme. It is, however, likely that growth will Ordinary proceedings Restructuring proceedings Imports of goods, as a % of total after several consecutive years of lacklustre be slightly higher than expected. The slowdown In addition to the date and place of issue, cheques The creditor must file a claim with the court This settlement is a court procedure which in consumption and the postponement of the established in amounts exceeding EUR 1,000 (citazione) and serve summons to the debtor, who allows a company in financial difficulty to propose Germany growth. Favourable financing conditions and 16% higher foreign demand have helped revive hike in VAT from 2018 to 2019 will limit revenue and intended to circulate abroad must bear the will file a defence (comparsa di constituzione e a debt restructuration plan. The debtor files a growth, while spending will remain unchanged. risposta) within ninety days via a preliminary hearing. proposal to the court to repay the total amount France investment, especially in the manufacturing endorsement non trasferibile (not transferable), as 9% sector. Businesses have also benefited from the Italian public debt will remain high, but weak they can only be cashed by the beneficiary. The parties then provide briefs and evidence to the outstanding to the secured creditors. If the court interest rates will be reflected in lower interest admits it, a commissioner trustee is appointed, China incentives under the Industrial Plan 4.0 aimed at To make the use of cheques more secure and court. When the debtor fails to bring a defence, the payments. and if the majority of the unpaid creditors accept 7% accelerating investment in industrial innovation. efficient, any bank or postal cheque issued without creditor is entitled to request a default judgment. the proposal, the court will officially validate the Netherlands Business failures are also declining, except in the The current account surplus will be maintained in authorisation or with insufficient funds will subject The court will usually grant remedies in the form proceedings. 6% construction sector. Household consumption 2018 but the rise in imports generated by higher the cheque drawer to administrative penalties and of declaratory judgments, constitutive judgments, specific performance and compensatory damages Spain benefited from the recovery in the labour market, demand for foreign goods will outpace that listing by the CAI (Centrale d’Allarme Interbancaria), Alternatively, a debt restructuring agreement 5% but it cannot award any damages which have not but was less dynamic than in 2016, hit by long- of exports. which automatically results in exclusion from the (accordi di ristrutturazione del debito) aims to been requested by the parties. term slower growth in purchases of durables. payment system for at least six months. restructuring the debt so as to rescue the debtor company from bankruptcy proceedings. The debtor + STRENGTHS Growth is expected to slow slightly in 2018, but Parliamentary elections in 2018 Bank vouchers (ricevuta bancaria) are not a means Undisputed claims are typically settled within four must file a report on its ability to pay the remaining the economy will continue to show momentum. of payment, but merely a notice of bank domicile months, but the timescale to obtain an enforceable • Reform effort (labour market, banking Following the resignation of Matteo Renzi, Italy’s creditors in full, who otherwise can challenge the The contribution of cyclical effects are, however, drawn up by creditors and submitted to their own court order depends on the court. Overall, disputed sector, insolvencies...) centre-left leader, the Democratic Party (PD) agreement before a Bankruptcy court by requiring likely to be less positive. The stronger euro will bank for presentation to the debtor’s bank for legal proceedings take up to three years on average. • Manufacturing industry still important appointed Paolo Gentiloni to manage current verification that their claims will be paid as normal. reduce the contribution of net exports to growth. business while waiting for the parliamentary the purposes of payment (the vouchers are also The current civil procedure code is intended to • Renewed competitiveness and stronger Consumption will continue to slow, because of speed up the pace of proceedings by reducing the Liquidation export sector elections scheduled for spring 2018. Italy has available in electronic form, in which case they are less sustained wage and job growth. Inflation meanwhile introduced a new electoral law known as “RI.BA elettronica”). procedural terms, imposing strict time limits on This procedure aims to pay out the creditors by • Improvement in the financial position of will dip as a result of the stronger euro and lower the parties for submitting evidence and making realising the debtor’s assets and distributing businesses in preparation for the elections. Passed in Bank transfers are widely used (90% of payments energy costs. Tax incentives provided for in the the proceeds to them. The status of insolvency October 2017, the Rosatellum Law came out from Italy), particularly SWIFT transfers, as they their cases, and introducing written depositions in • High-quality infrastructure justifies the adjudication of bankruptcy by the 2018 budget will, however, drive investment. of an agreement between the PD and the two considerably reduce the length of the processing addition to oral depositions. • Considerable tourism potential court, even where the insolvency is not due Positive growth should be observed in the main right-wing opposition parties, Matteo period. Bank transfers are a cheap and secure to the debtor’s misconduct. The court hears construction sector after several quarters of Salvini’s Lega Nord (Northern League) and means of payment once the contracting parties Enforcement of a legal decision downturn, thanks to a recovery in demand for the evidences of the creditors’ claims and Silvio Berlusconi’s Forza Italia. The polarisation have established mutual trust. A judgment becomes enforceable when all appeal - WEAKNESSES residential housing and a slight increase in public appoints a receiver to control the company and of Italian political life between the three blocs venues have been exhausted. If the debtor fails • Private and public debt levels still high, investment. - namely the right, the left and the Five Star its assets. This receiver must liquidate all of the Debt collection to comply with a judgement, the court can order company’s assets and distribute the proceeds to very negative net external position Movement (M5S) after the debacle of the PD compulsory measures, such as an attachment of • Duality of the labour market, high The banking system is getting stronger but during the referendum (over constitutional Amicable phase the creditors to have the proceedings formally Amicable collection is always preferable to legal the debtor’s assets or allowing the payment of the concluded. unemployment and high structural risk has not been eliminated reform) would, under the former law, have debt to be obtained from a third party (garnishee unemployment action. Demands and telephone dunning are The health of the banking system improved sharpened institutional blockages. But the order) - although obtaining payment of a debt via • Significant proportion of small, under- Rosatellum Law will give preference to a first- quite effective. On-site visits, which provide an productive enterprises sharply during the course of 2017 after the opportunity to restore dialogue between supplier the latter option tends to be more cost-effective. state recapitalised Monte di Paschi di Sienna past-the-post method corrected by a measure • Fragmented political landscape, unity of of proportional representation with a minimum and customer with a view to reaching a settlement, Bank and wound up two large Venetian banks. the country weakened by regions’ push required threshold for entering parliament of can only be conducted once a specific licence has for autonomy The restoration of confidence in the banking NUMBER OF CORPORATE FAILURES 3% of the national vote for single parties and been granted. system should facilitate access to credit for • Regional disparities 10% for coalitions and will actually penalise the Settlement negotiations focus on payment of the Italian businesses, which will continue to benefit Total Estimate (e) / Forecast (f) Yearly growth • Low administrative efficiency M5S. However, the populist party, founded principal, plus any contractual default interest as from advantageous financing terms. But the 18,000 25% by Beppe Grillo and led by Luigi Di Mario, is still may be provided for in writing and accepted by the very structure of the banking system, in which 19.6% 15,714 climbing in the opinion polls, despite the setbacks buyer. 16,000 20% the medium-sized regional banks suffer from 14,681 SECTOR RISK ASSESSMENT experienced in some localities, and represents When an agreement is not reached, the rate 14,132 considerable exposure to non-performing loans 14,000 13,507 the second political force in Italy and is gaining applicable to commercial agreements is the six- 15% remains problematic, especially as the ECB is 12,522 12.9% ground on the socialists. The PD is in a weakened monthly rate set by the Ministry of Economic Affairs 12,145 11.2% expected to tighten its guidelines for banks 12,000 11,218 position in parliament despite good economic and Finance by reference to the European Central 11,481 11,251 10% regarding non-performing loans and to demand results. It is true that Matteo Renzi still has a Bank’s refinancing rate, raised by eight percentage 10,000 a ratio of 100% coverage for bad debts. hold over the Democratic Party, of which he points. 8.3% 5% 8,000 The upturn in activity in 2017 enabled Paolo took over the leadership in spring, winning the Legal proceedings 3.1% 0% Gentiloni’s government to bring the public primaries, but defections within the centre-left When creditors fail to reach an agreement with their 6,000 -2.0% deficit down to 2.1% in line with the target set are multiplying. The overwhelming favourite debtors, the type of legal action taken depends on -5% by the Stability Programme. Civil service wage remains Berlusconi’s Party, the Forza Italia, the type of documents justifying the claim. 4,000 moderation (salary freeze since 2010) and cuts which is making a big comeback in Italian politics. -6.6% -10% to health spending have, moreover, helped The victory of the Italian right-wing in Sicily, with Fast-track proceedings 2,000 -8.0% -15.0% reduce spending despite the EUR 10-billion bill the support of the Lega Nord and the Fratelli de Based on “cambiali notes” – bills of exchange, promissory notes – or cheques, creditors may 0 -15% for the bank bailout. Despite encouraging growth Italia, bolsters the former prime minister’s lead, 2010 2011 2012 2013 2014 2015 2016 2017(e) 2018(f) forecasts for 2018, the government has chosen even though he has been caught up in and under proceed directly with forced execution, beginning to maintain the deficit target of 1.6% in 2018, investigation for various scandals. with a demand for payment (atto di precetto) Source: Cerved, Coface

122 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 123 IVORY COAST JAMAICA

COFACE ASSESSMENTS COFACE ASSESSMENTS B B COUNTRY RISK COUNTRY RISK B A4 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 8.8 8.2 6.7 7.2 GDP growth (%) 0.9 1.5 2.0 2.4 Exports of goods, as a % of total 24.3 Exports of goods, as a % of total 2.8 Inflation (yearly average, %) 1.2 0.7 0.9 1.5 POPULATION Inflation (yearly average, %) 3.7 3.8 4.5 5.2 POPULATION Euro Area (millions of persons - 2016) United States (millions of persons - 2016) 36% Budget balance (% GDP) -2.9 -4.0 -4.5 -3.8 41% Budget balance (% GDP)* -0.3 -0.9 -0.3 -0.1 1,466 4,934 United States Current account balance (% GDP) -1.4 -1.8 -2.8 -2.7 Euro Area Current account balance (% GDP) -3.0 -2.7 -3.1 -3.2 7% GDP PER CAPITA 13% GDP PER CAPITA Public debt (% GDP) 47.8 47.8 48.7 48.3 (US dollars - 2016) Public debt (% GDP)* 120.2 115.1 108.6 102.7 (US dollars - 2016) India Canada 5% (f): forecast 12% *Fiscal year: 1st April 2018 to 31st March 2019 (f): forecast Mali Russia 5% RISK ASSESSMENT 6% RISK ASSESSMENT Burkina Faso United Kingdom 5% Strong growth despite some turbulence over-indebtedness. The accumulation of debt, 4% Faster growth buoyed by domestic demand to balance the budgetary accounts. Thanks In 2017, growth, while strong, was less robust particularly external debt, is framed by the debt Growth is expected to continue in 2018, thanks to this policy, the government should be able Imports of goods, as a % of total due to lower oil production and lower cocoa management strategy in order to guarantee the Imports of goods, as a % of total to more vigorous domestic demand and more to keep to its commitment to bring the public sustainability of state financing. debt ratio to below 100% of GDP by 2019-20. Euro Area prices. In 2018, investments will continue to United States favourable economic conditions in the United 30% drive growth. In particular, public investment The deterioration of the goods surplus, following 39% States, despite the Jamaican government’s Furthermore, half of this debt is denominated in foreign exchange, exposing it to exchange China will continue to be driven by the continuation the decline in export earnings, in the wake of Euro Area fiscal austerity policy. Households will benefit 12% of major public infrastructure works under the cocoa prices, had the effect of deteriorating 7% from the gradual fall in unemployment, tax rate risk, especially as the Jamaican dollar is still Nigeria second National Development Plan (2016-2020 the current account deficit in 2017. In 2018, in Trinidad & Tobago cuts for the poorest households, and higher steadily depreciating. The government’s ability 12% NDP). The construction, transport and energy a context of relatively weak cocoa prices, and 7% remittances from expatriate workers in the to issue more bonds on the domestic market will United States sectors will continue to drive Ivorian growth. despite vigorous production, the balance of China United States. Exports of bauxite and aluminium allow it to limit this risk, while the public debt will 4% These public investments, combined with the goods is not expected to register significant 6% (44% of total exports) will sustain activity, gradually decline. India various reforms undertaken to improve the improvement. The demand for imports will Japan buoyed by a moderate increase in metal prices. 3% business climate, should also support increased continue to thrive on rapid economic growth and 6% Strong performances in the agricultural sector, Stable current account deficit dependent on private investment. Agriculture, agribusiness, the public investment programme. As in recent together with the depreciation of the local remittances from expatriate workers + STRENGTHS mining, manufacturing and services years, service, transfer and income accounts + STRENGTHS currency, will also help maintain the favourable The current account deficit is likely to remain (telecommunication) will be the favoured will remain in deficit. Despite the deterioration in trend of the country’s exports. Meanwhile, stable in 2018. The trade balance will continue • Diversity of resources: hydrocarbons, ores activities. Eager to develop the oil and gas the current balance, foreign direct investment • Natural resources (bauxite, sugar, bananas, there will be greater momentum in the tourism show a large deficit (17% of GDP) because of (gold, copper, iron, manganese, bauxite) industry, the government, on the other hand, had and external borrowing, especially concessional coffee) and tourism sector, thanks to the expected increase in the and agricultural wealth (world’s largest the moderate increase in the oil price (most difficulties stirring the interest of investors after borrowing, will finance the deficit. • Financial support from multilateral number of tourists from the United States, imported item) and rising imports triggered producer of cocoa, coffee, sugar, cashew institutions nuts) several setbacks in the exploration phase. Firmer which is the country’s main trading and tourism by reinvigorated domestic demand. The • Substantial remittances from the diaspora • Infrastructures undergoing modernization oil prices in 2018 could nevertheless encourage Political stability remains fragile partner. Private investment will be concentrated depreciation of the local currency against the new hydrocarbon projects. After suffering • Stable democratic framework mainly in this sector, as well as in transport • Improving the business climate and The smooth re-election of Alassane Ouattara dollar is expected to continue and to boost export governance in 2017, cocoa-related export revenues are infrastructure projects (roads, bridges), largely competitiveness. The trade deficit will, to a great expected to grow slightly, in line with the trend in 2015 made it possible to turn the page on financed by Chinese investors. However, limited • Strengthening political stability the violence that followed the 2010 election. extent, be offset by increased remittances from in brown gold prices. The entry into production - WEAKNESSES infrastructure expansion and low workforce Nevertheless, despite the victory of the ruling expatriate workers, who are mainly United of the Sissingué gold mine in the first quarter productivity will still hamper private investment States residents, as well as by excellent tourism of 2018 could, on the other hand, be a welcome bipartisan coalition (Rally of the Republicans - • Poorly diversified economy in other sectors. The central bank is expected, - WEAKNESSES performance. addition to the export basket. With some 6 million RDR) in the 2016 parliamentary elections, • Vulnerable to external shocks (climate, in accordance with the IMF’s recommendations, political stability remains fragile. A constitutional US economic cycle, commodities) • Economy dependent on weather-related Ivorians being dependent on the cocoa sector, to intervene in a limited manner on the foreign The Prime minister remains popular despite hazards and cocoa price evolution, main household consumption could suffer from low referendum boycotted by the opposition • Very high public debt and debt interest exchange market in order to build up foreign payments inhibiting growth austerity export product prices for the fruit of their labour. Nevertheless, in the same year in particular recalled that exchange reserves (currently five months of • Gaps yet to be filled in public financial, growth prospects for private consumption the reconciliation among Ivorians is not yet • High rates of crime and poverty imports), enabling it to withstand any pressures After narrowly winning the general elections held infrastructure and the business remain positive, thanks in particular to price complete. Mutinies in the armed forces in the on the local currency, the Jamaican dollar. on the 25th February 2016 (33 seats out of 63), environment management, despite the first half of 2017 have also brought the subject the Jamaican Labour Party (JLP) and the Prime progress that has been made stability. Meanwhile, inflation is likely to increase, due to of political stability back to the heart of the robust domestic demand and the moderate rise Minister, Andrew Holness, remain popular. One • Slow progress on national reconciliation debate. The payment of the bonuses claimed by in oil prices, though remaining within the central of the reasons for this popularity is the delivery Falling brown gold prices precipitate fiscal the mutineers to end the crisis could undermine adjustment bank’s target range (4-6%). Nonetheless, the of his key campaign promise to abolish income the credibility of President Ouattara. Indeed, bank could tighten monetary policy if there is a tax on the lowest-income households, without Compounded in 2017 by the difficult socio- while the disconnect between the dynamism significant increase in inflationary pressures. losing the IMF’s financial support. Nevertheless, economic conditions (lower cocoa prices, bonus of growth and the stagnation of the standard of austerity measures, high crime rates and the payments to meet social demands), the budget living fuels frustration, the agreement reached still significant unemployment rate are eroding deficit should be reduced in 2018. Controlling between the government and the mutineers, the Budgetary efforts rewarded, still under the watchful gaze of the IMF this popular support. At the geopolitical level, the current expenditure will free up margins for details of which have not filtered, has not gone government is expected to prioritise relations capital investment planned for the achievement over well with a population that is still suffering The government, in place since February 2016, is with the United States, its main trading partner of the 2016-2020 NDP. The rationalization of from lack of work and the inadequate quality of pursuing its fiscal austerity policy, begun in 2013, and source of remittances from expatriate certain tax exemptions and the improvement public services. In addition, the grumblings of civil in return for aid from the International Monetary workers. The government is also expected to of tax mobilization should allow revenues to servants, which led to strikes in January 2017, Fund. As a result of the progress already made on concentrate its efforts on regional co-operation progress over the next fiscal year. Reforms could also resurface, since their representatives stabilising the economy, the IMF approved a new to fight against drug trafficking and high crime to the tax system will be supported by the still believe that negotiations to obtain raises stand-by arrangement in November 2016 for levels, which affect the business climate because IMF under the three-year programmes of the and the payment of wage arrears have not USD 1.64 million, valid for three years from 2017. of the resulting high costs to businesses. Extended Credit Facility (ECF) and the Extended been successful. These sources of instability Apart from cutting operational spending, the Credit Mechanism (MEDC), which has been in could be exacerbated, as the race for Alassane consolidation covers the introduction of new operation since the end of 2016. The level of Ouattara’s succession, who, according to the indirect taxes (16.5% VAT, taxes on fuel, tobacco, public debt remains moderate, particularly below Constitution, must retire in 2020 after serving and alcohol), in order to increase the weak fiscal the WAEMU norm of 70%, and the sustainability two consecutive terms, is intensifying. revenues, linked to the large informal economy and liquidity indicators show a measured risk of (40% of the population). While the government has generated a primary surplus of 7%, the debt interest burden means it is only just able

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COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN JAPAN Payment Legal proceedings Furthermore, if the issuing country does not have a A2 Fast-track proceedings reciprocal recognition and enforcement treaty with COUNTRY RISK Japan has ratified the International Conventions of June 1930 on Bills of Exchange and Promissory Summary proceedings, intended to allow Japan, the decision will not be enforced by domestic Notes, and of March 1931 on Cheques. As a result, creditors to obtain a ruling on payment (tokusoku courts. A1 tetsuzuki), apply to uncontested monetary claims BUSINESS CLIMATE the validity of these instruments in Japan is subject to the same rules as in Europe. and effectively facilitate obtaining a court order Insolvency proceedings to pay (shiharaï meireï) from the judge within The bill of exchange (kawase tegata) and the much approximately six months. Restructuring proceedings more widely used promissory note (yakusoku There are two types of restructuring proceedings. TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) tegata), when unpaid, allow creditors to initiate debt If the debtor contests the order within two weeks The first of these is corporate reorganisation GDP growth (%) 0.6 0.8 1.5 1.2 127.0 recovery proceedings via a fast-track procedure, of service of notice, the case is transferred to proceedings (kaisha kosei), which are typically Exports of goods, as a % of total ordinary proceedings. Inflation (yearly average, %) 0.8 -0.3 0.8 1.7 POPULATION subject to certain conditions. Although the fast-track used in complex insolvency cases involving stock United States (millions of persons - 2016) procedure also applies to cheques (kogitte), their use Ordinary proceedings 20% Budget balance (% GDP) -5.4 -5.2 -5.2 -5.0 companies. They come with the mandatory 38,883 is far less common for everyday transactions. Ordinary proceedings are brought before the appointment of a reorganisation trustee by the China Current account balance (% GDP) 3.3 3.8 3.8 3.8 18% GDP PER CAPITA Clearing houses (tegata kokanjo) play an important Summary Court (kan-i saibansho) for claims under court and with a stay against enforcement by Public debt (% GDP) 238.1 239.3 240.3 240.0 (US dollars - 2016) JPY 1,400,000 and before the District Court (chiho Euro Area role in the collective processing of the money both secured and unsecured creditors. The court 8% (f): forecast supply arising from these instruments. The saibansho) for claims above this amount. typically appoints a third-party bengoshi with South Korea penalties for payment default act as a powerful Those proceedings, partly written (with submission substantial experience in restructuring cases. 7% RISK ASSESSMENT deterrent: a debtor who fails twice in a period of six of arguments and exchanges of type of evidence) The second of these is civil rehabilitation Taiwan months to honour a bill of exchange, promissory and partly oral (with respective hearings of the proceedings (minji saisei), which are used to 6% Cyclical recovery will slow in 2018 The current account is expected to remain in surplus note, or cheque collectable in Japan is subsequently parties and their witnesses) can take from one rehabilitate companies of almost any size and in 2018. The yen has remained weak against the Japan benefitted from a combination of cyclical barred for a period of two years from undertaking to three years as a result of the succession of type. The debtor-in-possession (DIP) administers dollar, which has played a role in boosting exports Imports of goods, as a % of total factors in 2017, enabling it to reach a higher business-related banking transactions (current hearings. These proceedings generate significant the rehabilitation under supervision of a court- in 2017. Robust demand from developed markets, a account, loans) with financial establishments China than anticipated level of growth. However, the legal costs. appointed supervisor. Enforcement by secured 26% economy is still subject to structural headwinds, stabilization of the Chinese economy, and a pickup attached to the clearing house. In other words, the in global commodity prices, have also facilitated The distinctive feature of the Japanese legal creditors is not stayed in principle. The debtor must United States which are set to come into force again in 2018 debtor is reduced to a de facto state of insolvency. the increase in exports since the last quarter of system is the emphasis given to civil mediation enter into settlement agreements with secured 11% and lead to a slowdown in activity. GDP grew These two measures normally result in the calling in 2016. However, this is not expected to continue (minji chôtei). Under court supervision, a panel of creditors in order to continue using the relevant Euro Area robustly in 2017, driven by foreign trade, a surge of any bank loans granted to the debtor. mediators – usually comprised of a judge and two collateral to conduct their business. 10% in the industrial production, and – to a lesser considering the slowing demand from Japan’s Bank transfers (furikomi), sometimes guaranteed neutral assessors – attempts to reach, by mutual Australia extent – fiscal stimulus, but private consumption main trading partners (China, the United States and Winding up proceedings by a standby letter of credit, have become concessions of the parties, an agreement on civil 5% remains lacklustre, as real wages have not Eurozone countries) and signs of commodity price There are two winding up proceedings. In significantly more common throughout the and commercial disputes. South Korea expanded – despite a tight labour market, with weakness. Imports are expected to increase as bankruptcy proceedings (hasan), the court economy over recent decades thanks to 4% the unemployment rate sitting at 2.8% in April households adjust to the expectations of another In practice, litigants often settle the case at this appoints a lawyer as trustee to administer the widespread use of electronic systems in Japanese its lowest level since June 1994. Wage growth sales tax hike in 2019. The trade balance is expected stage of the procedure, before a judgment is proceedings. Enforcement by secured creditors is banking circles. Various highly automated interbank has been constrained by Japanese companies’ to remain slightly in surplus. The services account delivered. While avoiding lengthy and costly legal not stayed; rather, they can freely exercise their + STRENGTHS transfer systems are also available for local or sticky deflationary mind-set, which has resulted will continue its consolidation as a result of the rise proceedings, any transaction obtained through claims outside of the bankruptcy proceedings. The international payments, like the Foreign Exchange • Privileged location in a dynamic region in insufficient efforts to redistribute profits. The of tourism – Chinese tourists, in particular and the such mediation becomes enforceable once trustee will usually attempt to sell secured collateral Yen Clearing System (FXYCS, operated by the structure of Japan’s labour market, which features income balance, which will remain significant. approved by the court. with the agreement of the secured creditors and • Very high level of national savings (around Tokyo Bankers Association) and the BOJ-NET 23% of GDP) rigid permanent contracts as well as a growing contribute a percentage of the sales proceeds to Funds Transfer System (operated by Bank of Japan). • Public debt is 90% owned by local investors number of temporary workers, has also played a Abe wins a majority, clearing the path Enforcement of a legal decision the estate. The debtor’s estate is distributed to Payment made via the Internet site of the client’s • Advanced technology products and role in keeping wages and productivity depressed. for reforms A court judgment is enforceable if no appeal is lodged creditors in accordance with prescribed statutory bank is also increasingly common. diversified industrial sector Domestic demand has played a muted role in Prime Minister Shinzo Abe took advantage of within two weeks. If the debtor does not comply with priorities without any need for voting by the boosting inflation. The modest pickup in inflation favourable cyclical conditions and called a snap the decision, compulsory measures can be ordered creditors. can be traced back to higher import prices – led by election on October 2017, stating he was seeking Debt collection through an execution against Real Property (an The second, special liquidation (tokubetsu seisan), - WEAKNESSES commodities – as well as a weaker yen. However, a fresh mandate amid threats from North Korea. In principle, to avoid certain disreputable practices Examination Court issues a commencement order is used for stock companies. A liquidator is • Difficulty of consolidating public finances consumer price inflation remains below the Bank As expected, his Liberal Democratic Party (LDP) employed in the past by specialised companies, for a compulsory auction) or an execution against appointed by either a debtor’s shareholders or the and bringing an end to deflation of Japan’s (BoJ) 2% target. Private investment managed to secure a majority, which gives him only lawyers (bengoshi) may undertake debt a claim (a compulsory execution is commenced court. Distributor of the debtor’s estate to creditors • Reduction of the workforce; increasing will likely remain sluggish as investors wait to ample room to forge ahead with economic reforms, collection. However, a 1998 law established through an order of seizure). has to be approved by creditors with claims to share of precarious workers see signs of a real pickup in domestic demand. and reform Article 9 of Japan’s pacifist constitution. the profession of “servicer” to foster debt Japanese law provides for an exequatur procedure two-thirds or more of the total debt or by way • Political instability Notwithstanding this caveat, corporate profits, The goal would be to increase military spending to securitisation and facilitate collection of non- in order for foreign awards to be recognised and of settlement. This procedure is used when the 3% of GDP for defensive purposes. Prime Minister • Low productivity of SMEs liquidity, and financial conditions are still favourable. performing loans (NPL debts) held by financial enforced. The court will verify several elements, debtor’s shareholders are confident that they will Going forwards, the Tokyo Olympics and an Abe has also stated that he is keen to revive the institutions. such as whether the parties benefited from obtain creditors’ cooperation for the liquidation TPP, and on May 21st, trade ministers representing extension of BoJ’s ultra-accommodative monetary Servicers are debt collection companies licensed a due process of law, or if enforcement will process, and wish to control the liquidation process 11 of the 12 signatories met to revive the pact. Japan policies will continue to sustain economic by the Ministry of Justice to provide collections be incompatible with Japanese public policy. without involvement of a trustee. SECTOR RISK ASSESSMENT also wants to maintain close relations with the US momentum. services, but only for certain types of debt: bank so as to avoid being isolated in Asia, and is working loans, loans by designated institutions, loans on a bilateral trade agreement. Consolidation of public finances remains contracted under leasing arrangements, credit card NUMBER OF CORPORATE FAILURES a crucial issue The North Korean threat continues to linger, repayments, and so on. posing a real security threat. The Korean Total Estimate (e) / Forecast (f) Yearly growth Amicable phase 2017 saw a widening fiscal deficit in 2017, due neighbour has continued to forge ahead with A settlement is always preferable, so as to avoid a 4% to ongoing policy stimulus, the rebuilding of its nuclear programme, despite reprimand from 14,000 13,321 infrastructure after a series of natural disasters, lengthy and costly legal procedure. This involves 12,735 the international community. On August and 12,125 2% obtaining, where possible, a signature from the and construction ahead of the Tokyo 2020 Olympic September 2017, it flew ballistic missiles over 12,000 debtor on a notarised deed that includes a forced- 10,854 -1.0% 0% Games . However, there is less room to implement Hokkaido, prompting Japanese authorities to sound execution clause, which, in the event of continued -2.4% further fiscal stimulus going forwards: the increase alerts. Although global markets have so far heavily 10,000 9,730 -2% default, is directly enforceable without requiring a in social spending significantly weighs on the state discounted the likelihood of a war with North Korea, 8,811 8,446 prior court judgement. -4.4% -4.8% 8,243 8,161 -4% budget while revenues are insufficient. However, a deterioration of investor sentiment could lead to 8,000 the government decided to postpone the next VAT the return of risk-off modes, triggering inflows into The standard practice is for the creditor to -4.1% - 6% rise (from 8% to 10%) until October 2019 for fear safe-haven assets such as the yen with a risk of send the debtor a recorded delivery letter with 6,000 -8% that another rate hike would cripple consumption. derail ing the rebound in exports and impacting the acknowledgement of receipt (naïyo shomeï), the With a debt service burden representing 25% profits of Japanese conglomerates. content of which must be written in Japanese 4,000 -10% of GDP, the current trajectory of the debt characters and certified by the post office. -9.4% accumulation does not appear sustainable, -10.5% -10.4% -12% The effect of this letter is to set back the statute especially as costs continue to increase with the 2,000 of limitation by six months (which is five years for -14% ageing population (health expenditure) and the commercial debts). If the debtor still fails to respond, -13.9% 2020 Olympics (investment expenditure). 0 -16% the creditor must start legal action during that 2010 2011 2012 2013 2014 2015 2016 2017(e) 2018(f) period to retain the benefit of interruption of the limitation period. Source: Tokyo Shoko Research, Coface

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COFACE ASSESSMENTS COFACE ASSESSMENTS C B COUNTRY RISK COUNTRY RISK B B BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic Indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 2.4 2.0 2.3 2.5 GDP growth (%) 1.2 1.1 3.3 3.0 Exports of goods, as a % of total 7.0 Exports of goods, as a % of total 17.9 Inflation (yearly average, %) -0.9 -0.8 3.3 1.5 POPULATION Inflation (yearly average, %) 6.7 14.6 7.5 6.5 POPULATION United States (millions of persons - 2016) Euro Area (millions of persons - 2016) 25% Budget balance (% GDP) -5.3 -3.2 -3.5 -3.2 44% Budget balance (% GDP)* -9.0 -4.5 -7.0 -2.0 5,549 7,456 Saudi Arabia Current account balance (% GDP) -9.1 -9.3 -8.4 -8.3 China Current account balance (% GDP) -2.8 -6.4 -4.5 -3.5 14% GDP PER CAPITA 12% GDP PER CAPITA Public debt (% GDP) 93.4 95.1 95.6 93.5 (US dollars - 2016) Public debt (% GDP) 22.0 21.0 22.0 22.0 (US dollars - 2016) India Russia 8% (f): forecast 9% * including transfers from the oil fund (NFRK) (f): forecast Iraq Switzerland 7% RISK ASSESSMENT 7% RISK ASSESSMENT United Arab Emirates Uzbekistan 6% Growth limited by the consequences of partners who in October 2017 approved a loan 3% Moderate growth and fragility of banks and the depreciation of the currency, public debt conflicts in bordering countries of EUR 100 million under the Macro-Financial The economy is expected to maintain moderate (half in foreign currencies) remains low. This is due to Imports of goods, as a % of total Momentum in the mining sector and higher Assistance programme (MFA). Imports of goods, as a % of total growth in 2018. Investment (25% of GDP) should the use of the sovereign wealth fund. Once assets from this fund are subtracted, the State has a creditor Euro Area phosphate prices gave economic activity a bit of Jordan is a net importer of oil and gas. Imports are Russia continue to benefit from the development of public 18% a boost in 2017. Growth will remain moderate in not expected to climb strongly as they depend 37% infrastructure, particularly road and rail and possibly position of 18% of GDP. Aside from a new banking bailout, the deficit is expected to drop significantly in China 2018 because of instability in the region and the mainly on movements in commodity and food Euro Area as part of the Chinese “One Belt, One Road” initiative, 14% fallout from the Syrian crisis. Fiscal consolidation prices. Exports will benefit from the opening of 18% supporting the construction sector. The site of 2018. The sovereign wealth fund, which represents Saudi Arabia and the very high unemployment rate will the border with Iraq and the “Jordan Compact” China Expo 2017 in Astana is set to be transformed into an almost two times the debt, even further tapped, 12% penalise private consumption, which represents which includes a free-trade agreement with 14% international financial centre. However, despite the would stabilise thanks to the increase in hydrocarbon United States 89% of GDP. The austerity measures, intended to the European Union. In September 2017, foreign United States tax incentives and the creation of a stock exchange production. There is room for improvement given the 7% deal with the very high debt burden, will hit low- exchange reserves were at a comfortable level 5% based on the partial privatisation of public companies, poor tax collection and the numerous exemptions. United Arab Emirates income households, dependent on subsidies for of USD 12.8 million, i.e. 7.2 months of imports. Turkey it will run into competition from the Almaty exchange Such improvements would reduce dependence on oil 4% essential goods (bread, sugar, electricity). Strong 2% and the reluctance of investors faced with institutional revenue while increasing capital expenditure. pressure will continue to bear on the property Political stability under strain from regional limitations. Exports, consisting of 57% oil and 16% The current account deficit that emerged in 2015 + STRENGTHS market, especially because of the presence of conflicts and the refugee crisis + STRENGTHS metals (steel, iron, copper, uranium), should benefit is expected to decline. The trade surplus would 1.4 million Syrian refugees, namely almost 15% from the modernisation of three refineries, the go up with increased hydrocarbon production of • Political and financial support from the Gulf of the total population. In 2018 the Jordanian Despite the entry into force of a new electoral • Increased oil production construction of a nickel plant, and the increased the Kashagan, Tengiz, and Karachaganak fields. law aimed at weakening the advantage of non- monarchies and the West economy could benefit from the reopening • High levels of foreign direct investment production of the Kashagan oil field. The country is Subsequently, the start-up of new automobile partisan candidates in the national elections • Significant phosphate and potash (on 30 August 2017) of the border with Iraq at • Net creditor position of the State expected to request a revision of its quota of 1.7m and nuclear fuel plants to reduce dependency production Karameh-Tureibil. This is because until 2014, (only 17% of MPs are affiliated to a party), the barrels per day (b/d) from OPEC. At the same time, on hydrocarbons will contribute to this. The large parliamentary elections in September 2016 • Strategic location between China and • Expatriate workforce and tourism - before the strengthening of the Islamic State Europe imports of capital goods (half of the total) should growing stock of foreign investment concentrated significant sources of foreign exchange Group’s position in Iraq, 14% of Jordanian exports have only slightly modified Jordan’s political also increase in connection with infrastructure in hydrocarbons will continue to generate significant landscape. Voter participation in the elections • Increase in working population (67% of the • Political stability, unlike neighbouring were destined for the Iraqi market. The banking total) thanks to a dynamic demography development, which would ultimately maintain the revenue outflows. The leasing of the Baikonur countries remained low, at 37%, despite participation by and insurance sector is expected to continue • Relatively high level of training slightly negative contribution of trade to growth. Cosmodrome to Russia brings in little revenue. The as one of Jordan’s growth drivers (+4.3% in the the Islamist Party, which is close to the Muslim Household consumption (a little more than half of GDP) indebtedness of banks and companies, mostly in first half of 2017). Tourism activity is expected Brotherhood (Islamic Action Front) and which would continue to grow moderately due to significant foreign currencies, soared with the devaluation of the - WEAKNESSES boycotted the previous two elections in 2010 and to recover, mainly stimulated by visitors from - WEAKNESSES inflation and credit remaining expensive and rare. country’s currency. It has come back down to 100% of the Gulf countries and Europe. Remittances from 2013. The August 2017 municipal elections also GDP and is expected to ease further. In addition, half • Shortage of natural energy resources and saw low voter turnout (37%) and a considerable Since the abandonment of the pegging of the tenge low productive base expatriate workers in the Gulf Co-operation • Economy reliant on commodities to the dollar (August 2015) and its floating along with of the debt corresponds to intra-group commitments Council (GCC) countries could increase against a lack of interest by the political parties. The (oil, gas, uranium, and iron) related to FDI. Lastly, the amount of the central • Vulnerable to international economic cycle country has a border with Syria and Iraq and over changes in oil prices, the central bank has focused and political instability in the Near and background of a rise in oil prices in 2017. • Fragile banking system bank’s foreign exchange reserves (8.6 months of half of the population is made up of refugees, on controlling inflation. Inflation is moderated by the Middle East • Continuing legal and institutional failings: imports, excluding gold) and the foreign assets of the With regard to monetary policy, the central bank mainly Palestinians and their descendants. lower expectations of economic agents, as well as the • Public and external account imbalances corruption, administrative delays and sovereign wealth fund (USD 62 billion in July 2017, or is expected to continue to maintain the dinar’s Syrian refugees have been able to obtain a work obstacles to trade stabilisation of import prices related to the stabilisation leading to a dependence on foreign aid and fixed parity against the dollar. of the tenge. Nevertheless, it should still exceed 6% in 42% of GDP) give the country a creditor position with foreign capital permit since October 2017, a measure designed • Inadequate road, port, and electrical 2018. Moreover, despite costly new recapitalisations regard to the rest of the world. • Very high unemployment rate (18%) to reduce the size of the underground economy infrastructures (5% of GDP) in 2017, the banking system continues Twin deficits at very high levels despite the and integrate the Syrian population. The return • Danger of political instability because reforms of many Jordanians who had joined the Islamic of lack of clear successor to President to be weakened by the sharp depreciation of the Uncertain succession of President State (after the group was defeated in Iraq and Nazarbayev tenge, which occurred while the 2008 crisis had not Nazarbayev Despite the budgetary reforms implemented been completely absorbed. The percentage of non- during the extension, in 2016, of the IMF’S Syria) and potential ethnic tensions between • Landlocked and low population density, Nursultan Nazarbayev, who has led the country communities pose a security challenge for particularly in the northern regions performing loans – officially 10.7% as of July 2017 – since 1989, was re-elected for a fifth time in April Extended Credit Facility (ECF, 2016-2019), the is certainly much higher. In addition, the system is deficit and the public debt burden remain high. the country. 2015, with 98% of votes. Without any real opposition, th both scattered (33 institutions, often small in size) his party (Nur Otan) easily won the parliamentary Fiscal consolidation is reflected in an over 50% Despite improving, (up from 118 place in 2017 and concentrated, with one institution holding 37% drop in the public deficit between 2014 and to 103rd place in 2018 in the Doing Business elections in March 2016 (over 80% of the vote). The of deposits. Lastly, while the share of deposits in constitutional reforms of 2017, increasing the powers 2016, but the level remained unchanged in 2017. rankings), the business climate is still affected by dollars has dropped from its peak in 2016, it remained With only 5% of households paying income tax, the unstable regional situation. of the parliament and the government, remain at 50% in August 2017. Many institutions are owned theoretical. Doubts around political stability within the State is heavily dependent on income from by influential personalities who are not easily pushed corporations. Tax paid by individuals represents the country continue: if the president (77 years old at around in efforts to restore order, and who manage the time of writing) were unable to remain in office, only 3.2% of income. The government’s plans to obtain public funds to avoid liquidation. Given these to widen its tax base in 2018, especially by the nomination of his successor presents a risk of conditions, interest rates on interbank loans would be conflicts between the different factions in power. Mass raising VAT, customs duties and corporation close to 13%. tax on companies in the banking, mining and protests are rare, especially as security measures telecommunications sectors. This is because are reinforced by the fear of terrorism and Islamic tax revenues account for only 15.4% of GDP. Deficits in decline and well-endowed fundamentalism. The government will target improving the fight sovereign wealth fund against tax evasion and remove exemptions for Despite the drop in oil revenues (from 50% to 35% certain companies. To finance its deficit, Jordan of budgetary revenue), the increase in expenditures will enjoy preferential rates from its European intended to support activity, the costly bank bailout,

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COFACE ASSESSMENTS COFACE ASSESSMENTS A4 A3 COUNTRY RISK COUNTRY RISK B A4 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 5.7 5.8 4.8 5.2 GDP growth (%) 0.8 2.7 -1.1 3.1 Exports of goods, as a % of total 45.5 Exports of goods, as a % of total 4.2 Inflation (yearly average, %) 6.6 6.3 8.0 5.2 POPULATION Inflation (yearly average, %) 3.5 2.9 2.4 3 POPULATION Euro Area (millions of persons - 2016) South Korea (millions of persons - 2016) 14% Budget balance (% GDP)* -8.7 -7.7 -8.9 -8.3 17% Budget balance (% GDP) -0.7 -0.5 0.0 0.2 1,552 26,245 Uganda Current account balance (% GDP) -6.8 -5.2 -5.9 -5.7 China Current account balance (% GDP) 3.5 4.3 5.5 6.7 10% GDP PER CAPITA 14% GDP PER CAPITA Public debt (% GDP) 50.7 52.6 56.2 59.0 (US dollars - 2016) Public debt (% GDP) 10.7 18 27 30.5 (US dollars - 2016) Tanzania Japan 9% * last fiscal year 01 July 2017 to 30 June 2018 (f): forecast 10% Public balance excluding transfers to the Future Generations Fund (f): forecast United States India 8% RISK ASSESSMENT 9% RISK ASSESSMENT United Kingdom United States 7% Strong growth despite the political The current account deficit should reduce slightly 7% Slight recovery forecast in 2018 will generate a financing requirements as it uncertainty and slow credit growth in 2018. The scale of the balance of goods deficit The expansion in economic activity will strengthen creates a deficit of around 10% of GDP, which Imports of goods, as a % of total Slowed by the drought, the slow progress of credit is however expected to continue weighing on Imports of goods, as a % of total in 2018. The oil and gas sector, accounting for 50% the authorities aim to cover using foreign debt, the global balance The improvement in climatic thereby avoiding the use of the national savings China and political uncertainty in 2017, growth is expected Euro Area of national GDP, will remain positive thanks to 24% to be strong in 2018. It will feel the benefits of the conditions will allow increased exports of tea and 17% slowly rising oil prices. The rate of growth could be fund. Kuwait, subject to a highly rated sovereign horticultural products. Although the first barrels of risk by the three leading credit agencies, because Euro Area ending of the drought conditions which acted China limited with the renewal of the OPEC agreements, 12% to restrict growth in the primary and secondary crude should start being exported in 2018, the oil 14% resulting in a cut in production of around 6% in of its substantial credit assets, raised $8 billion in India sectors (with the agri-industries). Cash crops will not make a significant contribution to reducing United States 2017 against 2016. The State retains its central March 2017. 11% (tea, coffee and horticulture) should therefore help the trade deficit before 2021. Imports of capital 11% role in the national economy thanks in particular United Arab Emirates redress the negative contribution to the balance goods will continue at a high level, but with a rate United Arab Emirates to its five-year development plan to increase Oil resources guarantee current account 8% of trade. Public investment will continue as driving of growth below that of exports. The balance of 8% the diversification of the economy – involving surplus Japan force of growth, thanks mainly to the development invisibles (services, transfers and revenues) will Japan large scale public investment in infrastructures 5% remain in surplus thanks in the main to tourism 6% The gradual rise in oil prices in 2017, and that of infrastructure projects. Start of work on the and a modernisation of the refineries. These predicted for 2018, will allow Kuwait to improve road between Malindi and Bagamoyo (Tanzania) and remittances from expatriate workers. Despite investments will drive growth in particular in the the reigning political uncertainty, the country is its current account balance. This upturn will + STRENGTHS will boost the construction sector. Completion of + STRENGTHS transport, property and healthcare sectors. They offset the rise in its import bill, reflecting higher projects, such as the Nairobi-Mombasa rail link still an attractive proposition for foreign capital, will help boost confidence among consumers and making it possible therefore to finance the deficit. prices for consumer goods. The balance of • East Africa’s leading economy and the opening of the second container terminal • Large oil reserves (6% of world total) investors, thereby helping consolidation within services will remain largely negative whilst • Pivotal role in the East African Community, at Mombasa port, will boost the transport sector. In addition, its currency reserves, equal to 5 months • Accumulation of substantial public and the non-oil and gas sectors and growth of 2.5% of imports, will provide a buffer against potential the national tertiary sector remains unable to the leading African common market However, despite the range of initiatives attempted foreign surpluses managed by Kuwait in 2018. Household demand will remain strong in satisfy local strong demand. The current account • Diversified agriculture and expanding to improve the business climate, the inadequacies external shocks, and help limit the volatility of the Investment Authority (KIA) sovereign funds 2018 given the levels of disposable income and Kenyan shilling. balance will also be negative as a result of services sector (telecommunications and of the credit supply and the clashes triggered despite the austerity measures. However, given remittances sent by foreign workers living in the financial services) by the difficult electoral context in the second- the lack of a domestic manufacturing industry, this country. With currency reserves at 5.1 months - WEAKNESSES • Improved business climate half of 2017, could lead to a slowdown in private Political uncertainty undermining business will tend to drive up imports. The Kuwaiti banking of imports, Kuwait can guarantee the pegging of • Dynamic demographic and emerging investment. The political situation could also impact climate • Political obstacles to structural reforms system remains profitable and resilient thanks to the Kuwaiti dinar to a US dollar weighted basket middle class on household consumption, although this should strengthened banking regulations imposed by the In 2017, President Uhuru Kenyatta was re- • Business climate and competitive context of international currencies. remain firm thanks to a fall in the rate of inflation. elected for a second term of office at the end of a could be improved Central Bank: the defined capital adequacy ratio is Consumption will also be the driving force for contentious political process. The general elections much higher than that required under Basel III and - WEAKNESSES • Uncertainties associated with the Atmosphere of political tension surrounding services, despite tourism, on an upwards trajectory, on 8 August 2017, anxiously awaited given the succession to the Emir and tensions the level of bad debt is shrinking. In addition, the royal family • Country dependant on hydroelectric possibly suffering the negative perceptions of a country’s history of political instability, led to an between the Executive and Parliament sector is not expected to experience a tightening power and rain-fed agriculture worsening security situation. Whilst the pressures unexpected outcome. Following the announcement • Location in a region of geopolitical in liquidity as has been the situation in other The resignation of the government in October 2017, following a censure motion, makes the dissolution • Persistent bottlenecks and skills on food prices have eased, the removal of subsidies of the re-election of Mr. Kenyatta (54% of votes) tensions, specifically proximity to Iran countries in the region; with the increase in public shortages on foodstuffs and domestic demand mean that and, notably, after Raila Odinga, the leading and Iraq deposits making it possible to offset the weak of Parliament and the calling of early elections in 2018 likely. The resignation came about in a context • Terrorist threat inflation is likely to remain around the middle of the opposition candidate, had rejected the results expansion in private deposits. The financial sector Central Bank’s target range (5% ±2.5%). produced by the Electoral Commission (IEBC), the has proven buoyant given the fall in oil prices and of recurrent tensions and impasses between the • Improving governance, but persistent Parliament and the ruling Al Sabah family, the head corruption Supreme Court cancelled the election result on continues to finance the economy as it is able to satisfy the strong demand for private sector of the Executive. The re-election of a Parliament at • Ethnic divisions Cost of elections weighs down public the grounds of irregularities, for which the IEBC accounts was held responsible, and called for the holding of a credit. Inflation will be higher in 2018, pushed up by loggerheads with the government could lead to a new election. Tarnished by a boycott by M. Odinga, the imposition, at the beginning of the year, of VAT political paralysis within the governing institutions After widening in 2017 as a result of increased at 5% throughout the GCC and increases in the and weaken the economy by undermining current expenditure, mainly because of the who deemed the reforms of the IEBC inadequate, the victory of the outgoing president with more cost of energy and food. confidence in the household and private sectors, organisation of two election, the budget deficit which determines the management of investments is expected to shrink in 2018. The removal of than 98% of votes, but with a very low turnout (39% against 79% in August), during the election on Continued balance in public accounts as part of the five-year plan. The issues within the subsidies on corn, introduced to deal with the ruling family concerning the Emir’s succession are risk of food shortages, should reduce the level 26 October, was validated by the Supreme Court. With oil receipts accounting for 88% of State Although Mr. Kenyatta was sworn-in, the rejection also clouding visibility on the political future of the of current expenditure. Reducing this latter, income, the falls in the price per barrel since 2014 country. On the diplomatic stage, the country is which has been constantly growing in recent of the outcome by the opposition and the refusal to have forced adjustments to be made in current cooperate could hinder the restoration of normal working to encourage a return to dialogue between years, is a priority for the Treasury, with the aim account spending, to maintain the equilibrium of the other members of the GCC and Qatar. of giving itself room for manoeuvre in increasing governance. Alongside this political incertitude the public accounts by means of a reduction in development spending. Strong growth and the there is also the security environment and the subsidies, in particular on electricity and water, reforms to the tax administration should help to ongoing threat from Shebabs, undermining the and with limits being placed on government further boost receipts. The deficit will once again perception of the business climate. According to the employee wages. Despite possible opposition be financed through a combination of domestic, Doing Business 2018 rankings, this has improved: from within Parliament, the Five-Year Plan the majority, and foreign borrowing. Whilst the the country simplified the business creation is expected to remain on track. This capital external debt (52% of the total stock) is for the process, shortened the registration process with expenditure will be covered by increased receipts most part concessionary, the rapid escalation of a dedicated office and set-up a platform allowing following the moderate rise in oil prices, and fiscal indebtedness is of growing concern. The build-up of companies to submit tax declarations on-line. The reforms, namely the introduction of VAT and, th domestic debt may generate a crowding-out effect country is thus in 80 place in the world rankings potentially, through public-private partnerships. on the private sector. in terms of doing business, and in third place The transfer of 10% of State revenues to the regionally. Future Generations Fund will continue. This

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TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 7.4 6.9 6.8 6.7 Exports of goods, as a % of total GDP growth (%) 3.9 3.8 3.6 3.8 6.1 Exports of goods, as a % of total 6.6 Inflation (yearly average, %) 6.5 0.4 4.0 5.0 POPULATION Inflation (yearly average, %) 1.3 2.0 2.3 2.7 POPULATION Switzerland (millions of persons - 2016) Thailand (millions of persons - 2016) 45% Budget balance (% GDP) -1.2 -4.5 -3.4 -2.8 40% Budget balance (% GDP) -2.7 -5.9 -5.3 -5.2 1,073 2,394 Kazakhstan Current account balance (% GDP) -16.0 -9.7 -12.1 -10.9 China Current account balance (% GDP) -16.8 -17.0 -18.8 -19.1 11% GDP PER CAPITA 28% GDP PER CAPITA Public debt (% GDP) 67.2 61.4 62.8 63.9 (US dollars - 2016) Public debt (% GDP) 65.5 67.3 71.6 75.0 (US dollars - 2016) Russia Vietnam 10% (f): forecast 14% (f): forecast Uzbekistan India 9% RISK ASSESSMENT 4% RISK ASSESSMENT Turkey Euro Area 6% Dependence on remittances from Higher private transfers – which account for 4% Growth still firm but dipping again slightly and capital goods, notably for the hydroelectric expatriate workers, gold and agriculture about 30% of GDP – and an improved trade In 2018, activity should continue to slow slightly, and construction sectors. However, the Imports of goods, as a % of total While there was a modest level of growth in 2017, balance should help reduce the current account Imports of goods, as a % of total although growth will remain robust. However, country’s exports should benefit from the deficit slightly in 2018. However, considering the development of electricity projects (80% of the China private consumption took over from the fiscal Thailand the Laotian economy is expected to benefit 38% stimulus policy introduced in 2016 to mitigate the country’s energy and food dependence and poor 65% from the slight recovery in commodity prices, electricity produced in Laos is exported) and sectoral diversification of exports, it is likely to the economic recovery in Thailand, Laos’ main Russia negative impact of a degraded regional economic China primarily those of mining products. Meanwhile, 21% environment. The recovery in Russia, although remain high. The foreign exchange reserves, 16% construction will benefit from the boom in the trading partner. Kazakhstan slight, together with a simultaneous recovery equivalent to 4.1 months of imports of goods and Vietnam hydroelectric sector, which contributes nearly At the same time, the expansion of tourism 16% in remittances from expatriate workers (one- services, may not be sufficient to withstand an 9% 20% of total exports. Thirty-five power plants should in part offset the repatriation of dividends Turkey sixth of the population, living mainly in Russia), is external shock. South Korea are under construction, with several projects by the foreign companies involved in the 5% expected to provide greater support for household 2% being launched at the end of 2016. Despite exploitation of natural resources. The country Euro Area consumption and exports in 2018. However, the First democratic transfer of power Japan fiscal consolidation measures, infrastructure also receives remittances from expatriate 5% contribution of investment will remain limited, and since independence 2% expansion continues. workers and foreign aid. Furthermore, FDIs are investment financing will rely heavily on multilateral Former Prime Minister Sooronbay Jeenbekov The country, which is confronted by major booming because of major projects initiated by + STRENGTHS institutions – both for infrastructure projects won the October 2017 presidential elections, + STRENGTHS infrastructure shortcomings, is involved in private, notably Chinese, companies, and the financed by the ADB, as well as for the small and supported by the outgoing President Almazbek projects aimed at improving the country’s rail funds generated by these FDIs serve to fund the • Major reserves of gold and other precious medium-sized enterprises receiving loans from Atambayev (ineligible to stand for a second • Abundant natural resources: minerals and road connections with other countries in import of capital goods. metals (including copper, uranium, the Russian-Kyrgyz Development Fund (RKDF) – (copper, gold, bauxite, iron, zinc), oil and mercury) term), gaining 54.3% of the votes cast compared agricultural commodities (maize, rice, sugar the region. These connections will enable the Nevertheless, the country has substantial thus weakening the impact of the expansionary with his 33.4% for main rival, businessman cane, rubber, manioc, soya, coffee) country to profit from its geographic position foreign debt and depends on its neighbours • Support from bilateral and multilateral monetary policy on bank credit and economic donors Omurbek Babanov who was also Atambayev’s • Expansion of the hydroelectric sector (borders with five other countries) to become (especially China) to fund its infrastructure activity. former Prime Minister. Despite the problems • Strategic pivotal position between Asia • Foreign investment in the commodities and a regional trade hub. In addition, a fifth airport projects. Meanwhile, the foreign exchange and Europe On the supply side, the rally in industrial production flagged up by the Organization for Security energy sectors is due to for construction and the country is reserves are still inadequate, covering less and Co-operation in Europe, this is the first • Membership of Eurasian Economic Union is expected to continue in 2018, thanks to • Regional integration (ASEAN) and expanding its hotel capacity. Accordingly, growth than two months of imports and making the since 2015 (Russia, Belarus, Kazakhstan production of gold (about one-third of total democratic transfer of power in a country WTO membership in the number of tourists, especially from China, country and its currency, the kip – whose and Armenia) industrial output and 40% of exports), textiles which has already experienced two revolutions is expected to remain high. The tourist source exchange rate is tightly controlled by the central and agri-food, as well as the performance of the since gaining independence. As his own Social countries will continue to be highly concentrated, bank – vulnerable to external shocks. Finally, construction and transport sectors. This is because Democratic party only holds 38 out of 120 seats, - WEAKNESSES with 80% of tourists coming from Thailand, China the banking sector – especially public banks – - WEAKNESSES infrastructure projects, like the construction of the Mr Jeenbejov will have to work with a tripartite or Vietnam. The agricultural sector, although remains fragile due to the lack of supervision North-South motorway, will help the country to parliamentary coalition, Prime Minister Sapar • Massive current account deficit under-modernised, will continue to dominate: it and inadequate capitalisation. With regard to the • Poor diversification of the economy, diversify its sources of growth at a time when gold Isakov, whose power was recently reinforced • Weak foreign exchange reserves represents 25% of GDP and employs over 70% of sharp growth in credit in recent years, credit risk which remains reliant on gold, agriculture, and remittances from expatriate workers could lose its attractiveness for investors, and when by a referendum, and the former president likely • Governance shortcomings and high the workforce. still needs to be watched. acting as figurehead. poverty rate • Landlocked country with high energy its price could fall if world economic conditions Household consumption is expected to remain dependency improve. Agriculture – focused on cotton, tobacco, The country benefits both from close co- • Weak banking sector firm and will benefit from the rise in the minimum Political stability despite major challenges • Difficult business climate and livestock, and accounting for a third of GDP and operation with Russia (which has a military base • Significant sovereign risk due to high wage, but could be hit by the consolidation regarding the development of governance half of jobs – will continue to play an important role. debt stock • Political and social instability associated in the country) as a member of the Eurasian measures and the slight rise in inflation. The presence of a single party, the communist- with high poverty rate and inter-ethnic Postponed until 2018, electricity price increases Economic Union, of which Kyrgyzstan became • Sensitivity to commodity prices and Moreover, robust mining and hydroelectric inspired Lao People’s Revolutionary Party regional economic cycle tensions are expected to maintain the inflationary a member of the Executive body in 2017, and output, low urbanisation rates, as well as an (PPRL), ensures the country’s political stability. • Difficult relations with its neighbours pressures observed in 2017, which were initially from its strategic position on the Eurasian trade inefficient banking sector, will continue to In April 2016, the transition of power to a new (water management, borders...) fuelled by higher prices for food and tobacco and routes which China wants to develop as part of prevent households from benefiting from the governmental team led by Thongloun Sisoulith the alignment of customs duties with Eurasian its “One Belt, One Road” project. However, the country’s strong growth. ensured continuity. Nonetheless, the country Economic Union norms. mediocre business climate, characterised in remains underdeveloped, despite the strong particular by high levels of corruption, is likely The considerable public debt ratio and economic growth observed in recent years. Undermined by its twin deficits to continue to deter foreign investment, as will the dependence on external finance expose This situation is explained by the advent of an the arbitration proceedings on profit sharing Fiscal consolidation efforts will continue in the country to external shocks economy strongly oriented towards the external currently being brought against the state by market and favouring FDIs (which enabled the 2018 thanks to contained public spending. The the Canadian company Centerra (the country’s The fiscal deficit will remain high in 2018 despite financing of the countercyclical fiscal policy the fiscal consolidation measures taken by the country to join the WTO) but offering little benefit leading taxpayer, with turnover equivalent to 10% to the population, since the public authorities through external borrowing conducted in 2016 of GDP), which operates the Kumtor gold mine. government. This is because tax collection (15% has not pushed up the public debt ratio thanks of GDP) is affected by high levels of corruption prioritise infrastructure spending over health and Relations with neighbouring Kazakhstan remain education spending. Meanwhile, despite some to the som’s appreciation against the US dollar. conflictual. and low rates of tax. However, greater spending However, Kyrgyzstan’s heavy public debt control by the different administrations has progress (especially on financial data), there are burden remains sensitive to exchange rate been observed, helping to improve expenditure still significant governance shortcomings, as risks, and to an increase in the state’s contingent effectiveness. evidenced by the high level of corruption. liabilities; particularly in the energy sector, where Despite the slight growth in exports of electricity structural reforms are expected to close the and mining products, the current account deficit gap between the cost of the utility and the price remains huge. This is because the country passed on to users. imports almost twice as many goods as it exports. Imports mainly consist of oil products

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TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 2,7 2,0 3,8 3,9 GDP growth (%) 0.8 1.7 1.8 2.0 Exports of goods, as a % of total 2.0 Exports of goods, as a % of total 4.5 Inflation (yearly average, %) 0,2 0,1 3,0 3,0 POPULATION Inflation (yearly average, %) -3.7 -0.8 3.1 2.5 POPULATION Lithuania (millions of persons - 2016) South Africa (millions of persons - 2016) 17% Budget balance (% GDP) -1,5 -0,4 -0,7 0,0 21% Budget balance (% GDP) -7.6 -9.9 -7.3 -7.0 14,063 11,295 Russia Current account balance (% GDP) -0,8 1,5 -0,3 -1,5 Saudi Arabia Current account balance (% GDP) -18.7 -18.6 -18.0 -16.8 11% GDP PER CAPITA 9% GDP PER CAPITA Public debt (% GDP) 34,8 37,2 35,6 33,2 (US dollars - 2016) Public debt (% GDP) 142.2 148.7 152.3 156.1 (US dollars - 2016) Estonia Euro Area 11% (f): forecast 9% (f): forecast Germany United Arab Emirates 7% RISK ASSESSMENT 8% RISK ASSESSMENT Sweden Syria 6% Growth buoyed by internal demand Contained current account deficit and 7% Persistent political uncertainty (compared with the commercial bank rate of Stronger growth is expected in 2018, sustained substantial non-resident bank deposits After President Michel Sleiman stepped down in 8.4%). The rate is intended for low- and medium- Imports of goods, as a % of total by internal factors. Private consumption will The current account deficit will widen because Imports of goods, as a % of total May 2014, Lebanon went through an institutional income households in order to boost property st sector growth, particularly in the Greater Beirut Lithuania likely also help underpin activity, thanks to a of a worsening goods balance. This is because Euro Area vacuum which lasted until the 31 October 2016, 17% rise in the minimum wage (up from EUR 380 imports, fuelled by the growth in domestic 33% the day on which the parliament elected Michel area. Regarding private investment, the law on public/private partnerships (PPP), passed in Germany to EUR 430 a month in 2018), as well as lower demand and poor diversification of production, China Aoun (a Christian former general), a member 12% taxes on the less wealthy and gradually falling will grow faster than exports. The services 11% of the “March 8 Alliance”, named after the pro- August 2017, is intended to facilitate involvement Poland unemployment. However, any increase in surplus, related to tourism and the transit of United States Syrian rally held on that date in 2005 and mostly by private actors in infrastructure modernisation 10% disposable income will probably be limited by goods (to and from Russia) and remittances 6% composed of Shiite (including Hezbollah and projects (Beirut International Airport, Khaldé- Estonia continuing high inflation. In addition, the shortage from expatriate workers, will largely offset this Egypt Amal) and Christian parties. On the 3rd November Nahr Ibrahim motorway). Private consumption, 8% of labour due to the emigration of young skilled deficit. The current account balance is funded by 4% 2016, Saad Hariri, leader of the Sunni members despite the political uncertainty, is expected to Russia workers, as well as the mismatch of higher European funds and foreign investment, which Russia of the Future Movement party - a bloc within the rise because of the arrival of Syrian refugees. 7% education and vocational training to needs, will is unaffected by the worsening relations with 4% “March 14 Alliance” (named after the date of the The central bank is expected to maintain continue to limit the reduction in unemployment. Russia. Gross external debt, although steadily rally against the Syrian presence that followed the Lebanese pound’s fixed exchange rate + STRENGTHS Exports, particularly of food products, timber declining, is still substantial (140% of GDP, but + STRENGTHS Rafik Hariri’s assassination in February 2005 (since 1999) against the US dollar, a measure and furniture, telephones and screens, will only 26% as net debt). A third is owed by Swedish and formed mostly of Sunni and Christian parties guaranteeing financial stability for investors in • Membership of the euro zone (2014) and benefit from stronger economic performance in bank subsidiaries to their parent companies, • Robust banking system which enjoys united by their opposition to the March 8 Alliance a highly dollarised economy. 60% of deposits on the OECD (2016) investor confidence the country’s main markets: Germany, Poland, and this proportion is shrinking as local - was appointed Prime Minister and formed a Lebanese accounts (which represent over twice • Financial system dominated by Swedish deposits increase. Another third corresponds • Financial support from the diaspora and the National Unity Government. During a visit to the GDP), which are mostly held by the Lebanese banks (85% of domestic credit) and the other Baltic countries. However, exports international community towards Russia will still be constrained by to non-resident deposits, mostly Russian, in Riyadh on the 4th November 2017, Prime Minister diaspora, are in US dollars. • Reform of insolvency law and legal system specialised banks. • Discovery of offshore deposits of Hariri decided to resign. This surprise declaration continuing Russian countersanctions. Sales of natural gas • Transit point between the European Union dairy products, fish, and beverages have been caused “devastation and chaos” in the country Significant twin deficits and growing debt and Russia (coastline and its ports) among all factions and, according to Mr Aoun, hit especially hard. The construction sector will Ministerial instability and fragmentation On the 9th October 2017, parliament approved • Advanced digitisation of the country benefit in turn from industrial momentum, as of the political scene took place under pressure from the Saudi regime. - WEAKNESSES nd its first budget since 2005. The draft budget well as from the upswing in private and public On his return to Beirut on the 22 November, The October 2014 elections returned the Saad Hariri put his resignation on hold. The most included provision for a 16% increase in wages investment, with the latter being boosted itself traditional centre-right coalition – made up • Political divisions along religious lines and and pensions. Subsidies, especially those for - WEAKNESSES by increased European funds enabling the serious political differences over the Syria plausible hypothesis is that he will stay in post of the Unity Party, the Alliance of Greens and question until the next parliamentary elections scheduled the national electricity company Electricité du • Decline in the workforce (low birth funding of numerous infrastructure projects, Farmers and the National Alliance Party – who Liban (6% of total spending), continues to put rate, emigration); high rate of structural principally in the transport sector. Private • Highly exposed to regional geopolitical for May 2018. now hold 61 out of 100 seats in the Assembly. tensions pressure on the public accounts. To offset this unemployment investment will also be buoyant, though still However, disagreements between the coalition rise in spending, VAT is expected to increase • Very high public debt • Technological lag (R&D = 0.6% of GDP, constrained by worries over Russia. International members and ministerial instability are rife: Maris Fragile growth in 2018 from 10% to 11%, corporation tax from 15% to EU average = 2%) road and rail transport, as well as warehousing, Kucinsskis is the third Prime Minister during this • Political instability After recovering in 2017, the Lebanese economy 17%, tax on deposit interest from 5% to 7% and, • Inadequate land links with the rest of will depend on their use by Russia, which wants parliamentary term. The upcoming parliamentary has once again proved its resilience due to the finally, taxes on some products like cement or the European Union to foster its own ports. elections, scheduled for October 2018, could stability of its banking system whose assets tobacco will also rise. All of these measures will • Concentration of wealth in the capital; result in a change to the current coalition. This represent 350% of GDP and to substantial contribute to deficit reduction. The primary high income inequalities A satisfactory fiscal position is because the Unity Party (22% of the votes remittances from the diaspora. Nevertheless, balance will continue to show a surplus, with • Heavy taxation of labour which hits those cast in 2014) is not expected to achieve the 5% activity is constrained by political uncertainty the large public deficit mainly due to payment on low wages and encourages under- The public accounts are set to be in balance in 2018. declaration Higher spending on defence (from 1.4% of GDP in needed to get into Parliament, according to polls and regional instability, exacerbated by the of interest on the public debt (32% of spending conducted in 2017. The collapse in popularity is presence of almost a million Syrian refugees in in 2018), which is steadily increasing. The debt, • Problem of corruption 2014 to 2% in 2018), infrastructure, education, and healthcare should be offset by higher incomes accompanied by more intense competition at the the country (almost a quarter of the population). which is at an exceptionally high level, is mainly • Declining competitiveness and profitability: centre, with two new parties since 2014, including Following the discovery of offshore oil and gas held by Lebanese banks, with 60% of their assets wage increases above productivity gains generated by stronger revenues, which result from combating tax evasion associated with the informal the Movement For!, which is pro-European. deposits in the Mediterranean, the government in sovereign debt securities. • Importance of non-residents’ bank The country’s main political force remains the set up a legal framework to cover the taxation deposits (half of the total) economy (24% GDP). Moreover, a wide-ranging In 2018, the current account will still show a fiscal reform was adopted by the parliament National Harmony Party, which is nonetheless and exploitation of oil and gas activities in sizeable deficit due to the trade imbalance. in August 2017 and will be implemented from expected to remain in opposition. This centre- January 2017 and launched calls for tender. It Imports (34.5% of GDP in 2016) are expected to 2018 onwards. It comprises, in particular, greater left party (currently with 24 seats), which draws seems unlikely that the impact on the Lebanese remain at high levels on the assumption of firm income tax progressivity (with the creation of tax support from the Russian-speaking minority economy will be observed as early as 2018, oil prices (21.2% of imports). Rising domestic brackets rather than a single 23% tranche) and (27% of the population), is still unable to form a despite the authorities’ avowed aim of beginning demand for food and consumer goods, triggered higher corporation tax (rising from 15% to 20%) coalition because of the ethnic vote reinforced production from the beginning of the year as by the population increase, will also encourage – although companies who reinvest their profits by the cooling of relations with Russia. there is stiff competition with Israel over some this trend. Exports to neighbouring Syria, which are fully exempt. The public debt burden, already fields. Tourism (15% of GDP in 2016) is likely to be have never stopped despite the war, will increase moderate, will likely continue to ease in 2018, after only weakly affected by the call for nationals of following the defeat of IS, especially in the peaking temporarily in 2016 in connection with the Saudi Arabia (2.5% of tourists) and its allies in the agricultural sector. The large current account early refinancing of a repayment due in early 2017. Middle East to leave Lebanese territory. deficit is financed by current transfers from Although mostly contracted with non-residents Household investment is expected to benefit the diaspora and by FDIs (16% and 5.5% of GDP and denominated in euros, there is no exchange from the central bank borrowing rate of 1% respectively in 2016). rate risk.

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TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) GDP growth (%) -10.2 -17.2 15.8 20.1 Exports of goods, as a % of total GDP growth (%) 0.0 -1.6 2.6 3.9 4.4 Exports of goods, as a % of total 6.4 Inflation (yearly average, %) 7.7 8.8 12.8 10.0 POPULATION Inflation (yearly average, %) 9.8 27.1 32.8 32.1 POPULATION Euro Area (millions of persons - 2016) Euro Area (millions of persons - 2016) 27% Budget balance (% GDP)(*)(**) -10.2 -5.3 -7.9 -5.9 53% Budget balance (% GDP) -126.6 -102.6 -42.9 -23.3 478 3,205 Poland Current account balance (% GDP)(**) -35.2 -24.7 -26.7 -31.3 Egypt Current account balance (% GDP) -52.5 -22.3 1.7 9.8 18% GDP PER CAPITA 21% GDP PER CAPITA Public debt (% GDP) 39.5 45.0 50.8 56.2 (US dollars - 2016) Public debt (% GDP) 42.3 34.5 32.1 30.8 (US dollars - 2016) Switzerland Croatia 10% (*)2018 fiscal year: from July 2017 to June 2018 (**)including grants (f): forecast 5% Iranian calendar from March to March (f): forecast United States China 6% RISK ASSESSMENT 4% RISK ASSESSMENT South Africa Canada 5% A more favourable economic context The huge current account deficit, due to the trade 4% Recovery in oil and gas production Unending Libyan crisis In 2017, Liberia exited a recession triggered by imbalance is expected to continue to widen in The expansion in activity is mainly due to the After a number of unfruitful mediation attempts Imports of goods, as a % of total the Ebola epidemic, falling commodity prices and 2018. Exports consist above all of unfinished raw Imports of goods, as a % of total increase in oil and gas production following the under aegis of the United Nations, the Libyan materials, of which rubber (34.6% of exports in South Korea the phased withdrawal of the UN peacekeeping Euro Area securing of the oil fields in the west and the crisis again seems to have entered another 38% force (UNMIL). Growth prospects for 2018 are 2016), iron (29.3%) and diamonds (17%) are the 17% reopening of a number of production facilities impasse. Undermined by the political discord main components. The drop in prices for the Singapore better. This momentum is fostered by recovery China such as Sharara. Oil and gas production reached its arising in the post-Gaddafi transition, Libya is a 18% in the mining sector (mainly gold and diamonds). first two of these will adversely impact trade 14% highest level since 2014, with the 1 million barrels divided country, split between lawless regions, China Mining production will be up by 15% in 2017 and terms. Only exports of palm oil are likely to see South Korea a day mark being reached in 2017. The country areas under the control of tribal allegiances 16% investments in this sector will continue on an considerable growth thanks to investments in 13% is the subject of a preferential agreement within and a range of militias. The progress made with Japan upward curve (+5% expected in 2018) to reach the sector. Imports are expected to rise, against a Turkey OPEC that allows it to increase its production the Skhirat agreement signed in Morocco in 11% their pre-crisis levels. Nonetheless, iron prices background of firm oil prices and the depreciation 10% outside the quotas. Despite the obsolescence December 2015 which led to the establishment Euro Area could decline in 2018, which would discourage of the Liberian dollar. To finance the deficit, the United States and the destruction of some of its infrastructures, of a transition government, has not produced 6% foreign investors. In contrast, investments country depends on remittances from expatriate 3% Libyan production is expected to continue in 2018 a way out of the crisis. The legitimacy of the are expected to rise in other sectors thanks workers (50% of GDP in 2016), particularly those at a similar level to that of last year. Although government led by Faïez Sarraj is disputed by in the United States due to historical links. Since + STRENGTHS to the agreement between the State and + STRENGTHS foreign companies are cautiously showing signs that of Al-Beïda supported by Field Marshal Tidfore Investment for the construction of the December 2016, 25% of these funds are held by of being ready to return, the ever-present security Haftar. Whilst the former is recognised by the • Diverse natural resources (rubber, iron, gold, country’s first steel plant for an estimated cost the central bank to mitigate the haemorrhaging • Large gas and oil reserves Very low level of problems risk slowing any such trend meaning international community, the latter whose diamonds, oil) of USD 200 million (10.5% of GDP). With a view of foreign exchange, which was equivalent to external debt that the FDI flows will remain very limited unless major supporter is a Field Marshal and head of • Strong financial support from the to diversification, the government’s stated 2.5 months of imports in late 2017. The capital • Strategic location on the Mediterranean the political situation is settled and peace restored the Libyan Liberation Army, retains military international community priority is to develop tourism activity as part flight is, however, expected to trail off, if there near Europe to the country. In addition, the non-oil and gas control of Cyrenaica (east). Following a number • Member of the Economic Community of the National Export Strategy on Tourism is a democratic transition following the 2017 economy continues to suffer from shortages of discussions between the two parties during of West African States (ECOWAS) (2016-2020). This will be implemented through presidential elections in 2017. However, these of resources and the ongoing security issues. 2017, the appointment of a new United Nations infrastructure development, particularly thanks revenues are insufficient, so FDIs (11% of GDP - WEAKNESSES Problems with replenishment, foreign currencies emissary, Ghassan Salamé, presents one in 2016) and external loans will help offset the to the Road Fund paid into from fuel taxes and • Country split in two: the west is well shortage and the black market have resulted in possible route towards a solution. The task is, - WEAKNESSES current account deficit. the contribution from the Millennium Challenge governed by the Tripoli government high prices, exacerbated by the removal of food to say the least, a difficult one but the objective • Infrastructure shortcomings Corporation (MCC). recognised by the international subsidies. Inflation however is expected to stabilise. of the Libya plan as submitted by Mr. Salamé Complicated democratic transition, even community, the east is controlled • Dependent on commodity prices The Liberian dollar’s depreciation against the The growth in oil and gas exports will help reduce will be to revise the Skhirat agreement so as to with the Ballon d’Or elected President by the government in Al-Beïda supported the currencies shortage. Two central banks operate find areas of potential compromise between • Significant levels of poverty and US dollar (i.e. 20% during the first six months of by Field Marshal Haftar. unemployment, shortcomings in education 2017) is expected to slow slightly, reducing the After two consecutive civil wars (1990-1997 and implement parallel policies, one in Tobruk the two key factions. There are thus three • The south of the country is suffering linked with the National Union government, the core components to the plan: the creation of and healthcare inflationary pressures on private consumption. and 1999-2003), which left over 250,000 dead a proliferation in trafficking (human, • Recent Ebola epidemic which could The central bank’s tight monetary policy is not or 8% of the total population, and a transition weapons, drugs) other based in Al-Beïda. Closer links between the a constitution approved in a referendum, the reappear very effective because the economy is highly period (2003-2006), Ellen Johnson Sirleaf led • High inflation various protagonists and the scale of deterioration holding of elections and a process of national of the economic fundamentals is probably likely to reconciliation similar to that carried out in Tunisia. • Recent and fragile democracy, high levels dollarised (90% of lending and 80% of deposits). the country for over 10 years. She contributed to • Social tensions, political and tribal of corruption Two currencies, the Liberian dollar and the US the much-improved situation and helped bring fragmentation encourage a reunification agreement between the The Special Envoy could also reintegrate Libyan two bodies. The pegging of the Libyan dinar to the institutions such as the Central Bank, split in • Difficult business climate dollar are legal tender and compete against calm to the political arena. After two terms in • Adverse business climate SDR rate is expected to continue but a devaluation two. In December 2017, the HNEC, the Libyan • Dominant informal sector each other. office, she was no longer eligible to stand in the presidential elections, the second round of which of the currency is planned by the Tobruk central Electoral Commission, launched the electoral took place in December 2017. The first democratic Bank. The recovery in the oil and gas sector should list registration process for elections in 2018. Deficits plugged with difficulty through however have positive knock on effects for the The challenge for this election process will be foreign aid and peaceful transfer of power from one elected president to another for 73 years represented a non-oil and gas sector. for it to be accepted by all the parties involved State revenues fell significantly before the major challenge. This because neither candidate in the crisis: the two governments in Tripoli recession. The budget was only balanced won an absolute majority in the first round, Huge twin deficits and Al-Beïda, as well as former Gaddafists and thanks to international aid, even if its share in resulting in a second round contest between Royalists. For the UN mediator, this requires a the budget is expected to gradually decline. The decline in oil and gas exports severely prior agreement by the key parties to accept the former footballer George Weah and Joseph disrupted the economic balance within the The EU will pay EUR 65 million (3.4% of GDP) Boakai, vice president since 2006. Initially set results of the vote, failing which no consensus into an aid programme between 2016 and 2018. country and created a public deficit and a current can be achieved following the elections. This for 7 November, it was postponed sine die by the account deficit. The restarting of oil and gas Likewise, the IMF’s Extended Credit Facility Supreme Court following an allegation of fraud has become all the more pressing as the Libyan mechanism (ECF), which completed in late 2017 production should help the gradual elimination question has returned to the international agenda (rejected on 20 November) by the candidate of the deficits in the medium term but this will (but is expected to be extended), will boost Charles Brumskine, who was third. Considerable with the revelations around the trafficking of State revenues during the 2017-2018 tax year by remain dependent on finding a settlement to Sub-Saharan migrants in the region in 2017. The uncertainty prevails as to the policies the new the political crisis and the measures to follow USD 20.7 million. Current spending will represent president George Weah will follow. African Union, with the support of the European 90% of the budget. Nevertheless, there has been this. Although they were higher in 2017, budget Union and the United Nations, is working jointly a drive to reduce the wage bill, the main item of Despite the reforms undertaken by Ellen revenues cannot cover the major structural with the IOM, the International Organization for expenditure. The withdrawal of the UNMIL, which Johnson Sirleaf, the business climate remains expenditure. The wage bill in effect accounts for nd Migration, to implement a plan for the evacuation will complete in March 2018, will increase budget difficult (172 out of 190 in the Doing Business 33% of GDP, on top of which there are the costs and repatriation of Sub-Saharan migrants to difficulties, as it is likely to drive up security 2018 rankings), particularly because of the lack associated with the energy subsidies. In addition, their home countries. spending. The public deficit is financed by bilateral of adequate infrastructure and the absence of given that Libya imports 80% of its domestic and multilateral concessional loans. (non-customary) legal property rights. consumption, the growth in exports will not make it possible to offset the large trade deficit.

136 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 137 LITHUANIA LUXEMBOURG

COFACE ASSESSMENTS COFACE ASSESSMENTS A1 A3 COUNTRY RISK COUNTRY RISK A1 A2 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 1.8 2.3 3.5 3.3 Exports of goods, as a % of total 2.9 Exports of goods, as a % of total GDP growth (%) 2.9 3.1 3.4 3.8 0.6 Inflation (yearly average, %) -0.7 0.7 3.5 2.5 POPULATION Inflation (yearly average, %) 0.1 0.3 1.6 1.4 POPULATION Russia (millions of persons - 2016) Germany (millions of persons - 2016) 13% Budget balance (% GDP) -0.2 0.3 0.1 0.5 23% Budget balance (% GDP) 1.4 1.5 0.3 0.2 14,893 104,095 Latvia Current account balance (% GDP) -2.3 -0.9 -1.1 -1.7 Belgium Current account balance (% GDP) 5.1 4.7 4.7 4.9 10% GDP PER CAPITA 17% GDP PER CAPITA Public debt (% GDP) 42.7 40.2 37.5 35.1 (US dollars - 2016) Public debt (% GDP) 21.6 20.0 23.5 22.7 (US dollars - 2016) Poland France 9% (f): forecast 15% (f): forecast Germany Netherlands 8% RISK ASSESSMENT 5% RISK ASSESSMENT Estonia Italy 5% Growth still driven by internal demand The trade deficit (5.5% of GDP in 2016) could 4% Further improvement in activity in 2018 The current account will remain easily in surplus in Growth is set to remain firm in 2018, buoyed edge upwards in 2018 thanks to robust internal There was a slight uptick in growth in 2017 which 2018 despite the balance of trade deficit and that Imports of goods, as a % of total by private consumption and the recovery of demand, which local manufacturing output Imports of goods, as a % of total remained steady. Following a weaker first quarter of the balance of income as a result of transfers meets only in part. The service surplus generated by cross-border workers. These transfers Russia investment. After falling due to a gap between Belgium resulting from the downturn in the services 14% two European programmes, public infrastructure by road transport will almost completely cover 29% and construction sectors, activity in these two are largely offset by the large surplus in the this. Dividend and interest repatriation by foreign balance of services. Luxembourg is in effect the Germany investment will grow strongly thanks to the Germany sectors gradually improved during the year. 12% return of European funds in 2017. Private investors (4.2% of GDP in 2016) will continue to 24% Information and communication services once world’s second-largest centre for investment Poland investment also is also expected to perform exceed remittances by emigrant workers (2.9%). France again demonstrated their vitality, with double funds, behind the United States, and remains 11% better, sustained by robust external demand for In these conditions, the current account balance 10% digit growth since the beginning of 2014. In terms a key central location for banks specialising in Latvia local products. Exports (more than 70% of GDP), is expected to worsen slightly, but will show only United States of demand, household consumption remains managing intra-group liquidity. It also hosts a 8% of which 60% are directed to the European Union, a modest deficit. European structural funds, 7% buoyant, bolstered by the increase in purchasing large number of reinsurance companies. The level Italy will benefit from more dynamic eurozone growth accounting for an annual average of 3% of GDP, China power thanks to the tax reforms that allowed of exposure to the housing market of a number 5% and Russia’s exit from recession. Meanwhile, will continue to finance transport and energy 6% the indexing of wages to inflation in 2017 and of the domestic market facing banks still needs after the counter-sanctions and the Russian infrastructure, research, and innovation. Foreign the continued growth in the rate of employment to be watched. direct investments will still come mostly from + STRENGTHS recession, substitute markets have been found + STRENGTHS in the country. Growth is expected to remain for agri-food products, and for the road transport northern Europe and will benefit a diverse variety at a high level in 2018. Weaker inflation, the Parliamentary elections in 2018 of sectors.. The external debt burden (83% of • Membership of the eurozone since 2015 used for goods transit to Russia. Nevertheless, • Budgetary stability continuing strength of the jobs market and new The early elections called in October 2013 led • Prospect of OECD membership the contribution of external trade to growth GDP at the end of September 2017) is slowly • Skilled multi-lingual workforce measures for the indexing of wages expected shrinking as the banks reduce the debt (15% of to the formation of a new coalition bringing • Sound public and external accounts will still be nil due to the simultaneous growth in • Quality infrastructures, business-friendly for the middle part of the year should continue total debt) they owe to their parent companies. together for the first time the Liberals, Socialists • Banking system dominated by imports associated with lively domestic demand. regulations underpinning consumption. At the same time, the and Greens, headed by liberal Xavier Bettel. The three Scandinavian banks In addition, investment growth and rising • Important international financial centre unemployment rate, relatively low, should remain coalition, already weakened by the massive • Transit region between the European Union industrial output will benefit construction. Government fragility is not expected • High standard of living at around 6%. Exports are expected to grow with rejection, in June 2015, of its proposed changes to and the Russia/Kaliningrad enclave Private consumption will also support activity in to threaten the continuity of reforms the expansion of the financial sector, resulting in the constitution, was further weakened following • Diversification of energy supply (Klaipeda 2018, buoyed by solid wage growth, lower taxes In the October 2016 elections, the electorate a further consolation of the external position. In the local government elections of Sunday the gas terminal, shale gas potential, electricity on households, and falling unemployment (7.4% – irritated by corruption, the new labour code, - WEAKNESSES addition, the relaxed monetary policy combined 7th October 2017. Transformed into the opposition links with Poland and Sweden) in September 2017). Higher wages demonstrate and a lower standard of living than the European with a more expansionist budget are favourable in 2013, the Christian-Social Party (CSV), average – confounded expectations and voted • Level of dependence on its very large for company investing. gathered more than 30% of the votes throughout the country’s declining population associated financial sector with the emigration of skilled workers, in part in the centrist Farmers and Greens Union (LVZS), the Grand-Duchy, ahead of the Socialist LSAP - WEAKNESSES which won 56 out of 141 seats in the Seimas, the • Economy vulnerable to economic Balanced public accounts and a solid (24%), the Liberal Parti Démocratique (DP, 18%) offset by greater resident worker participation performance of the eurozone • Shrinking workforce (emigration of skilled brought about by the raise of the legal retirement local parliament. Putting an end to the alternating external position and the Ecologist Déi Gréng (16%). This vote, coalitions led by the conservatives and social • Long-term budgetary implication of its also open to foreign voters, was a test for Xavier young people) age. However, higher consumption could be ageing population The budget surplus fell in 2017 and this trend • Large underground economy dampened by inflation, although at a more democrats, Saulius Skvernelis (LVZS) formed a should continue in 2018. This decline reflected Bettel a year before the Parliamentary elections. (26% of GDP) moderate pace in 2018. coalition government with the Social Democratic the impact of the tax reforms of 1st January These elections must be held at the latest in • Wide income disparity between the capital Party (17 seats). However, in September 2017, the 2017 on budget revenues. Expenditure was also October 2018. The new regulations do not in and the regions, especially in the north- Current account deficit and slight budget latter decided to leave the government coalition, higher following the indexing of government effect set a precise date, but define a five-year east where poverty persists surplus although some ministers chose to remain in employee wages with inflation, and the increase term of office with a vote to be held at the latest • High structural unemployment, place. This departure could lead to early elections in investment spending. In 2018, the favourable on the Sunday preceding the end of the term even though it is coming down The position of the public accounts has improved in 2018, even though this is not expected to of office. considerably since 2009, when the deficit was in economic context is expected to lead to higher • Limited added value of exports (mineral fundamentally change the country’s policies, tax revenues which will increase the room for products, timber, agrifood, furniture, excess of 9%. In 2018, the fiscal balance should given the consensus within political circles on electrical equipment) again be in positive territory. Higher tax receipts, manoeuvre for a more expansionist budget. The certain topics, such as the creation of a new tax reforms should mean a reduction in taxes • Competitiveness eroded by insufficient linked to lively consumption and wage growth, social model aimed at reducing inequalities and productivity gains should help offset the rise in defence spending, on households as the rate falls from 19% to 18%. poverty, and also convergence towards the other The growth in expenditure should remain under the index-linking of pensions, and the cuts to euro zone countries. Nevertheless, the many social security contributions all of which were control but the government will be trying to scandals linked to corruption among politicians boost investment spending. A total package implemented in 2017. The 2018 budget will focus will continue to cause distrust among the public. on poverty reduction, by improving the health worth 4.1% of GDP will be allocated towards Moreover, the President Dalia Grybauskaitė is set productive investments and improvements to system and exonerating the lowest earners to stick to her pro-European stance and firmness from tax obligations. The public debt burden (85% certain infrastructures. Social spending, which towards Russia because the country shares a accounts for 46.5% of total spending, will be held of which is held by non-residents and 37% of border with the Russian enclave of Kalingrad which is denominated in dollars) should gradually to a level of around 20% of GDP. The public debt – home to a major naval base. The Polish remains one of the lowest in Europe (the assets ease, especially as the structural balance (-0.1% minority (7% of the population) will continue forecast for 2017), adjusted for the influence held by the public sector exceed its liabilities). to be criticised because of its alleged collusion After having risen in 2017, the trajectory is likely of the economic cycle, has greatly improved with Russia. since 2014. to reverse in 2018. It will reach 22.7% of GDP and well below the 30% upper limit set by the authorities.

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COFACE ASSESSMENTS COFACE ASSESSMENTS B D COUNTRY RISK COUNTRY RISK B D BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 3.1 4.2 4.2 4.8 Exports of goods, as a % of total GDP growth (%) 3.8 2.4 1.7 2.8 2.1 Exports of goods, as a % of total 24.9 Inflation (yearly average, %) -0.3 -0.2 1.2 1.8 POPULATION Inflation (yearly average, %) 7.4 6.6 7.8 6.8 POPULATION Euro Area (millions of persons - 2016) Euro Area (millions of persons - 2016) 66% Budget balance (% GDP) -3.5 -2.6 -3.2 -2.9 41% Budget balance (% GDP) -3.3 -4.0 -5.9 -5.2 5,264 401 Bulgaria Current account balance (% GDP) -2.0 -3.0 -2.8 -2.7 United States Current account balance (% GDP) -1.9 0.3 -4.7 -5.3 5% GDP PER CAPITA 13% GDP PER CAPITA Public debt (% GDP) 46.5 47.8 49.0 51.0 (US dollars - 2016) Public debt (% GDP) 41.3 38.7 41.5 43.5 (US dollars - 2016) Serbia China 4% (f): forecast 6% (f): forecast Kosovo Japan 4% RISK ASSESSMENT 5% RISK ASSESSMENT Romania South Korea 3% Acceleration of growth by foreign net investments. The private sector is 4% Following the political crisis, recovery, Current spending, although still high, is expected The stabilisation of the domestic political scene responsible for two thirds of foreign debt (73.5% hampered by poor weather, resumes to fall in 2018. This is explained by the fact that Imports of goods, as a % of total should put an end to two years of cyclical lows, of GDP) particularly in connection with foreign Imports of goods, as a % of total Growth in 2017, hampered by the violent passage current spending was particularly high in 2017 investment. Its short-term share is only one fourth due to the payment of subsidies, especially to Euro Area and increase growth. Private investors, particularly China of the Enawo cyclone just when the island was 36% from overseas, made cautious by the long political and is largely covered by foreign exchange reserves, 21% struggling to recover from the drought brought the national water and electricity company which represent four months of imports. (Jirama) as a result of the weather events. This United Kingdom crisis, are expected to regain confidence. Public Euro Area on by El Nino, stagnated. Nevertheless, the 11% investment should retain its momentum with the 14% momentum gained following the political crisis drop in current spending will, however, be largely Serbia construction of the motorway and rail infrastructure A disturbed political scene that may put India (2009-2013) is expected to pick up again in offset by a rise in capital spending, which could 8% (corridor VIII between Albania and Bulgaria and off investors 6% 2018. After two years of poor harvests, activity exceed 10% of GDP in 2018. In an electoral year, budget slippage that would widen the deficit China Corridor X between Serbia and Greece) thanks to The early elections of December 2016 eventually United Arab Emirates in the agricultural sector, which represents 6% 6% cannot, however, be ruled out. The international financing from the EIB and the EBRD. The industrial led to the formation of a coalition government almost a quarter of GDP, is expected to be Turkey and construction sectors should benefit from this Saudi Arabia more productive. In the secondary sector, institutions, which had suspended aid between 5% in May 2017, composed of the social democrats 5% 2009 and 2014, will be paying particular dynamic. Household consumption should remain (SDSM) of the new Prime Minister Zoran Zaev, with agri-industry will benefit, in particular, from strong, fostered by growth in jobs and immigrant the increased contribution of the Nosy Be and attention. This is true for the IMF, which supports 49 seats in Parliament out of 120, and of the parties the island to the tune of USD 305 million under + STRENGTHS workers’ remittances. Household credit should representing the Albanian minority. This minority, + STRENGTHS Morondava sugar refining mills. For its part, continue to be favoured by accommodative the textile industry should continue to benefit its ECF arrangement. Public debt, given its which constitutes one quarter of the population primarily concessional nature, will continue on a • Integrated into the German production monetary policy and the banking sector’s good and is concentrated in the north and the west, • Significant mineral (precious stones, nickel, from Madagascar’s reinstatement in the African chain cobalt) and oil reserves sustainable path. health. Lastly, exports of car components (cables, obtained from its partner an extension of the use Growth and Opportunity Act (AGOA). This sector • Proximity to Central European factories electronic circuits), chemical products, plastics, of Albanian to the entire country; beyond the areas • Agricultural sector potential - is also set to be one of the main beneficiaries of The current account deficit is expected to widen world’s leading producer of vanilla • Wage competitiveness textiles, construction materials, and food-grade where it exceeds 20% of the population. Although the island’s membership of the Afreximbank in in 2018, despite IMF support and the probable • Support from international donors glass will feel the benefits of the European holding 51 seats and the support of the Macedonian • Expansion of the tourism sector June 2017. rise in remittances from expatriates. The value • High levels of immigrant workers’ economic upturn. However, given that imports of president, the conservatives of VMRO-DPMNE, led • Public debt mostly on concessional terms The outlook for the tourism sector is also of imports will still exceed that of exports, hit remittances (19% of GDP) capital goods related to the recovery of investment by Nicola Gruevski, ultimately had to accept defeat brighter, after it was hit by the bad publicity by a fall in export competitiveness. In particular, • Denar pegged to the euro will increase at the same time, the contribution of after eleven years in power, as their traditional accompanying the political crisis, benefiting, in vanilla, of which Madagascar is the world’s trade to growth is expected to be fairly low. Albanian ally, the TUI, failed them. This put an end - WEAKNESSES addition, from more positive growth dynamics leading producer, is in crisis: bad weather not only resulted in disappointing harvests in 2016 and to a period of political turmoil that began in spring • Dependence on agricultural and mining in Europe (from where most tourists originate). - WEAKNESSES Slow improvement of public accounts, but 2015, with the broadcasting of audio recordings output Identified because of its potential in the National 2017 but also triggered a surge in prices (above significant current account deficit implicating members of the previous government Development Plan (NDP) 2015-2019, tourism will USD 600/kg in March 2017 against USD 100/kg • High level of structural unemployment • Inadequate road, hydraulic and electricity in 2015) for poor quality vanilla. The 2017-2018 and training shortfalls The August 2016 floods and the economic coalition in election corruption and fixing, followed networks benefit from public investment flows. Investment by demonstrations by the Albanian community, in the context of the NDP, aimed at infrastructure harvest does not look very promising. The price • Large informal economy downturn halted the fiscal consolidation that is • Dependence on foreign aid during which 22 people died. development, is therefore expected to continue of nickel, Madagascar’s main export product, will • Inadequate transport infrastructures set to resume in 2018. Improvement will be slow. • Chronic political instability remain relatively low. Dividend repatriation to Revenues are burdened by tax evasion, the scale The country will continue to face several challenges: to drive growth in the construction sector too. • Significant indebtedness of private sector Activity in this sector will further benefit from non-resident companies, especially in the mining (93% of GDP at end 2014) of the informal economy, and a single income the strength of the government coalition, increased sector, will further impact the income balance. and corporation tax rate of 10%. On top of this, ethnic polarisation of the society, and the process reconstruction work after Cyclone Enawo. The • Conflictual political landscape with the aim of attracting and retaining foreign of the country’s accession to the European Union island’s membership of the Asian Infrastructure • Tensions between the Slavic majority and investment, these investors are offered 10-year tax and NATO. On this last point, Greece has given Investment Bank (AIIB) could also help support 2018 election tensions the Albanian minority exemptions and free access to public services. 80% its support to this dual accession, although it new projects. The political agenda will be dominated by the of public expenditure concerns wages, pensions, was opposed to it because it refused to see its In contrast, despite lower inflation, linked to presidential and parliamentary elections due social transfers, and debt interest, and offers little neighbour be called Macedonia, a name that the expected dip in food prices, household to be held before December 2018. This will be flexibility. The recurrent deficit and the sovereign refers to a Greek region. This situation is leading consumption is likely to remain limited. Still high, the second presidential election after that guarantee of funds borrowed by public companies to caution among investors. Whilst within the inflation will have an impact, with over 80% of the of 2013 which brought an end to four years for the construction of infrastructures have led to Industrial and Technology Development Zones population living below the poverty threshold. of political crisis triggered by a coup d’état in significant and growing public debt, held at 69% (duty-free areas), foreign companies benefit Despite more positive prospects overall, rising 2009. President Henry Rajaonarimampianina, by foreign creditors and denominated in euros, to from significant tax advantages and low labour tensions and political uncertainty in the run-up who has often had to deal with rumbling social which the local currency, the denar, is pegged. costs, they are faced with a shortage of skilled to the 2018 elections present significant risks discontent in a country suffering from poverty, The trade balance deficit is expected to remain high labour, inadequate infrastructures, insufficient in a country struggling to recover from a major corruption and infrastructure shortcomings, (18.8% of GDP in 2016). The increase in exports by resources allocated to R&D, the slowness of political crisis. will certainly fight to remain in office. The holding foreign companies related to the development of internal payments and the legal system, as well as of presidential elections therefore presents their local production capacities and the recovery corruption. The local entrepreneurial fabric, which Twin deficits still high a substantial risk: the thorny question of the in the Eurozone will be offset by the increase in remains underdeveloped, derived little benefit from eligibility of the potential candidates, Marc the business of foreign companies, the origin of the The public deficit, although remaining high, is Ravalomanana and Andry Rajoelina, needs in purchases of capital goods and consumer goods. expected to reduce in 2018. Public accounts Remittances from expatriate workers (16% of majority of exports. particular to be settled and could engender will benefit from higher revenues, thanks to the controversy and protests. The government is GDP), surpluses of services, and, to a lesser extent, pick-up in activity and further progress on tax spending by visitors from Turkey, Bulgaria, and considering postponing the elections until 2019, collection. Higher levels of aid, which will be used, which could also spark a crisis. The business Serbia should partially cover the trade deficit and in particular, to finance infrastructure projects, the deficit of foreign investment revenues. In total, climate, suffering from government inefficiency are also expected to support an overall increase and, above all, corruption, remains very poor. the current account deficit will remain covered in revenues.

140 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 141 MALAWI MALAYSIA

COFACE ASSESSMENTS COFACE ASSESSMENTS D A4 COUNTRY RISK COUNTRY RISK D A3 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 3.3 2.7 4.5 5.0 GDP growth (%) 5.0 4.2 5.3 5.0 Exports of goods, as a % of total 18.6 Exports of goods, as a % of total 31.6 Inflation (yearly average, %) 21.3 21.8 12.9 10.6 POPULATION Inflation (yearly average, %) 2.1 2.1 3.7 2.9 POPULATION Euro Area (millions of persons - 2016) Singapore (millions of persons - 2016) 19% Budget balance (% GDP) -9.2 -10.0 -7.6 -5.4 15% Budget balance (% GDP) -2.8 -3.0 -3.0 -2.7 295 9,374 Zimbabwe Current account balance (% GDP) -9.4 -13.9 -9.3 -8.2 China Current account balance (% GDP) 3.0 2.4 2.5 2.3 13% GDP PER CAPITA 13% GDP PER CAPITA Public debt (% GDP) 54.6 54.3 49.9 48.9 (US dollars - 2016) Public debt (% GDP) 57.9 56.2 55.2 54.2 (US dollars - 2016) Mozambique United States 11% *excluding grants during the tax year (July to June) (f): forecast 10% (f): forecast South Africa Euro Area 7% RISK ASSESSMENT 8% RISK ASSESSMENT United States Japan 6% Growth fuelled by agriculture of international donors, including USD 80 million of 8% Growth expected to remain strong of sukuk (Islamic bonds), as well as of traditional After two years marked by weather shocks and funding from the World Bank, will help to finance Already strong in 2017, growth is expected to bonds. Imports of goods, as a % of total food shortages, growth has been stronger in capital investment projects and to clear payment Imports of goods, as a % of total maintain this pace in 2018. Activity will continue The current account surplus is expected to dip arrears without worsening the deficit. South Africa 2017, thanks to increased agricultural production. China to be driven by internal factors, and also by good in 2018 due to the reduction in the trade surplus. 20% Representing almost 30% of GDP, agriculture, if After peaking in 2016 following a need for maize 19% export performance (75% of GDP). Exports will This will be hit by the rapid increase in exports, China spared any further weather shocks, will still be imports in order to contain the food crisis, the Singapore benefit from robust external demand as well as associated with robust domestic demand, 14% the main engine of growth in 2018. Specifically, current account deficit is expected to continue 10% the moderate recovery in hydrocarbon prices, which will only be partially offset by renewed India production of maize, tobacco, tea and sugar are on a downward trend in 2018. Higher agricultural Euro Area which represent 20% of total exports. Moreover, exports. The income balance will continue to 11% expected to rise. With almost 65% of jobs in the output, which is the main source of export income, 8% the energy sector (liquefied natural gas and oil) show a deficit, because of profit repatriation United Arab Emirates sector, household consumption, boosted by should help contain the structural trade deficit, Japan will benefit in 2018 from the maturing of several by foreign companies. Likewise, the balance of 9% higher revenues, is likely to benefit. Moreover, with which remains the main negative contributor to the 8% projects, even if investment momentum has transfers deficit is expected to endure because Euro Area household income eroded by inflation, inflationary current account deficit. The balance of transfers will United States slowed due to ongoing low prices. The country of remittances by foreign workers to their 7% 8% pressures are expected to decline. As a result, trade continue to provide the main positive contribution. also exports high value-added manufactured country of origin. The services deficit is expected activities, dynamic in 2017, are expected to continue The gradual reduction in the current account deficit products, such as semi-conductors and other to fall slightly in connection with the increasing of + STRENGTHS to remain firm. More generally, the tertiary sector should help ease the pressure on the foreign + STRENGTHS electronic products (39% of exports), for which tourists. will benefit from the recovery in agricultural activity, exchange reserves, equivalent to three months of there is strong world demand. Investment in The external debt is high (67% of GDP) and mostly • Natural resources (uranium, tea, coffee, as will demand for transport services which, for imports, and on the Malawian kwacha. • Diversified exports this sector will be sustained by the good outlook denominated in foreign exchange. However, high tobacco) example, is expected to climb. Despite a modest risk of over-indebtedness, • Dynamic services sector for these products, especially as the country levels of foreign exchange reserves (almost • Rapidly expanding services sector benefits from growing integration in the regional The government’s efforts to restore investor Malawi’s debt remains vulnerable to external • Good infrastructure, high R&D 7 months of imports) will help limit this risk, and value chain. The sectors associated with tourism • Resumption of support by financial donors confidence, shaken in 2013 by the misappropriation shocks. • Investment supported by expansion of local enable the country to respond to any capital are expected to continue to expand, but will still • Member of the SADC (Southern African of public funds (the Cashgate scandal), could help financial market and broader access to FDIs flight associated with a rapid tightening of US Development Community) and the suffer from the effects of Malaysia Airlines’ two stimulate growth through private investment. • Exchange rate flexibility monetary policy. Meanwhile, the banking sector COMESA (Common Market for Eastern and The 2019 elections cast a shadow over air disasters in 2014 and 2015, as well as from a Like trade, private investment could also benefit • High per capita income remains sufficiently capitalised and liquid, even if Southern Africa) the country less favourable security context than that of its from the double taxation treaty signed between high household debt levels are a risk. Elected in 2014, President Peter Mutharika is local rivals like Thailand and Vietnam. Malawi and Zambia in 2017. Despite the need for preparing to stand as his own successor in the fiscal adjustment, development spending is likely - WEAKNESSES Despite high levels of household debt (88% of - WEAKNESSES 2019 elections. Nevertheless, while there is still Despite the scandals, the Prime Minister to be maintained and will sustain activity. Chiefly GDP), private consumption will continue to be is expected to remain in office strong defiance towards institutions, corruption • Economy reliant on external demand • Economy dominated by agriculture, intended for infrastructure, this investment will the main contributor to growth. The gradual vulnerable to weather conditions scandals continue to impede the effectiveness The general elections will take place in spring support the energy and construction sectors. • Budget income highly dependent on appreciation of the ringgit will help reduce the • Food insecurity of Malawian governance. In February 2017, a new performances in the gas and oil sector cost of imported goods and contain inflation, 2018, brought forward several months The start of the first development phase of the compared with the initial date set for August. • High inflation scandal forced Peter Mutharika to sack his Minister • Very high private debt levels while the unemployment rate is still at its lowest. Kamwamba coal-fired power plant in 2018, will The right-wing coalition, Barisan Nasional (BN), of Agriculture, George Chaponda, who he had • Erosion of price competitiveness in Households will also benefit from tax cuts as well • Infrastructure shortcomings also contribute to the vitality of these sectors. led by Prime Minister Najib Razak, is expected (water, energy) considered a close ally. Dubbed “Maizegate” by the economy due to high labour costs as higher civil service wages. Meanwhile, a still Nonetheless, despite favourable prospects, growth, the media, and an echo of “Cashgate”, which cost to remain in power, given the splits within the • Low foreign exchange reserves • Persistent regional disparities accommodative monetary stance and higher especially with regard to industry, will continue to Malawi the support of its financial backers between opposition. Effectively, despite numerous calls • Increase in extreme poverty be hampered by the lack of access to credit and an • Ethnic and religious disputes public spending in a pre-electoral period will also 2013 and 2016, this scandal has isolated the support growth. The country’s economy will, for co-operation, the centre-left coalition • Diplomatic tensions with Tanzania inadequate water and electricity supply. president within the Progressive Democratic Party Pakatan Hrapan (PH) and the Malaysian Islamic and Mozambique however, still be vulnerable to slowing demand Despite the downward pressures weighing on the (PDP), and has at the same time eroded its political from China, its main trading partner. Party (PAS), are expected to stand separately Malawian kwacha, the disinflation process, begun capital with a population unhappy with recurrent at the elections, reducing their chances of in 2017, is likely to continue in 2018, thanks to the governance deficiencies, repeated corruption success. Moreover, the country’s good economic mitigation of rising food prices. scandals, endemic poverty and inadequate public Fiscal consolidation underway and performances are expected to consolidate satisfactory external accounts Improvement in the twin deficits services. Because it is disorganised, the opposition the legitimacy of the Prime Minister, whose seems unable to capitalise on this social frustration, Fiscal consolidation remains one of the priority party has dominated the country’s political life The fiscal deficit, at a worrying level following the despite the weakness of the government coalition objectives of the government, whose ambition since independence in 1957. In advance of the Cashgate scandal and successive budget slippages, with the United Democratic Front (UDF). In addition, is to achieve a balanced budget in 2020. In 2018, elections, the government has also increased its started to improve in 2016/2017. As in the previous more vigorous growth, weaker inflationary the fiscal deficit is expected to continue to aid for the country’s ethnic minorities and lower- tax year, the government’s efforts to reduce the pressures, the resumption of talks with donors and decline. Higher revenues, associated with better income households, especially in rural areas. deficit will continue during the 2017/2018 financial relative legislative stability could work in favour of collection of taxes and duties (in particular, VAT The country is made up chiefly of Muslim Malays year. More positive growth is expected to boost the the PDP and the UDF. introduced in 2015), growing mining revenues (64% of the population), but also of Chinese, collection of government revenues. Despite the fall and robust domestic demand, will help offset Indians and indigenous communities (Orang Asli, At the heart of the tensions with Tanzania which in aid and dedicated donations, the reform of VAT the increase in some expenditure. The rise in Dayak, etc.). However, suspicions regarding the have existed for over 50 years, the division of the and abolition of certain tax exemptions, adopted expenditure will be directed towards higher Prime Minister and his cabinet, alleged to have Nyasa/Malawi lake has become an even more during the previous financial year in order to infrastructure investment, as well as tax cuts misappropriated a share of the assets in the sensitive issue since 2011, when Malawi handed out widen the tax base, will support the upward trend. for lower-income households, partially limited country’s sovereign fund (MD 1 billion) and placed oil and gas exploration licenses. Illegal fishing in Lake The tax adjustment will apply mainly to current by the cut in subsidies. The improvement in the them in their personal bank accounts, could be Chiuta by Mozambican armed groups is poisoning spending, which is expected to decline in real fiscal balance will help reduce public debt, which exploited by the opposition during the electoral relations with Mozambique. terms and as a percentage of GDP. Development will remain high. This debt is essentially made up campaign. spending, particularly on agriculture, is expected The business climate remains poor despite the to be spared in order to sustain growth. The return progress made.

142 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 143 MALAYSIA MALDIVES

PAYMENT AND COLLECTION PRACTICES IN MALAYSIA COFACE ASSESSMENTS Payment claim, whichever is later. A defendant may make to inquire into its regularity or validity for certainty a counterclaim in the same action brought by the or the want of it. If the judgment debtor wishes to D Bank transfers, cash, and cheques are all popular COUNTRY means of payment in Malaysia. The well-developed plaintiff. A plaintiff must serve on the defendant his impeach the judgment for uncertainty or irregularity banking network allows for online payments. Letters reply and defence to a counterclaim, if any, within or non-conformity with the rules of court, he should C of Credit are also commonly used. fourteen days after the defence (and counterclaim) proceed to do so in the original court. When the has been served on him. judgment debtor has no assets in Malaysia, leaving BUSINESS CLIMATE As of 2017, the Central Bank requires that 75% of Proceedings may be resolved and/or otherwise the judgment creditor unable to enforce his judgment payments in foreign currencies are converted into in Malaysia, the creditor may be able to enforce it in a the Malaysian ringgit automatically upon receipt. summarily terminated and/or determined and/or disposed of at an early stage before the trial of the country where the debtor does have assets. He might TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) Payments for transactions within Malaysia are do so by beginning new proceedings or, if possible, required to be made in ringgit. action GDP growth (%) 3.3 3.9 4.6 4.7 by registering his Malaysian judgment in the foreign Exports of goods, as a % of total 0.4 Fast Track country (on the basis of reciprocity of enforcement Inflation (yearly average, %) 1.4 0.8 3.5 0.9 POPULATION Failure to enter an appearance may result in a Thailand (millions of persons - 2016) Debt collection between the two countries). Any decision rendered by 34% Budget balance (% GDP) -9.5 -10.3 -8.0 -7.2 plaintiff proceeding to enter a judgment-in-default a foreign country must be recognized as a domestic 11,984 Amicable phase against a defendant. Ordinarily, when a defendant Euro Area Current account balance (% GDP) -7.3 -19.6 -16.7 -14.8 It is common for disputes and or debt to be settled judgment in order to become enforceable through 30% GDP PER CAPITA has filed an appearance and also a statement of an exequatur procedure. Malaysia has reciprocal Public Debt (% GDP) 72.0 65.0 69.4 72.2 (US dollars - 2016) amiably after negotiations. If there is no response defence subsequent to other procedures of filing of Sri Lanka Recognition and Enforcement Agreements with 10% (f): forecast from the buyer, a site visit and online searches are documents in support, the matter would be set for conducted to ascertain the operating status and some countries, including Hong Kong, India, and United States trial. If the defendant has entered an appearance and New Zealand. 9% RISK ASSESSMENT legal status of the buyer. If the buyer continues to filed a defence, but it is clear that the defendant has ignore and or neglect to settle the matter amicably, United Kingdom no real defence to the claim, the plaintiff may apply to Increased growth through tourism and Exports, mainly fish, are expected to increase the supplier may begin legal proceedings to recover Insolvency proceedings 4% court for summary judgment against the defendant. infrastructure projects slightly, driven by growth in the frozen tuna payments for goods sold and delivered. However, There are several insolvency and restructuring To avoid summary judgment being entered, the Economic growth, highly dependent on that trade, which in turn should offset the decline due diligence should be done to ensure that the procedures available. Under the Companies Act, the Imports of goods, as a % of total defendant has to show that the dispute concerns of the tourism sector (24% of the GDP), should in fresh tuna trade. Tourism revenue, which buyer has sufficient assets to satisfy the debt before available insolvency proceedings include: United Arab Emirates a triable issue or that there is some other reason stabilize at a fairly high level in 2018. It will likely enters in the balance of services, constitutes proceedings are initiated. • Compulsory and voluntary winding-up of companies 16% for trial. be supported by the increase in the number the main positive contribution to the current Malaysian court system • Appointment of receivers and managers Singapore of visitors from European countries (largest account balance. Thus, the archipelago has a The hierarchy of courts in Malaysia starts with the • Restructuring mechanisms 14% Enforcement of a legal decision regional market, 49%), but it will also depend need for significant external financing, which Magistrates’ Court at the first level, followed by the China makes the country dependent on the support Writ of Seizure and Sale (WSS) Winding-up 13% on the situation in China (largest national Sessions Court, High Court, Court of Appeal and the of international donors. Nevertheless, reserves A WSS may be enforced against both movable and In a compulsory winding-up, the court can wind India market, 21.5%). Federal Court of Malaysia. The High Court, Court of up a company on a number of grounds under the have moderately increased thanks to tourism immovable property as well as against securities. 13% The tourism drive will be supported by the Appeal and the Federal Court are superior courts, Companies Act. The most common of these is the growth and large FDI flows (10% of the GDP). When the property to be seized consists of immovable Euro Area massive investment in dedicated infrastructure. while the Magistrates’ Court and the Sessions Courts company’s inability to pay its debts. The creditor 7% These two sources help reduce the pressure on property or any registered interest, the seizure shall The project for an international terminal at the are subordinate courts. There are also various other initiates this process by filing a winding-up petition the Maldivian currency, the rufiyaa, and therefore be made by an order prohibiting the judgment debtor country’s main airport has been awarded to a courts outside of this hierarchy, e.g. Employment with the court. If an order is made, the court will the risk of a currency crisis. from transferring, charging or leasing the property. Saudi company, and accounts for almost 10% of Admiralty, Shariah or Muslim matters. appoint a liquidator to oversee the liquidation process. + STRENGTHS the GDP. It will accommodate more than 7 million Malaysian legal system Garnishee Proceedings A voluntary winding-up can be either a members’ • Growing bilateral relations with China passengers per year compared to the current Increasingly significant demonstrations and The Malaysian legal system is based upon the English A Judgment Creditor may garnish monies a Judgment and Saudi Arabia or creditors’ winding-up. In a members’ winding-up, 1.5 million. The construction of a bridge linking anti-democratic measures common law system. Central to the Malaysian legal Debtor is supposed to receive from a third party. If the shareholders can voluntary wind up their own • Growth of tourist activity on uninhabited Malé, the capital, to the airport has been financed Since the election in 2013 of President Abdullah system is a written constitution based upon the the garnishee does not attend court, then the order islands company if their company is solvent. Shareholders by a loan from China, and it should be operational Yameen, half-brother of former President Westminster model. The jurisdiction and powers is made absolute. If the garnishee does attend, the appoint a liquidator, at which point the directors’ • Airport infrastructure in mid-2018. The construction sector is therefore Mamoon Gayoom (from 1978 to 2008), the of courts under the Malaysian hierarchy of courts court can either decide the matter summarily or fix powers cease and any transfer of shares or any • Support from the World Bank and the Asian expecting a strong increase in activity, and more regime has become more and more authoritarian. are contained principally in the Courts of Judicature the matter for trial. alteration in the statutes of members will be void. If Development Bank (ADB) than 75% of business leaders plan to increase Many arrests have taken place, which has led to Act 1964 (Act 91) for the superior courts and in Judgment Debtor Summons the liquidator discovers that the company is insolvent, their workforce, which should have a positive many citizens’ demonstrations, which are firmly the Subordinate Courts Act 1948 (Act 92) for the The objective of this summons is to give the he must convert the members’ voluntary winding-up effect on domestic consumption. Nevertheless, repressed. Even the judiciary is not spared: subordinate courts. judgment debtor an opportunity to pay the judgment into a creditors’ winding-up. - WEAKNESSES payment deadlines in the sector remain lengthy, 56 lawyers have been suspended from their Claims in Magistrates’ court are limited up to MYR debt in instalments to commensurate his means. Appointment of receivers and managers • Dependence on the international economy which can discourage companies. The fishing activity for demanding respect for the rule of law. 100,000, whilst a Sessions Court may hear any civil Debtors themselves can apply for such a procedure. Court-appointed receivers will either manage the due to the scale of tourism in the national sector, a major source of employment in the The president is now able to employ the army matters where the amount in dispute does not exceed Alternatively, under Order 14 the defendant can admit company’s operations as normal, or take custody economy archipelago, remains archaic. to face the opposition. As a result, in July 2017, MYR 1,000,000. Where the amount claimed does the plaintiff’s claim and propose to pay by instalments, and possession of the assets of the company. • Insularity Inflation is expected to be very low in 2018 and is the military blocked access to the Majlis, the not exceed MYR 5,000, a claim should be filed with which the court can subsequently order if the plaintiff Alternatively, receivers appointed by debenture • Chronic budget deficit and growing expected to return to the rate seen in previous Maldivian parliament, to prevent a vote on the small claims division of the Magistrates’ Court. accepts the proposal. holders based on the terms of the debenture dynamic of public debt years, fuelled by quota and tax policies on censorship concerning an individual close to However, legal representation is not permitted. The Bankruptcy Proceedings agreement (privately-appointed receivers), may • Political instability imported products. the head of state. The elections in late 2018 will High Court has the jurisdiction to try all civil matters If the total judgment of debt exceeds MYR 30,000, take possession of the company’s assets subject to • Vulnerability to natural disasters and the be opposed by the two main political forces and monetary claims exceeding MYR 1 million. bankruptcy proceedings can be triggered if the the floating charge that has since crystallized in the negative effects of climate change of the country: the Progressive Party of the judgment debtor has not complied with the judgment Public and current account deficits fuelled Legal Proceedings debenture. outgoing president, and the Democratic Party or order made against him. Once a debtor has been by investments An unpaid debt normally has a six-year statute of of the Maldives, led by exiled dissident Mohamed adjudged bankrupt, other creditors are also entitled Restructuring mechanisms limitation period. The creditor commences a writ The public investment programme is expected Nasheed (who has requested political asylum in to file the Proof of Debt form and Proxy in order to be There are three restructuring mechanisms: action and serves the writ on the debtor within six to keep the budget deficit high in 2018. Tax the United Kingdom after having been sentenced entitled to share in any distribution from the estate • Scheme of arrangement: A company can enter months from the issue of the writ. When defendants revenues are expected to increase in 2018, driven in the Maldives). If the electoral process is of the bankrupt. The distribution of the estate is into a scheme of arrangement with the approval are served with a writ, they have fourteen days by tax reforms on imported products, as well as properly carried out, it seems that it would be according to the priority of the creditors’ claim. of 75% of the creditors in value and a simple after service of the writ (or 21 days if the writ was the payment of an airport tax by tourists since difficult for the current president to remain in majority. After creditors approve the scheme, June 2017. Subsidies, particularly on electricity served outside Malaysia) to file a Memorandum of Enforcement of / Reciprocal Enforcement of the court must sanction it before it can be power. Appearance with the court to indicate their intention Judgments (Order 67 Rules of Court 2012) and food products, are set to be phased out, and implemented. Debtors can apply for an order With the exception of tourist islands, which to appear in court and defend the suit. The Reciprocal Enforcement of Judgments Act 1958 spending by the Asandha social security system restraining all proceedings against it while it Maldivians are barred from visiting, the safety (REJA 1958) applies to judgements given in the should fall. Before a writ can be issued, it must be endorsed with develops its scheme. situation in Malé and other islands could become superior courts of reciprocating countries specified a statement of claim or, with a general endorsement • Special administration: it involves the The current account deficit is likely to remain worrisome in 2018 with the threat of terrorism in the first schedule to the Act (section 3). REJA 1958 consisting of a concise statement of the nature of appointment of a special administrator. The large. The country’s lack of a manufacturing and demonstrations of the opposition. the claim made and the requisite relief or remedy. applies to foreign judgments or order given or made industry compels it to massively import, and appointment must serve the public interest. The business climate in the country seems to be When the writ only has a general endorsement, in any civil or criminal proceedings for payment places a strain on the balance of trade (pertaining • Conservatorship: The Malaysia Deposit deteriorating continuously due to, among other the statement of claim must be served before the of a sum of money in respect of compensation to goods). Imports are expected to increase with Insurance Corporation takes control of a non- aspects, growing instability, corruption, and the expiration of fourteen days after the defendant enters or damages to the injured party and in the case of increasing demand for building materials as part viable financial institution or acquires and authoritarianism of the regime. The country was an appearance. Commonwealth countries or territories, includes takes control of non-performing loans that are of new investment. The share of commodities in an arbitration award (section 2). A judgment is imports is also expected to grow, and the extent demoted by more than 100 places out of 190 in When the defendant has entered appearance, he is outstanding between the financial institution, deemed final and conclusive even if there is an appeal of the current account deficit will be determined the Doing Business ranking of the World Bank required to file and serve his defence on the plaintiff borrowers and security providers. st th pending against or if it is subject to appeal. The fact by their market prices, notably that of oil. over ten years, falling from 31 to 135 place). fourteen days after the time limit for entering an of registration does not transform the judgment appearance, or after service of the statement of into a Malaysian judgment so that the court may sit

144 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 145 MALI MALTA

COFACE ASSESSMENTS COFACE ASSESSMENTS D A2 COUNTRY RISK COUNTRY RISK D A2 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 7.1 5.5 5.8 5.0 Exports of goods, as a % of total GDP growth (%) 6.0 5.8 5.3 5.0 18.3 Exports of goods, as a % of total 0.4 Inflation (yearly average, %) 1.4 -1.8 0.2 1.2 POPULATION Inflation (yearly average, %) 1.2 0.9 1.5 1.9 POPULATION South Africa (millions of persons - 2016) United States (millions of persons - 2016) 47% Budget balance (% GDP) -1.8 -3.9 -3.4 -3.3 27% Budget balance (% GDP) -1.1 1.1 1.3 0.7 768 25,329 Switzerland Current account balance (% GDP) -5.3 -7.1 -7.0 -5.5 Germany Current account balance (% GDP) 5.2 7.0 9.0 9.0 15% GDP PER CAPITA 14% GDP PER CAPITA Public debt (% GDP) 30.7 35.9 34.7 35.5 (US dollars - 2016) Public debt (% GDP) 60.3 57.6 55.0 52.0 (US dollars - 2016) Ivory Coast France 6% (f): forecast 8% (f): forecast Burkina Faso Singapore 4% RISK ASSESSMENT 6% RISK ASSESSMENT Bangladesh Japan 3% Relatively dynamic economy allow authorities to maintain public debt at a 5% Growth still strong owning a residence worth EUR 350,000 for Despite a difficult security situation, activity in sustainable level, several years after the country As in 2017, growth will be driven by internal five years can vary. Finally a new bailout for the Imports of goods, as a % of total Mali is expected to remain firm in 2018, buoyed benefited from substantial debt relief under the Imports of goods, as a % of total demand. Private consumption (50% of GDP) will national airline, Air Malta, cannot be excluded. HIPC and MDRI initiatives. The primary surplus (excluding debt interest) Euro Area by public investment spending, agricultural Italy benefit from good labour market performance 21% and gold production, and international aid. Gold The current account deficit is expected to fall 22% as well as higher wages due to the scarcity of and growth help bring down the considerable level of public debt (to which should be added the Senegal output is expected to be particularly dynamic, in 2018, but will remain relatively high. Higher Canada labour. Moreover, household incomes will benefit 19% due to the start of operations at two new mines, imports of capital goods associated with the 10% from the indexation of wages to inflation (Cost State guarantee for publicly-owned enterprises China and the extension of mine life at two others. development and reconstruction projects Germany of Living Allowance or COLA). Public investment representing 10% of GDP), which is held by 16% The country is Africa’s third leading producer of currently underway – with a slight rise in the oil 6% will be sustained by ongoing road works, residents, specifically the local banks. Ivory Coast this mineral and its exports account for almost bill and the bill for foodstuffs – will be offset by United Kingdom construction of tourist or education facilities 10% 70% of GDP. Public investment is expected to export growth. Exports of gold and cotton are set 6% and social housing. Investment is expected The trade deficit is broadly offset by the South Africa continue at a more sustainable pace and will to climb, thanks to higher production and a slight France to profit from the start of operations at the services surplus 3% 4% be concentrated mainly on defence equipment upturn in prices. High levels of public transfers Malta Development Bank, which, alongside the Despite huge deficit in the trade in goods (19% and transport infrastructure. Furthermore, the and private remittances (from migrants) will limit financing of major infrastructures, also has to of GDP in 2017), due to the shortage of energy + STRENGTHS agricultural sector, which contributes over a third the extent of the current account deficit, which is + STRENGTHS finance SMEs. Exports of electronic, electrical resources, poorly diversified manufacturing of GDP, will continue to be one of the country’s mainly funded by foreign aid, official loans, and – and optical components, the archipelago’s output and the strong import component of • Significant natural resources: agriculture main contributors to growth. Food crops (rice, to a lesser extent – foreign direct investments. • At the crossroads of the eastern and main manufacturing output, as well as generic consumer goods, the country runs a current (cotton, rice, maize), mining (gold, bauxite, maize) and cotton ( second most important Nevertheless, changes in the current account western Mediterranean regions medicines and seafood products, should benefit iron) account surplus. This due to the positive export commodity) are performing much better balance depend on gold and cotton exports, • Eurozone membership from the upturn in the European economy. balance on services associated with tourism, • Stabilisation of the political situation; due to an increase in land under cultivation, as which are highly exposed to fluctuations in • Public and external accounts in surplus Tourism (27% of GDP and 27.8% of jobs in 2016 drive to restructure the economy online electronic gaming and the duty-free well as equipment modernisation. However, world prices. • Public debt held by residents including related activities) will continue to port at Marsaxlokk. This port is used for the • International aid agricultural potential is largely under-exploited, • Tourism (2 million visitors a year for benefit from Malta’s competitiveness (price/ transhipment of cargoes from high-tonnage and the lack of local processing plants for farming Security environment still very fragile 430,000 inhabitants) and port activities quality ratio, security and health conditions) vessels to smaller vessels suited for smaller products or for the cotton sector is hindering the • Low taxation compared with other Mediterranean capacity Mediterranean ports and vice versa. The - WEAKNESSES development of a powerful industrial fabric. President Ibrahim Boubacar Keïta, elected in destinations for European visitors, in particular • Productive, English-speaking and growing port of Valetta retains the other port operations. August 2013 after the recapture of the northern from the UK and Italy (29% and 11% of spending • Economy vulnerable to weather and Household consumption is set to remain firm and half of the country from Islamist groups thanks to workforce to commodity price fluctuations respectively). Income from online gaming should only slightly affected by the slight upturn French military intervention and the mobilisation A large offshore financial centre • Geographic isolation in inflation, as the growth in agricultural revenues (e.g. poker) via the Internet and digital TV, and of the international community, is expected The banking sector manages assets equivalent to • Precarious security situation – on which almost two thirds of the workforce - WEAKNESSES from database management is rising. Finally, to remain in power until the next presidential port activity is benefitting fully from the 468% of GDP and contributes about 15% to public • Dependence on international aid depends – will largely offset the higher prices. elections scheduled for late 2018. However, • Inadequate higher education provision, country’s optimal position at the crossroads of revenues. The truly local banks, chiefly Bank of Despite favourable prospects, the economic the security situation remains very fragile: the shortage of highly qualified workers, R&D Mediterranean routes and especially its position Valletta, HSBC and Mediterranean Bank manage and innovation situation will still be exposed to the risks Jihadist groups did not sign up to the June 2015 half-way between the Suez Canal and Gibraltar. assets representing 245% of GDP. They hold a associated with the precarious security situation peace agreement, and continue to clash with the • Road infrastructure still inadequate The contribution of trade in goods and services third of sovereign debt and are very involved in and agricultural production’s vulnerability to United Nations forces (Minusma) and the Malian • Small, isolated country resulting in close (290% of GDP) is expected to remain positive. mortgage loans to households, which are rising weather events. The country is counting on army, while also carrying out attacks against relationship between public authorities as houses become more expensive. The lack of eventually diversifying its economy thanks to its civilians in the north and centre of the country. and business Consolidated public accounts competition ensures good profits, even if non- oil potential and reserves of iron ore and bauxite. Moreover, the implementation of the agreement • Slow legal process, favouritism, corruption performing loans represent 10% of the portfolio Progress in this regard could, however, be slow is threatened by quarrels within the member • Potential impact of EU adoption of a Fiscal consolidation has not been a top priority of loans to non-financial companies. The other because of infrastructure shortcomings, weak groups of the Coordination of Movements of consolidated, common tax base for for the Labour party, back in power under the share of the assets (223% of GDP and falling) commodity prices and a difficult business climate. Azawad (a separatist rebel group fighting for the companies leadership of Prime Minister Joseph Muscat is held by subsidiaries of foreign, especially independence of the northern Mali), as well as by • Potential impact of Brexit on number of since 2013 (re-elected with 37 out of 67 seats UK, German and Turkish, groups looking for Vulnerability of the external and public repeated violations of the agreement by these visitors from the United Kingdom (29%) in the early elections of June 2017, triggered advantageous tax arrangements. They operate accounts groups and the Self-Defence Group of Imghad by allegations of corruption against the Prime with non-resident resources, invest only abroad Tuaregs and Allies (GATIA). Ongoing insecurity Minister) after fifteen years of rule by the The draft 2018 finance law aims to stabilise the and employ few local staff. Their services, and could, over time, hit the confidence of consumers, centre-right National Party. However, a budget also online games, database management fiscal deficit, with a sharp increase in spending businesses and financial backers. Meanwhile, responsibility law was passed in 2014 and that will be offset by higher revenues. This and the citizenship acquisition programme are the implementation of governance-related the public accounts posted a surplus as early under closer surveillance in a context marked includes, notably, income tax hikes, higher reforms is slow, especially as regards the fight as 2016. The improvement is down to strong taxes on goods and services, and better tax by allegations of corruption against the whole against corruption. growth, structural measures like improved tax political class. collection. Spending will increase substantially collection, and tax hikes on tobacco, construction on the back of higher security expenditure, materials and other products. The surplus is the implementation of the peace agreement, expected to drop in 2018 due to the impact of and the organisation of presidential elections the new collective wage agreement in the public in late 2018. The fiscal deficit is mainly funded sector and the introduction of a basic pension. through recourse to the internal and regional Moreover, the income from the Individual markets, and an IMF contribution in the form of Investor programme allowing any foreigner with an Extended Credit Facility. A gradual reduction more than a year’s residence to claim Maltese in the deficit towards the 3% target by 2019 will nationality by contributing EUR 675,000 and

146 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 147 MAURITANIA MAURITIUS

COFACE ASSESSMENTS COFACE ASSESSMENTS D A4 COUNTRY RISK COUNTRY RISK D A3 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 0.9 1.7 3.8 3.2 GDP growth (%) 3.6 3.8 3.9 4.0 Exports of goods, as a % of total 3.8 Exports of goods, as a % of total 1.3 Inflation (yearly average, %) 0.5 1.5 2.9 3.6 POPULATION Inflation (yearly average, %) 1.3 1.0 3.6 3.8 POPULATION China (millions of persons - 2016) Euro Area (millions of persons - 2016) 37% Budget balance (% GDP) -3.4 -0.3 -0.6 -2.1 35% Budget balance (% GDP)* -3.6 -3.7 -3.5 -3.9 1,247 9,613 Euro Area Current account balance (% GDP) -19.7 -14.9 -15.3 -12.4 United Kingdom Current account balance (% GDP) -4.9 -4.4 -5.8 -6.2 20% GDP PER CAPITA 12% GDP PER CAPITA Public debt (% GDP) 77.8 78.3 77.7 80.8 (US dollars - 2016) Public debt (% GDP) 63.6 64.5 64.7 65.0 (US dollars - 2016) Switzerland United States 14% * excluding passive debt due to Kuwait, currently under negotiation (f): forecast 11% *last fiscal year from July 2017 to June 2018 (f): forecast Japan South Africa 8% RISK ASSESSMENT 8% RISK ASSESSMENT Russia Madagascar 5% The end to ambitions for the oil industry in 2018. The balance of transfers surplus is also 7% Robust growth despite weak exports account, thanks to the repatriation of profits is hampering the recovery expected to be maintained. Despite a less significant In 2018, growth should be in line with that of the many offshore companies established in Imports of goods, as a % of total Hard hit by the drop in mineral prices in 2014, deficit, the external accounts imbalance continues. Imports of goods, as a % of total observed in 2017. The weakness of exports, Mauritius, should not make it possible to offset These accounts remain vulnerable, therefore, to a the widening deficit on the balance of goods. Euro Area the economy, sustained by the fishing and Euro Area particularly to the key markets of France and 33% construction sectors, confirmed its recovery in new shock. The official foreign exchange reserves, 19% the United Kingdom, will continue to be a drag on Foreign direct investment and capital flows will estimated at four months of imports (excluding the finance this current account deficit. United States 2017. Nevertheless, growth is expected to stall in China the expansion of activity in the manufacturing 13% 2018, curbed by the ceasing of production at the oil and mining industries), will therefore remain under 18% sector (especially textiles) and agriculture. In United Arab Emirates Chinguetti oil field. After almost ten years of oil pressure and are expected to continue to fall in 2018. India particular, the sugar sector could suffer from Mauritian stability challenged by repeated 12% production, the persistent lack of profitability at the 16% the end, in October 2017, of production quotas scandals China site for operators has finally put paid to this only Tense political climate South Africa in the European Union, the main destination of Since its victory in the 2014 legislative elections, 9% 7% offshore field in production. Elsewhere, the extractive The executive, represented by President Mohamed Mauritian sugar. Tourism and financial services the governing Lepep Alliance has changed Morocco industries are expected to confirm, in 2018, the Japan will continue to drive growth in 2018 but are 6% Ould Abdel Aziz, re-elected for five years in 2014, 3% its faces many times, damaging the image of modest progress made in 2017. Iron production is after gaining power following a coup d’état in 2008, expected to grow at a slightly slower pace than stability enjoyed by the country. In December set to continue to increase, while gold production will is expected to emerge from 2017 stronger than in the past. The amendment of the provisions of 2016, the tripartite coalition in power was + STRENGTHS receive a boost from the expansion of the Tasiast before, at the cost of a very tense political climate. + STRENGTHS the non-double taxation agreement with India notably weakened by the defection of one of the mine. The Tijirit gold mine projects and the Ahmeyim The President’s use of a referendum to push through could compromise the status of Mauritius as a constituent parties of the Alliance, the Mauritian • Supported by donors and international and Guembeul offshore gas fields, on the border with • Strong tourist activity preferential investment vehicle to India and thus Social Democratic Party. The month following the organisations constitutional reform, initially rejected by the Senegal, continue to offer favourable longer-term Parliament, is apparently weakening the institutions • English/French bilingualism constrain the financial sector. Public investment decision of Prime Minister Sir Anerood Jugnauth • Rich in minerals and fisheries resources prospects for the extractive industries. In addition, even further, at a time when they are far from being • Solid banking system will support construction and should offset (86), who had already held this office (1982- • Energy potential (gas, renewables) activity in the secondary sector is expected to well-established. Boycotted by the opposition, • Democratic institutions and effective weak exports. Although still constrained by the 1995 and 2000-2003) and that of President continue its recovery, buoyed by public investment the August 2017 elections were tarnished by governance weakness of some export sectors, household (2003-2012), to withdraw for the benefit of his which will mainly benefit the manufacturing and accusations that the voter turnout figures had been consumption should be driven by the return of son Pravind Jugnauth sparked the opposition’s - WEAKNESSES construction industries. The drive to develop fishing manipulated. An ugly campaign, at times marred by confidence. ire, as well as many demonstrations. In addition, and agriculture, in order to diversify the economy, - WEAKNESSES • Persistent political and security instability violence, deepened the identity, community, social Relatively dynamic domestic demand, changes many scandals have pushed some ministers should manifest via growth in the primary sector. and economic divisions of Mauritanian society. in the price of imported oil, as well as the easing to resign in recent months. In September • Poorly diversified economy, vulnerable to The services sector should remain firm, particularly • Commercial and economic dependence commodity price fluctuations Aiming, in particular, to change the Mauritanian on Europe (tourism, construction) of the monetary policy in September 2017, should 2017, Attorney General Ravi Yerrigadoo was thanks to transport and telecommunications activity. embroiled in a money laundering case. Named in • Growth not very inclusive with high national anthem and flag, in order to pander to • Infrastructures failing in certain regions keep inflation at a high level. The lowering of the The depreciation of the ouguiya is likely, however, nationalist passions, this referendum had, above central bank’s key interest rate, to its lowest the Paradise Papers revelations, Mauritius also unemployment, especially among • Lack of skilled workers young people to affect prices, more especially those of basic all, the power to abolish the Senate and replace it historical level (3.5% at the end of 2017), is aimed sees its name associated with some suspicious foodstuffs, thus penalising trade. • Limited formal economy with regional councils and a High Council for Fatwa. in particular at counteracting the appreciation fund investments. These scandals could mar Despite the president’s denials, the opposition sees of a rupee, deemed overvalued by exporters, the reputation of one of the highest ranking External imbalances persist despite efforts this referendum as a move to enable Abdel Aziz to against the greenback (50% of export earnings countries in sub-Saharan Africa according to improve them stand for a third term in 2019. A few days after the are in dollars). to the World Bank’s governance indicators. Improved mobilisation of tax revenues and control election, the arrest, irrespective of procedures, of Mauritius enjoys a favourable business climate th of expenditure have made it possible to almost one of the main opponents of constitutional reform, Widening deficits that allows it to rank 25 (out of 190) in the 2018 completely eliminate the fiscal imbalances triggered Mohamed Ould Ghadda, supports the hypothesis Doing Business Guide as well as attract foreign Relatively expansionary fiscal policy should investment. by the collapse in commodity prices. Close to of a shift to authoritarian rule. The risk of political be maintained in order to support growth. equilibrium in 2017, the fiscal balance is, however, and social unrest cannot, therefore, be ruled out in a However, the increase in capital investment expected to go back into deficit in 2018 because of country still ravaged by poverty, unemployment and spending should slow, while the authorities will increased public investment aimed at supporting inequalities. In addition, slavery, though abolished is try to contain the growth of current spending growth. Constrained by the explosion in the external still a scourge: the 2016 Global Slavery Index stated through tax administration reforms. A $500 borrowing ratios following the shock to the trade that over 43,000 people (1% of the population) million credit line granted by India is expected terms and the depreciation of the ouguiya, the were affected by slavery. President Aziz also faces to finance part of the capital investment. The authorities will therefore attempt to contain current persistent rumours of complacency with regard introduction of negative income tax, help for the spending, especially since income is unlikely to rise to certain Islamist groups such as Al-Qaida in poorest households, should contribute to widen much in 2018, despite the reforms undertaken, as the Islamic Maghreb (AQMI), symbolised by the the deficit. Many tax deductions introduced in the they are still limited by weak revenues from the declassification of documents attributed to Osama 2017/2018 budget, especially for businesses, will extractive industries. Bin Laden, showing evidence of a non-aggression weigh on revenues. Since the budget is financed In contrast, the current account deficit is expected pact signed in 2010 between the Jihadists and mainly by concessional loans and domestic debt, to be lower in 2018 thanks to a reduced trade deficit. the Mauritanian government. Although spared the risk of over-indebtedness remains low. Income from exports of gold and fish products will from terrorism since 2011, Mauritania, like other members of the “G5 du Sahel”, remains exposed to The current account is expected to continue to make a positive contribution. Driven by spending deteriorate in 2018 following a worsening in the linked to the public investment programme, imports the terrorist threat, given the porous nature of the border with Mali. trade deficit. The modest demand, particularly are, nonetheless, expected to remain stable, thanks from the United Kingdom and France, for textile to the fall in imports of capital goods destined for the The country is continuing its efforts and progress and sugar exports will be felt, in particular, on extractive industries. Showing deficits, the balance on improving the business climate with the aim of the balance of goods. Surpluses in the balance of of services and of income is unlikely to change much attracting foreign investment. services, mainly thanks to tourism, and income

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COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN MEXICO Payment Debt collection Once the assets are seized as a guarantee of the B debt, the legal process continues until the judge COUNTRY RISK The most commonly used methods of payment in Amicable phase Mexico are cheques, wire transfers and - in some Before entering into legal proceedings in Mexico, renders his final resolution. Then, if there is no A4 special cases - credit cards. creditors normally attempt to contact their negotiation or payment, the creditor can initiate debtors via telephone. If this is unsuccessful, the auction of assets to recover the debt. BUSINESS CLIMATE In Mexico, the documents most frequently This legal process takes approximately six to related to commercial transaction are invoices, a written letter is sent to the debtor, in which the debtor is notified of the amount of the eighteen months, although this can vary from promissory notes, and cheques. Promissory case to case. notes and cheques also serve as certificates of debt and the creditor’s intentions to negotiate TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) indebtedness. Once buyers possess the relevant payment terms. Ordinary Business Proceeding GDP growth (%) 2.6 2.3 2.2 2.2 122.3 information, they can proceed to make payments The next step is a visit to the debtor by a Ordinary Business Proceedings are the Exports of goods, as a % of total most time consuming procedure in Mexican Inflation (yearly average, %) 2.7 2.8 5.9 3.0 POPULATION by wire transfer or cheque, with both methods collection specialist. During this visit, the United States (millions of persons - 2016) taking approximately ten to fifteen working days. collection specialist will attempt to develop commercial law. They can take place in the 81% Budget balance (% GDP) -3.5 -2.6 -1.5 -2.4 absence of a Certificate of Indebtedness, which 8,562 Wire transfers are more common, as cheques a more detailed perspective on the debtor’s Euro Area Current account balance (% GDP) -2.5 -2.2 -1.4 -1.6 means that the only proof of a commercial 4% GDP PER CAPITA can be post-dated, thus presenting the risk situation. The specialist will endeavour to Public debt (% GDP) 53.7 58.4 53.3 52.4 (US dollars - 2016) that buyers will issue cheques that they cannot ascertain if the company is still in business and sale between the parties is the commercial Canada agreement with invoices. In this type of process, 3% (f): forecast finance. if it has assets (such as real estate, merchandise or other rights) that could be seized in the event assets can only be seized as a guarantee of the China Promissory notes are unconditional promises, total amount of the debt when the judge has 1% of a legal process. The main purpose, however, of RISK ASSESSMENT in writing, to pay a person a sum of money. In rendered his final sentence condemning the Japan Mexico, this document is normally used as a such a visit is to understand why debtors did not 1% Continued subdued growth in 2018 Presidential elections will ensure a heated pay their invoices within the allotted time frame. debtor to make payment. This legal process takes guarantee of payment from the buyer. It is signed approximately one to two years. As in 2017, economic activity is likely to remain political environment in the first half of 2018 by the legal representative of the buyer - and Due to the increasing complexity of Mexico’s Oral Proceedings subdued in 2018. In 2017, GDP growth contracted Mexico will hold presidential elections in July hence, the debtor – for an amount which is financial situation, particularly during 2017, Imports of goods, as a % of total Oral proceedings take place when the total amount in the third quarter (the weakest outcome since 2018. Mexicans will have to choose the successor superior to the total amount of the debt. amicable settlements have become less and less United States of the debt does not exceed EUR 31,856.68. As 46% the fourth quarter of 2015), partly due to the of unpopular President Enrique Peña Nieto successful. When creditors initiate collection Corporate payment processes are governed by with ‘Ordinary Business Proceedings’, assets can effects of the damages caused by the two major (Institutional Revolutionary Party, PRI). After actions with an amicable phase, it is common China companies’ internal policies. Most companies only be seized as a guarantee of the total amount 18% earthquakes that hit Mexico City and nine of the taking office in December 2012, President Peña for debtor companies to disappear altogether. request supporting documentation from the of the debt when the judge has rendered his final Euro Area country’s states. Oil activity and services were Nieto signed an agreement with the two main This means the discontinuation of commercial other party before proceeding with a transaction judgment condemning the debtor to pay the 9% particularly affected. In 2018, activity is expected opposition parties (PAN and PRD) to promote activities which could potentially enable the (e.g. the company’s articles of incorporation, amount due. This process, which was established Japan to benefit from reconstruction work and by the political cooperation. Called the “Pact of Mexico”, payment of sums due. This scenario intensified or its tax identification, known as the Registro under commercial law on 11 January 2013, takes 5% generally positive fundamentals of domestic the agreement allowed the government to further towards the end of this year. Federal de Contribuyentes). approximately four to six months. South Korea demand. The latter should be driven by a pass an ambitious constitutional reform When entering into commercial export 4% Invoices On the 2nd May 2017, Mexican congress made relatively strong job market and by the expected agenda, including reforms for both energy and Invoices are commercial documents issued by relationships, companies are advised to ensure deceleration of inflation (6.4% in 12 months telecommunications. The reforms aimed to that all documentation conforms to Mexican law. a modification which ruled that all commercial sellers to buyers, which list the goods sent or disputes be processed through Oral Proceedings, + STRENGTHS accumulated until October 2017). Moreover, substantially boost the potential GDP. However, services provided, along with a statement of A lack of correct information and documentation manufacturing output has also benefited from a the results have been disappointing, and the opens exporters up to the possibility of fraud with no limitations on amounts, with effect from the sum due. In terms of debt collection, original th • Geographic proximity to the North strong US industrial activity. GDP annual growth rate is expected to average committed by Mexican companies and reduces the 25 January 2018. American economy invoices act as proof of the acceptance of the However, some downside risks will weigh on at only 2.3% during President Peña Nieto’s five- debt and the establishment of a commercial the likelihood of successful debt recovery during • Membership of NAFTA, OECD, the G20 and year term. an amicable phase. Enforcement of a legal decision the Pacific Alliance activity. Investment growth is set to remain relationship between the parties. According weak, due to the pending presidential elections However, the president’s feeble popularity is not to commercial and civil laws, the commercial Legal proceedings A judgment is enforceable as soon as it becomes • Substantial industrial base and the doubts brought by the extension of the only related to sluggish activity: the population agreement is sealed by two elements: an object There are three types of proceedings which can final. If the debtor does not comply with the • Recent improvement in fiscal position NAFTA renegotiation talks (to be concluded in is angry about widespread corruption and rising (in this case the product or the service), and the be initiated against debtors: judgment, the creditor can request a mandatory early 2018). Despite the difficulties of reaching violence. The extension of the NAFTA talks may price of the object as agreed by the parties. Even Pre-Legal Process (Medios Preparatorios a Juicio enforcement order from the court, in the form of an agreement, the most likely scenario is that also disturb the PRI’s presidential campaign in in the absence of a written agreement, an invoice an attachment order, sale of specific assets, or - WEAKNESSES Ejecutivo Mercantil) NAFTA will make only small changes to the 2018. This scenario creates opportunities for provides both of these elements. Invoices are This pre–legal process takes place when there liquidation of the company. This takes between • High dependence on the United States current treaty. Monetary policy is expected to non-traditional candidates in the presidential therefore the most effective form of proof in a is an invoice as a proof of the pending payment six months to two years. economy; vulnerable to changes in the ease once uncertainties regarding the Mexican elections. Although candidates have not yet been lawsuit situation, as they show that the parties and of the commercial relationship. Creditors Foreign judgments can be enforced through NAFTA agreement economy have ceased (probably during the officially confirmed, late 2017 polls portray left- made a sale agreement and have a reciprocal request that the judge obtains a citation from the exequatur proceedings. The court will verify • Rising criminality rate second half of 2018). wing populist candidate Andrés Manuel López obligation to pay the price agreed and to deliver debtor or its legal representative. He then obtains that certain requirements are fulfilled, prior • Infrastructure and education weaknesses Obrador (MORENA party), also known as ALMO, the goods or provide the service. the confession and acceptance of debt from the to recognising the foreign decision. The court • Oil sector undermined by years of Budget deficit is expected to remain as the frontrunner. In addition, the candidate In 2014, the Mexican Tax Authorities (Servicio debtor, as well as the pending payment. As the establishes whether the foreign court had underinvestment sustainable Margarita Zavala resigned from the PAN after de Administraci Servicio de Administración confession before the judge is an executive jurisdiction to decide on the issue and whether 35 years to run as an independent. This decision Fiscal policy has remained prudent, despite the Tributaria, SAT) ruled that all invoices must be document, the creditor is then able to initiate the enforcing the decision will not conflict with may split the PAN votes and, as the country electronic, with an XML file. They must also ‘Summary Business Proceeding’ legal process. Mexican law or public policy. slump in oil prices. Oil revenues account for roughly does not have run-off, a more divided centre- SECTOR RISK ASSESSMENT a third of government revenue. As such, the drop be verified by the tax authority system in This pre–legal process takes approximately two right could benefit AMLO. However, a tactical order to be validated. The tax authority also in its prices has prompted a tightening of the fiscal vote cannot be ruled out: voters may choose to or three months. Insolvency proceedings policy that has been well executed. Fiscal deficit requests electronic confirmation when the support the candidate who has the best chance Summary Business Proceeding Out of court proceedings improved to 2.6% of GDP in 2016, from 3.5% in creditor receives payment, along with a receipt of beating AMLO. This legal process takes place when there is a Debtors with the approval of creditors holding 2015, and is set to reach 1.5% of GDP by the end of in an XML file as legal confirmation. These new Certificate of Indebtedness (promissory notes, 40% of the debt can constitute a ‘pre-packaged’ 2017 at the time of writing. As recognition of the requirements entered into force in December cheques or legal confessions before the judge reorganisation agreement. This enables the court efforts done, Standard & Poors raised its outlook 2017. The goal of these changes is to limit the by the debtor or its legal representative). The to issue an insolvency declaration and declare on Mexico’s credit rating to stable from negative, amount of fraud cases and ghost companies, process begins with the phase of citation, when the company in concurso mercantile. arguing that it doesn’t expect a material worsening both of which are prevalent in Mexico. the creditor initiates the lawsuit by requesting in the country’s debt levels. They praised Mexico’s Liquidation that the debtor pays the total amount of the debt prompt reaction to recent negative shocks, such as Liquidation can only be requested by the due. If the debtor does not have sufficient funds, the depreciation of the currency in late 2016. They debtor itself, but the debtor can be placed into the creditor can request that some of its assets expect the country to be able to diminish the rapid liquidation as a result of its failure to submit an be seized. These assets can include real estate, pace of debt accumulation seen in previous years, acceptable debt restructuration proposal to merchandise, bank accounts, industrial property helping to stabilize the government’s debt burden. its creditors through the concurso mercantile rights and trademarks, to be used as a guarantee proceedings. A liquidator is appointed and given against the total amount of the debt. the responsibility for managing the company, selling its assets and distributing the proceeds to the creditors according to their rank.

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COFACE ASSESSMENTS COFACE ASSESSMENTS C C COUNTRY RISK COUNTRY RISK C C BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) -0.4 4.1 3.2 3.7 GDP growth (%) 2.4 1.0 3.0 4.0 Exports of goods, as a % of total 3.6 Exports of goods, as a % of total 3.0 Inflation (yearly average, %) 13.0 6.4 6.5 5.3 POPULATION Inflation (yearly average, %) 5.9 0.6 4.4 6.0 POPULATION Euro Area (millions of persons - 2016) China (millions of persons - 2016) 26% Budget balance (% GDP) -2.3 -2.1 -3.2 -3.0 79% Budget balance (% GDP) -8.3 -17.0 -8.7 -7.4 1,907 3,660 Romania Current account balance (% GDP) -5.0 -3.8 -4.0 -4.0 United Kingdom Current account balance (% GDP) -4.0 -6.3 -4.9 -8.7 26% GDP PER CAPITA 16% GDP PER CAPITA Public debt (% GDP) 44.8 43.2 41.3 40.5 (US dollars - 2016) Public debt (% GDP) 59.5 87.6 94.9 101.3 (US dollars - 2016) Russia Euro Area 12% (f): forecast 2% (f): forecast United Kingdom Russia 6% RISK ASSESSMENT 1% RISK ASSESSMENT Belarus Singapore 5% Growth to remain firm in 2018, but below main trading partners are its neighbours (Ukraine, 0.3% Growth stimulated by mining investment reassure investors about Mongolia’s capacity to potential Rumania), but exports to Western European Recovery is expected to continue in 2018, repay its debt. Imports of goods, as a % of total The Moldovan economy was hit by a banking countries are growing fast (+20% to Germany, Imports of goods, as a % of total stimulated by greater investment in the mining The reduction in the current account deficit +12% to Italy in 2017). Exports mainly comprise Euro Area scandal in 2015 involving the embezzlement of China sector and higher mineral prices. The second observed in 2017, thanks to increased mineral 25% over USD one billion (15% of GDP), the collapse of agricultural products, electric cables and clothing 31% phase of expansion at the Oyu Tolgoi mine (one exports, is unlikely to continue. Effectively, ensembles. Moldova will benefit from the drop Romania three major banks and a considerable downturn in Russia of the largest gold and copper reserves in the imports of capital goods are expected to rise 14% economic activity. Since 2016, the consolidation of in import prices following the 14.5% appreciation 26% world, operated by the Rio Tinto corporation alongside new investments in mining. This rise Russia the financial sector, as well as the positive shock of in the lev against the dollar during the first ten Japan via its Turquoise Hill subsidiary) is set to attract is unlikely to be fully offset by the growth in 13% external demand mainly from the European Union months of 2017. However, this will not be enough 10% substantial foreign direct investments. This exports, which is stimulated by higher mineral China and Turkey, helped restore growth, which should to offset the rise in commodity prices, especially Euro Area project should have a beneficial effect on investor prices but limited by weakening Chinese demand. 10% remain satisfactory in 2018. Private consumption, those of oil and gas imported from Russia. To 8% confidence, and stimulate investments overall. After a period of strong depreciation of the Ukraine which accounts for 86% of GDP, should increase, finance its current account deficit, the country South Korea Mining development is expected to boost the tugrick, the local currency, the trend is expected 10% benefiting from low unemployment, higher real makes use of concessional loans from the IMF and 6% construction sector, not only regarding mining to reverse in 2018, as growth recovers and wages and disposable household income. This the World Bank. Foreign exchange reserves remain infrastructure, but in terms of accommodation political uncertainties lessen. This should allow at a comfortable level of USD 2.5 billion or almost + STRENGTHS is because remittances from Moldovan workers + STRENGTHS construction – a consequence of the country’s the central bank to cut its key rates again in 2018, abroad, concentrated in Russia, are likely to continue 7 months of imports. growing urbanisation, with an influx of labour after a two-percentage-point cut in June 2017. • Agricultural potential (wine, fruits, to benefit from the Russian economic recovery • Exploitation of colossal mining resources attracted by the mining boom. vegetables, wheat) (coal, copper, gold) (remittances up 9.5% in the first six months Tensions in the run-up to the 2018 However, growth is expected to remain below The political situation is expected • Small, open economy which attracts of 2017). The country depends on these flows, parliamentary elections • Strategic geographic location between to stabilise foreign investment China and Europe (New Silk Road the average observed between 2010 and 2014 which represented 20% of GDP in 2016. Inflation The 2015 banking scandal led to a loss of confidence (11.3%), while waiting for the full utilization of • Fairly cheap labour is expected to continue to fall in 2018, but this will development project) After the victory of the Mongolian People’s in the political class. The first presidential election mining resources, and will be limited by Chinese Party (PMD) in the June 2016 parliamentary • Very low unemployment rate (4.2% in 2016) probably be accompanied by a tighter monetary • Potential to diversify production, specifically conducted by universal suffrage took place in agri-business (dairy products, meat, demand (90% of the country’s exports). In elections (65 out of 76 seats in parliament), the policy. The manufacturing industries are struggling November 2016 and resulted in a victory for Igor cashmere) and tourism addition, subsistence agriculture focused on to expand and the retail and agrifood sectors are presidential elections of June/July 2017 were Dodon, from the Party of Socialists of the Republic livestock remains vulnerable to climate shocks won by the opposition candidate, Khaltmaagin - WEAKNESSES the main drivers of activity. Meanwhile, Moldova of Moldova (PRSM), elected for a four-year term. and pandemics. Meanwhile, public demand is depends on the primary sector (14% of GDP and Battulga (Democratic Party). Following • The poorest country in Europe The Head of State, from a pro-Russian coalition, - WEAKNESSES likely to be dampened by the fiscal consolidation this defeat, infighting resurfaced within the 33% of jobs in 2016). Weather conditions were has to cohabit with a majority pro-European • Size of the informal sector measures put in place by the government. parliamentary majority, resulting in the dismissal favourable for the 2016-2017 harvest. Accordingly, government, led by Pavel Filip (Democratic Party). • Economy vulnerable to commodity price Household consumption is expected to receive variations of Prime Minister Jargaltulga Erdenebat in • Dependence on remittances from agricultural production climbed 103% during the So, the balance will remain fragile and tensions will a boost from the benefits of mining sector expatriate workers first 9 months of 2017 compared with 2016. Foreign • Highly exposed to Chinese economy September 2017, on allegations of corruption. remain high until the next parliamentary elections development – provided, however, that there The appointment of Khurelsukh Ukhnaa as new • Political instability and social tensions investment, which fell in 2015, is picking up again • Internal political disputes scheduled for November 2018. They will allow is a more egalitarian distribution of the profits. Prime Minister in October 2017 is likely to help • Corruption, weak governance and gradually though is hampered by political instability. the 101 seats in the single-chamber parliament • Alarming level of corruption and risks Finally, inflation too is expected to rise. This has stabilise the situation, although renewed rounds patronage associated with rising inequalities due to to be filled and the favourite in the polls is the been triggered by higher fuel prices and growth of infighting cannot be ruled out. • Secessionist ambitions in Transnistria Slow improvement in the public accounts PRSM. However, there is a possibility of foreign non-inclusive mining development in money supply with foreign investment flowing policy leaning towards Russia. This will be the first into the mining sector. With regard to the business climate, the The IMF’s Extended Credit Facility Mechanism composition of the new parliament, which is much (ECFM) and the Extended Credit Facility (ECF) are election following the entry into force of a divisive electoral code, which was met with protests. There more favourable towards foreign operations, delivering USD 178 million (3% of GDP) over the The country’s financial position will remain is expected to encourage foreign investment period 2016-2019 and are mainly intended for has been a shift from a proportional system to a precarious. mixed system within which MPs will be elected at and help implement more cautious economic restructuring the financial sector and boosting With the implementation of an Extended Credit policies under the IMF programme. The arrival public revenues. It is in this context that numerous both local and national level. The polarisation of political life into two camps - pro-Russian and pro- Facility under the aegis of the IMF in early 2017, of President Battulga , whose campaign focused reforms have been implemented to improve the government moved to implement fiscal on more egalitarian wealth distribution and the the supervision of banks and their activities, European - is behind the tensions in the run-up to the elections. So, in response to a government consolidation measures to reduce its deficit. The fight against corruption, should encourage the as the government is keen to comply with 2018 budget foresees a new reduction of the implementation of good governance practices Basel III agreements. However, the ratio of non- request, the Constitutional Court decided to temporarily suspend the president for rejecting all deficit, creating grounds for social discontent and improve the business climate, which have performing loans is still high, at almost 17%. The within the population (e.g. teacher protests been inadequate to date. IMF’s requirements have led to a policy of fiscal government nominations for the vacant post of Minister of Defence. calling for wage rise). The president (from the consolidation which will require strong increases opposition party) tried to veto the proposal in tax receipts (especially VAT) and diversification Moldova is in the grip of separatist ambitions (cancelled by a Parliamentary vote), judging the of income sources. Public investment spending will involving the eastern Russian-speaking region of consolidation efforts to be inadequate. A new also rise, but more modestly. Transnistria, which enjoys autonomous status and draw on the IMF USD 5.5 billion loan should The current account deficit is expected to remain which unilaterally declared independence under allow the government to meet the next interest fairly high in 2018, because of the huge trade the name of the Dniester Moldovan Republic in payment on a significant portion of its debt (USD deficit (29% of GDP in 2016) despite remittances 1992. A referendum (not recognised by the central 500 million and USD 160 million due in January from expatriate workers. Demand from European government) took place in 2006 and the de facto and June 2018, respectively). Other payments countries is expected to continue to stimulate leader of the region issued a decree in 2016 to due will be financed by the issuance of sovereign exports following the entry into force of the free- join Russia. bonds by the central bank as well as bilateral trade agreement with the EU in 2016. Moldova’s (Japan) and multilateral (ADB) loans. This should

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COFACE ASSESSMENTS COFACE ASSESSMENTS C A4 COUNTRY RISK COUNTRY RISK B A4 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 3.4 2.9 4.0 3.0 GDP growth (%) 4.5 1.2 4.3 2.9 Exports of goods, as a % of total 0.6 Exports of goods, as a % of total 34.5 Inflation (yearly average, %) 1.5 0.9 2.4 2.6 POPULATION Inflation (yearly average, %) 1.8 1.6 1.0 1.6 POPULATION Serbia (millions of persons - 2016) Euro Area (millions of persons - 2016) 25% Budget balance (% GDP) -8.3 -3.7 -6.0 -4.0 59% Budget balance (% GDP) -4.2 -4.0 -3.8 -3.5 6,707 3,004 Euro Area Current account balance (% GDP) -13.3 -18.0 -18.0 -17.0 United States Current account balance (% GDP) -3.1 -4.3 -3.9 -5.3 19% GDP PER CAPITA 3% GDP PER CAPITA Public debt (% GDP) 73.7 71.4 74.0 78.0 (US dollars - 2016) Public debt (% GDP) 63.7 64.7 64.9 65.3 (US dollars - 2016) Hungary India 11% (f): forecast 3% (f): forecast Bosnia Herzegovina Turkey 8% RISK ASSESSMENT 3% RISK ASSESSMENT Kosovo United Kingdom 6% Activity supported by investment not be possible without obtaining concessional 3% Slight downturn in 2018 agri-food, automotive, and aeronautical exports. Although lower, growth is expected to remain funding. Nevertheless, subject to construction Growth in Morocco is correlated to that of the Phosphate sales have also risen, driven by increased Imports of goods, as a % of total comfortable in 2018, continuing to be driven by of the Serbian portion, this route would improve Imports of goods, as a % of total agricultural sector, which, although on a trend demand from emerging markets despite a fall in commercial and tourist trade with Europe through world prices. In 2018, firm oil prices will continue to Euro Area investment. Investment will be supported notably Euro Area towards greater diversification, is still concentrated 35% by the continued construction of the 41 km long Serbia, as it would replace a dangerous road often 49% around cereal production, which is sensitive to adversely affect the cost of imports, but to a lesser closed in winter. extent than in 2017, while the expected increase Serbia first section (Podgorica – Mateševo) of the Bar- China weather conditions. 2016, characterised by a period 22% Boljare motorway project, which will eventually link The current account deficit will remain substantial 9% of drought, was followed in 2017 by heavy rains in investment will continue to sustain imports of China the Port of Bar to Boljare, on the Serbian border. in 2018 due to the abyssal trade deficit in goods United States pushing agricultural GDP up by 15.1% and total GDP capital goods. In contrast to 2017, the growth in 9% Foreign investment in tourism infrastructure is (45% of GDP). Exports, mainly metals (aluminium 6% up by more than 4%. From a sector perspective, remittances from expatriate workers driven by Bosnia Herzegovina set to continue, further developing a sector that from Kombinat Aluminijuma in Podgorica and steel Turkey manufacturing industries continued their upturn more favourable economic conditions in European 5% already contributes 10% to GDP. However, the from the Toscelik steel mill in Nikšić) and electricity, 4% begun in 2016, as has the services sector, buoyed countries, improved tourism income and higher Croatia construction of a second coal-fired power station which are very sensitive to international economic Russia by the recovery in tourism. Construction is still FDIs will help consolidate foreign exchange reserves 5% in Pljevlja seems to be compromised by tighter conditions and rainfall, are largely offset by imports 2% on a downward trend, evidence of the downturn at a satisfactory level of just over five months of European environmental standards. Consumption, of equipment for road infrastructure, but also by in the residential property market since 2016. In imports. Following the announcement of a move to a floating exchange rate, these reserves came under + STRENGTHS both private and public, will contribute little to imports of food and oil products. Tourism generates + STRENGTHS 2018, growth is likely to be more muted mainly growth, in connection with the fiscal consolidation. a surplus representing 20% of GDP. Russians, who because of the underlying effect associated with downward pressure from the massive purchase of • Tourism potential (sea, mountains, The contribution of foreign trade will be negative constitute one quarter of the summer arrivals, have • Favourable geographic position, close to the a slowdown in agricultural GDP growth. However, hedging products by domestic economic players and and climate) due to the increase of imports related to the not been sensitive to the country’s alignment with European market the economy, excluding agriculture, is expected from central bank interventions aimed at stabilising • Hydroelectric potential construction of the motorway. the Western position on Ukraine or the country’s • Strategy to move to high-end market and to continue perform well, buoyed by still resilient the dirham’s exchange rate. The reform, which is • Use of the euro accession to NATO. In the end, half of the current diversify industrial production internal demand. Household consumption, although intended to result in greater flexibility for the dirham, has been postponed to a later date. • Negotiations for membership in the EU account deficit is financed by FDI, and the balance • Political stability and commitment to benefiting from moderate inflation, will be slightly Consolidation of public and foreign accounts reforms • Good-quality education and healthcare linked to the completion of the motorway is financed by debt and undeclared capital inflows penalised by falling agricultural incomes. Investment construction project invested in secondary residences. Foreign debt • Growing integration in African market is expected to remain firm, thanks to the ongoing Increased social risk represented 167% of GDP at the end of 2016. Its pursuit of an expansionary public investment policy Although he won the 2016 parliamentary elections, Although diminished, the public deficit will remain recent growth is due to the growth in its public based on major projects, chiefly oriented towards - WEAKNESSES high, leading to a further increase in debt (78% of the leader of the JDP (Justice and Development share (one third), a consequence of the external - WEAKNESSES port projects (Tanger-Med 2, the Nador West- Party), Abdelilah Benkiran, failed to capitalise on • Small market GDP at the end of 2016, 60% of GDP for its foreign financing of the public deficit and the disbursement Med port complex) and robust private investment portion alone). However, the consolidation of • Economy very dependent on his victory in the polls by building a coalition able to • Dependence on tourism, construction, of the Chinese loan for the motorway. performances in the agricultural sector encouraged by a policy of tax incentives (exemption form a government. After 5 months of impasse, a and energy the budget will intensify. Indirect taxation, which from registration fees for new businesses, lower tax already represents 67% of tax revenue, will be • Significant social and regional disparities. new prime minister, also from within the ranks of the • Electrical production relying largely rates on certain sectors). Exports, on the way up in further increased. The ordinary VAT rate will thus Frozen political scene Although falling, the poverty rate remains JDP was appointed by King Mohammed VI to replace on subsidised coal high 2017, are expected to continue the same positive increase from 19% to 21% in early 2018. Levies on The Democratic Party of Socialists (DPS) - formed him. Saâdeddine El Othmani took up his post as head • Inadequate road and electrical networks trend in 2018 with recovery consolidating in the tobacco, sodas, and alcohol will rise. Control will be from the former Communist party and dominators • Weak productivity and low of the government in April 2017, after concluding • Structural unemployment (14%) and competitiveness markets of the Kingdom’s main trading partners. an agreement with five other parties. Among the shortage of qualified workers facilitated by the widespread use of connected cash of the political scene since 1991 - came out on top registers. The exceptional 2% increase of the tax on in the October 2016 legislative elections, winning • High unemployment rate and low female challenges the new government will face is the • Size of the ethnic vote and political participation in the labour market Ongoing fiscal consolidation uprising affecting the landlocked regions in northern impasse high incomes (single rate of 9%) is expected to be 36 out of 91 seats. Thanks to the withdrawal of extended. The action on current expenditure (social the DPS’s historic leader, Milo Djukanovic, and the • Political tensions with regional neighbours The fiscal consolidation begun in 2013 has led to Morocco. The Hirak movement is campaigning for • Mediocre business climate benefits and salaries mainly), which is equivalent to parliamentary boycott by the opposition dominated a gradual stabilisation of the public deficit. Rising greater social justice and action to address the • Large black-market economy 80% of total expenditure, will be smaller. Salaries by the Democratic Front (pro-Russian) – which internal demand pushed up revenues from indirect regional disparities penalising the Rif region. Street (39% of GDP) and low labour market demonstrations intensified in July 2017 following participation rate (54%) of senior civil servants will be further cut, while still disputes the results –, Duško Marković, vice- taxes, particularly VAT, and from direct taxes. the increase will not exceed 1% for others. Faced prime minister in the previous government, took Spending remained contained, despite there being the arrest of the movement’s main leaders now with this, the pension deficit borne by the State the lead of a coalition government uniting the DPS no government from November 2016 to April 2017. facing serious charges. The police response was and mainly due to early retirement represents and the minority ethnic parties. The government In 2018, public spending is likely to edge upwards, not the only response by the Moroccan authorities. more than 3% of GDP. The tax cuts designed to has completed the NATO accession process boosted by an increased investment drive by public- In October 2017, King Mohamed VI announced the attract foreign investments in tourism, such as the and is working to obtain European Union (EU) sector companies, but also by higher operating sacking of several ministers and secretaries of application of a reduced VAT rate of 7% for luxury membership. Corporate life is complicated by expenditure associated with the rise in the number state. This reshuffle came after several speeches by hotels, are costly. However, the critical obstacle corruption, the politicisation of the legal system of civil servants in the national education system. the king strongly denouncing the administration’s is the construction of the motorway, without (harming the performance of contracts and the Financed primarily on the domestic market on ineffectiveness and its inability to meet the demands which the budget would be balanced. The cost of handling of insolvency), organised crime, an preferential terms, the public debt is expected to of its citizens. Morocco is strengthening its economic the first segment represents one quarter of GDP. inaccurate land register, and slow administrative remain stable in 2018, so debt interest payments and political presence on Africa by becoming a key The construction by China Road & Bridge, 30% of procedures. However, EU accession negotiations look set to remain moderate. player in the region after its reintegration into the African Union on the 30th January 2017, as well as its which is local subcontracted, is 85% financed by a are leading to improvements in the business climate. The deepening trade deficit puts pressure on the st accession to ECOWAS. 20-year loan in dollars from Exim Bank at a rate of In 2016, Montenegro was in 51 place out of 190 in external accounts. The combination of temporary th 2% with a grace period of six years. The country is the World Bank’s Doing Business survey and 77 factors like the increase in purchases of capital responsible for the remaining cost. Construction out of 138 in the Global Competitiveness Report. goods associated with infrastructure projects and should be completed in 2019, allowing the balance the higher energy bill resulting from the rebound to become positive and the debt to fall quickly as in the oil market has pushed imports higher. of 2020. It seems certain that the construction of However, this increase obscures the dynamism of the remaining 136 km, for an equivalent cost, will

154 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 155 MOROCCO MOZAMBIQUE

PAYMENT AND COLLECTION PRACTICES IN MOROCCO COFACE ASSESSMENTS Payment Ordinary proceedings Amicable settlement procedure A writ of summons is sent by the creditor’s Amicable settlement procedures can only E Cheques are still commonly used as instrument COUNTRY RISK of payment and also constitute efficient debt representative to the relevant court and be implemented by a commercial company, recognition titles: debtors may be prosecuted served by a bailiff to the debtor, who may trader, or artisan, who is experiencing financial subsequently obtain legal representation in the difficulties but is not yet cash flow insolvent. D if they fail to pay the amount owed. Bills of BUSINESS CLIMATE exchange also constitute an attractive means period prescribed by the judge and file a counter Once initiated, the debtor is placed under the of payment, because they are a source of claim. Several hearings may be required for the supervision of the Court. The Court subsequently short-term financing by means of discounting, exchange of written submissions, transmissions appoints an external mediator for a limited period instalment, or transfer. of documents and to produce the relevant of three months to assist the debtor in reaching TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) evidence. an agreement with its creditors. A settlement Promissory notes are used to record the financial GDP growth (%) 6.6 3.8 3.5 4.8 28.8 The main hearing is set by the judge to hear the can be reached with all creditors or the debtor’s Exports of goods, as a % of total details of personal debts, business debts and “main creditors”. Creditors are entitled to their Inflation (yearly average, %) 2.4 19.2 17.5 10.5 POPULATION real estate transactions. They are legally binding presentation of the pleadings. Discussions and Euro Area (millions of persons - 2016) pleadings are conducted by the judge during entire claim, but the mediator may propose an 40% Budget balance (% GDP)* -7.2 -5.7 -4.8 -4.5 contracts that can be used in a court of law if arrangement or creditors may assign a portion 392 the debtor defaults. A promissory note acts the public hearing. The case is then taken under India Current account balance (% GDP) -40.3 -38.2 -42.2 -39.6 of the debt if they so wish. Once approved by the 15% GDP PER CAPITA as solid evidence of an agreed payment, and deliberation to allow judges to discuss the means, Public debt (% GDP) 94.7 127.5 128.1 125.6 (US dollars - 2016) grounds, and pronouncement that make up the Court, all judicial proceedings relating to debts South Africa subsequently debt in case of dispute. * Including grants (f): forecast content of the judgment. After the sitting of the covered by the agreement are suspended for the 15% Nevertheless, bank transfers are becoming judgers, a reasoned judgment is rendered. It can duration of the amicable settlement agreement. Singapore the most popular means of payment for both usually be obtained within an average delivery Judicial rehabilitation proceedings 3% RISK ASSESSMENT domestic and international transactions. time of one year. This insolvency procedure is only available for China 3% Faster growth underpinned by the mining a government debt interest payment default in debtors that have become insolvent (état de sector January 2017. The hoped for restructuring of this, Debt collection cessation de paiement), but whose financial Enforcement of a legal decision naturally dependent on the implementation of more situation is not irreparably compromised. An Imports of goods, as a % of total Although growth in 2018 will be faster, it will Amicable phase severe fiscal consolidation measures, will prove Once all appeal venues have been exhausted, insolvency judge and an office holder (the person continue to suffer because of the crisis resulting Debt collection must begin with an attempt to South Africa salutary for the country, which also lost its access a judgment becomes final and enforceable. appointed by the court as part of an insolvency 36% from the suspension of multilateral aid following reach an amicable settlement. Creditors attempt Garnishee orders are normally efficient for to the international markets. Although talks with or liquidation; also acts as the syndicate) are Euro Area the revelation, in April 2016, of hidden (1.4 billion to contact their debtors through different the donors have restarted, the guaranties provided seizing and selling the debtor’s assets. appointed by the court. During the process, 19% dollars, approximately 10.7% of GDP) being means (telephone calls, written reminders by the government against the borrowings of According to Moroccan law, commercial courts the debtor and its management remain in China concealed by the government. The result is that such as formal letters, emails or extrajudicial public sector companies has increased the risk of are obliged to recognize judgments rendered possession of the company’s assets and the 11% the government’s funding needs will take priority notifications, etc.). Amicable settlement a sovereign default. abroad, even if there is no convention signed for debtor continues its business. The rehabilitation Bahrain over the many, constantly delayed, infrastructure negotiations can be intense, and cover aspects 5% such as the number of payment instalments, this purposes with the issuing country. In order procedure can result in either the reorganization projects such as the Maputo-Catembe bridge The current account deficit, linked with the scale to be recognized and enforced, the original copy of the debtor’s business or its liquidation. The United Arab Emirates initially planned for 2017. The scale of the State’s of imports the country needs to be able to improve write-offs, guarantees/collateral, and grace 4% period interest. Moroccan law states that a of the foreign judgment must be provided to the office holder is required to prepare a report on financial requirements will also dominate the its infrastructure (gas, transport), is likely to lawyer can acknowledge the signature of the court with a certificate of non-appeal. the situation of the company within four months banking sector, to the detriment of providing remain high in 2018. The vigour of mining sector debtor via payment plans, which are signed, When a foreigner gets final judgment that they from the opening of the proceedings. In his + STRENGTHS finance for the private sector. However, the mining (aluminium and coal) exports will still not be enough certified, and legalized by the competent want to enforce in Morocco and, if not, when report, the office holder will either recommend a sector, in particular coal and aluminium, will help to reduce the very large trade deficit. The current • Favourable geographic location: long authorities in Morocco. The creditors’ lawyer can seeking enforcement of a Moroccan judgment rehabilitation plan for the debtor, the sale of the drive economic growth, thanks to the vitality of account deficit will however be funded thanks to coastline, proximity to southern African incoming FDI and a moderate upturn in prices. massive FDI inflows in the mining sector, further subsequently use this payment agreement as abroad, they must follow exequatur proceedings. business, or liquidation. The court is then required markets to reach a decision on the fate of the debtor, Increasing demand for precious stones, as well as increased thanks to the opportunities arising debt recognition in case of legal action. There are two enforcement procedures. The based on the report. There is no direct vote by the • Significant mineral (coal), agricultural and the start of production in 2017 of the country’s first from future production of liquefied natural gas, Legal proceedings first is uniquely Moroccan, whereas the second hydroelectric resources creditors on the options available to the debtor graphite mine, will help improve the diversity of the expected in 2022. The Central Bank is also likely to Morocco has a dual legal system that consists is fixed by judicial bilateral agreement between • Huge offshore gas field discovered in 2010 during the procedure. country’s exports. The exports of the extractive continue its interventions in the markets to try and of secular courts based on French legal tradition Morocco and other countries, including Germany, • Support from donors and foreign industry will also feel the benefits of the increase maintain the managed float of the metical to the Judicial liquidation proceedings and courts based on Islamic traditions. The Belgium, the United States of America, the United investors (FDI) to finance mining and capacities of the rail line linking the mines in the dollar, supported by a slight increase in its currency The judgment initiating the procedure makes gas infrastructures (suspended since appointments in brackets are written in French Arab Emirates, Spain, France, Italy and Libya centre of the country with the port of Nacala, where reserves (2.3 months of imports), thanks to these all the debts immediately due and payable, November 2016) because they are the own appointments of the specialised coal terminal has been expanded. FDI flows. the creditors within a period of two months different courts in Morocco. Insolvency proceedings The vitality of external demand, in particular in must present their claims. Moroccan creditors Secular courts includes proximity courts the eurozone (40% of exports), will also help Insolvency proceedings are regulated by have two months to submit their declarations; - WEAKNESSES A fragile political situation and governance (juridictions de proximité) in charge of settling boost exports. The continuation of the ceasefire Book V of the Commercial Code. It provides for creditors residing abroad have a period of four weaknesses disputes between individuals, Courts of First • Lack of diversification; dependence on raw between the armed faction of the main opposition prevention of difficulties (alert procedure and months. Liquidation proceedings may terminate Instance (tribunaux de première instance) material prices (aluminium, coal) party (Renamo) and the government will, if it lasts, As of the parliamentary elections in October 2014, amicable settlement procedure) as well as formal prematurely before a distribution in liquidation if: Frelimo, in power since 1994, has had to deal with dealing with all civil matters, Commercial Courts insolvency procedures (judicial rehabilitation • Lack of suitable transport and port enable the farmers in the centre of the country to dealing with business disputes, Appellate • the debtor has no more debt, or infrastructures limiting country’s raw once again ship their products around the country a vigorous opposition from the leading opposition proceedings and judicial liquidation proceedings). material export capacity party, Renamo, both within parliament and on the Courts (Cours d’Appel) dealing with civil and • the office holder has sufficient funds to pay all and abroad. Agriculture will in fact continue to be a Alert procedure ground in the form of guerrilla actions in certain administrative matters, and a Court of Cassation the creditors in their entirety, or • Scale of grey economy (40% of GDP) key sector for Mozambique, as it accounts for 21% Businesses are compelled to work towards the (Cour de Cassation). • Banking system constrained by the of GDP and employs almost 75% of the workforce. provinces in which it is firmly installed and wants internal prevention of their financial difficulties • the debtor does not have enough assets to government’s financing needs Finally, household consumption is expected to to exercise local political power. It would however There are 27 Sadad Courts, which are courts of and recovery with the aim of maintaining cover the costs of the liquidation procedure. • Poor governance receive a boost from the stronger performances seem likely that a peace agreement could be first instance for Muslim and Jewish personal law. their activity. The alert procedure is initiated signed between the two factions, in so far as Under Moroccan law, there are no specific • Problematic climatic conditions with of the agriculture sector, but it will be limited by the by a business’ auditors or partners (external Fast-track proceedings rules on the priority of claims in the event of frequent flooding continuing high rate of inflation, despite a clear drop. Renamo appears to want to take advantage of the The order to pay is available when the debt has auditors hired by the company to rectify the insolvency. Nevertheless, there are some declining popularity of President Nyusi in order to a contractual cause or the obligation is of a financial situation), who are required to notify the privileged creditors such as: the employees, the win seats in the local elections in 2018, followed statutory origin. It is characterized by a petition manager of the business of any opportunities to Major efforts to bring public finances under by the presidential election in 2019. The scale of public treasury, the social agencies, the creditors control in the context of reduced financing form sent to the relevant clerk of the court. The redress the situation within eight days. If no steps of a collective conciliation, finally the unsecured social discontent within the country remains a debt must be certain, liquid (i.e. clean and clear), are taken to remedy the situation within fifteen creditors. Since the sharp worsening of the budget balance source of political instability, because of continuing due, and uncontested. An enforceable order days, a general assembly must be convened to in 2014, the government has continued its policy high inflation, alongside widespread corruption. to pay is obtained within an average delivery take a decision on how to redress the situation of fiscal consolidation. This fiscal position could The business climate in Mozambique remains time of six months, unless the defendant based on the auditor’s report. prove hard to maintain because of the ongoing difficult. Its performances as measured by the lodges an opposition against the ruling. In the suspension of international aid, which funds 20% of World Bank’s governance indicators are generally defendant opposes the order within one month State spending. The implementation of measures below those of its neighbours (with the exception of being served, the case is referred to ordinary aimed at broadening the tax base and improving of Zimbabwe). The country has dropped in the proceedings. tax collection services as well as the efforts in rankings, in particular those concerning the rule terms of expenditure, will nevertheless still not be of law (176th place out of 209 countries in 2016 enough to significantly improve the budget balance. against 129th in 2010), combating corruption and In addition, the holding of local election in 2018 will political stability. make it difficult to reduce current expenditure. This means that investment spending could be cut instead. At the same time, public indebtedness (mostly external) has reached a record level, with

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COFACE ASSESSMENTS COFACE ASSESSMENTS D B COUNTRY RISK COUNTRY RISK E A4 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 6.0 1.1 -0.6 2.5 Exports of goods, as a % of total GDP growth (%) 7.0 6.1 7.2 7.6 52.3 Exports of goods, as a % of total 2.3 Inflation (yearly average, %) 10.0 6.8 6.5 6.1 POPULATION Inflation (yearly average, %) 3.4 6.7 6.3 5.8 POPULATION China (millions of persons - 2016) Switzerland (millions of persons - 2016) 41% Budget balance (% GDP) -1.2 -3.2 -4.8 -4.6 20% Budget balance (% GDP)* -8.2 -6.3 -5.9 -4.6 1,232 4,709 Thailand Current account balance (% GDP) -5.2 -5.9 -6.6 -6.6 Euro Area Current account balance (% GDP) -12.6 -14.2 -8.1 -7.6 19% GDP PER CAPITA 18% GDP PER CAPITA Public debt (% GDP) 32.0 32.0 32.2 32.8 (US dollars - 2016) Public debt (% GDP) 39.6 40.9 42.2 42.9 (US dollars - 2016) India South Africa 9% (f): forecast fiscal year (April 2018 to March 2019) 17% * Last fiscal year from April 2018 to March 2019 (f): forecast Singapore Botswana 8% RISK ASSESSMENT 15% RISK ASSESSMENT Japan Zambia 6% Growth will remain very strong use of loans from the central bank to finance its 7% Limited upturn in growth is expected to be slightly comparable, thanks Myanmar’s economic growth is set to remain one deficit. The goal is to go from 40% of the deficit in Impacted by drought and lower raw material to further increases in mining sector revenues, Imports of goods, as a % of total of the region’s highest in 2018. Activity benefited 2017 to 20% in 2018. Imports of goods, as a % of total prices, the Namibian economy continued to which will help offset the expected reduction in payments from the SACU. In terms of expenditure, China from the democratic transition and the arrival In terms of external accounts, the current South Africa suffer in 2017, with reduced public expenditure. 34% to power of the National League for Democracy account deficit should remain stable in 2018. 57% However, following two consecutive years of the government is planning a slower rate of consolidation, already tempered over the last Singapore (NLD) in April 2016. Nevertheless, the dynamism Exports will continue to increase, especially Botswana slowing economic activity, punctuated by a 14% will be relatively dependent on the establishment to China (largest trading partner), boosted 7% recession in 2017, growth is expected to start two tax years. The government is thus planning Thailand of a clear economic agenda by the government in by the construction of the gas pipeline (gas Euro Area recovering in 2018. Any upturn in the rate of growth a reduction in spending of 1% of GDP in 2018/19. 12% 2018, institutional reform, and the resolution of is the most exported product – 39% of total 5% will be essentially driven by further increases in Despite the planned reduction, the deficit is Japan the crisis of the Rohingya population – a Muslim exports). Imports will increase further, including Zambia agricultural and mining production, which has expected to remain at a high level, and there is a 8% minority in a Buddhist majority country, in the transportation and construction materials. The 4% already helped limit the downturn in growth in 2017. possibility of budgetary slippage in the run up to the India state of Rakhine (western part of the country). current account deficit will be offset by very China Badly impacted by the extended drought, and made 2019 elections. In order to finance the deficit, debt 7% 3% is set to continue increasing, although at a slower The agricultural sector, which benefited from strong FDI inflows. worse by the effects of theEl Niño climate pattern rate than in recent years. As a result of the country’s favourable climatic conditions in 2017, will To improve the economy’s resilience to external in 2016, the agricultural sector is set to continue worsening budget situation and debt ratios, + STRENGTHS continue to develop in 2018 notably due to large shocks, authorities are likely to move towards a + STRENGTHS the improvement that began in 2017. The raising Moody’s downgraded Namibia’s bond and issuer water collection from dams. Burmese production floating exchange rate of the kyat in 2018. of the minimum wage for agricultural workers - status to “junk” in August 2017. The cost of debt is • Ongoing democratic transition and opening is expected to benefit from relatively high • Plentiful mineral (diamonds, uranium, reflecting this upturn in an economic sector that of the economy copper) and oceanic fishery resources therefore likely to rise over the coming months. demand for rice, both domestic and external (rice employs (directly or indirectly) almost 70% of the • Strategic geographical location, between Democratic transition in a context • Tourist potential population – should have a beneficial knock-on for being the main export of the primary sector). of inter-ethnic conflict Thanks to a favourable shift in the balance of trade, India and China • Good transport infrastructure household consumption. the current account deficit is expected to fall in • Abundant raw materials (rice, jade, Public and private (especially foreign) investment In political terms, the country has seen an Following its recovery in 2017 from three years of 2018, while remaining in deficit. Increased mineral minerals, gas and oil) in infrastructure is increasing. The construction unprecedented period of liberalisation. Partial contraction, a revival in the mining sector is also likely exports will likely be the biggest contributor to • Significant hydroelectric potential sector should be the first to benefit from this, parliamentary elections were held in April - WEAKNESSES to stabilise in 2018. With the increased production this, with the weakness of economic activity – and with a predicted growth of 16.4% in 2018. Chinese 2012, the first elections in which all elements • Proximity to vibrant economies from the Husab uranium mine, where operations most notably the construction sector – making (India, China, Thailand) companies have built a 771-kilometre gas of the opposition had taken part since 1990. • Dependence on the mining sector (almost 50% of exports) began at the start of 2017, the country (currently itself felt in terms of the levels of imports. The pipeline, operational since 2017, and have seven The National League for Democracy (NLD) won • Huge tourist potential the world’s fifth leading producer) should climb the customs duties paid to Namibia as part of the SACU, major infrastructure projects in the Irrawaddy 43 of the 45 seats up for election, enabling its • Agriculture sector subject to climatic • Potential of the primary sector (agriculture, hazards rankings of uranium producers (behind Kazakhstan which were critical in boosting the transfers balance Valley, the country’s main river. leader Aung San Suu Kyito become an MP. In the arable land) and Canada). The Otjikot copper and Tschud gold surplus and thus in reducing the current account general election of 8 November 2015, the NLD • Dependence on South Africa • Youthful profile of the population The development of tourism should also continue mines, active since 2015, are also expected to deficit in 2017, are expected to remain static, won over 80% of the vote, and subsequently • Very high unemployment (28%) and despite the lack of hotel accommodation. contribute to the level of activity. Launched in June however. A loan from the ADB, granted in June 2017, entered into office in April 2016. Htin Kyaw was extreme inequality Although poverty remains widespread, private 2017, the world’s largest deep-water diamond helped Namibia maintain a better level of currency elected President by Parliament and Aung San - WEAKNESSES consumption (50% of GDP) will likely continue exploration and sampling vessel should further help reserves, and so it should be able to sustain parity Suu Kyi was appointed “State Counsellor” – a role to support growth in 2018, benefiting from the the diamond sector consolidate its recovery. The with the rand. • Extreme ethnic tension between specifically devised for her as the Constitution increase in the level of wages and transfers decline in public consumption, which has been a drag the Muslim Rohingya minority and prohibits her from becoming President because the Buddhist majority from Burmese residents abroad. This reflects on growth, is also expected to be reversed with the of her foreign family links. The partial legislative Swapo set for the 2019 elections a household savings rate which remains very upturn in revenues generated from the extraction • International condemnation of the elections of April 2017 maintained the position Having consolidated his position as leader of discriminatory policy against minorities low. Inflation will remain high as a result of of mineral resources in the country. The agricultural of the NLD, which lost only one of the 255 seats Swapo in November 2017, despite internal divisions, expansionary economic policies, rising wages, production processing industries could be particular • The role of the Central Bank not yet really it held. President Hare Geingob now has a clear run at re- defined housing prices, and growth in domestic demand. beneficiaries of this. European and US sanctions could return election in 2019. Swapo, having held power since • Undiversified economy However, with continuing tight budgetary in 2018 if the Rohingya situation does not independence (1990), is expected to once again • Underdeveloped financial sector Dual deficits but increase in FDI limitations, the recovery in 2018 will likely be improve. Following attacks on police stations, reassert its total domination of the political stage. Efforts to bring the budget deficit under somewhat restrained. The increase in levels of the Myanmar army’s campaign of repression There could, however, be signs of waning support control are expected to continue in 2018. Public private investment could be slowed as a result of against the Rohingya population in the state for Namibia’s leading party, as levels of inequality expenditure accounts for nearly 15.6% of GDP, of the rhetoric of radical operational environment of Rakhine, led to the departure of more than and unemployment remain extremely high in a which 31% is military expenditure. Nevertheless, changes which are part of the New Equitable 500,000 Muslims, who mostly moved to context of slowing economic activity. At the same social and educational spending will remain at Economic Empowerment Framework (NEEEF). Bangladesh. At the end of 2017, Bangladeshi time, the relatively poorly-organised opposition is a high level. The state will invest mainly in the Reflecting the downwards dynamic of inflation seen authorities planned to begin the process of unlikely to threaten the Swapo hegemony. construction of new economic zones in Thaliwa, in South Africa, prices are expected to continue repatriating the Rohingya population, although Thanks to its regular progress in terms of enforcing Dawei and Kyaukpyu. At the same time, with gradually slowing through 2018, while still remaining the latter are not citizens of Myanmar following contracts, Namibia brought to an end its ten year- revenues being restricted by weak natural gas vulnerable to the volatility of the rand (to which the a decision by the Burmese army in 1982 not to long unbroken decline in the Doing Business prices, the government wants to push ahead Namibian dollar is linked). with reforms aimed at increasing the tax base, grant them this status. The UN refers to this rankings. In the 2018 rankings, the country situation as “ethnic cleansing”. has thus progressed from 108th to 106th (out of which would help boost budget revenues. In fact, Gradual budget consolidation Myanmar’s tax collection is the smallest of the Lastly, the business environment remains very 190 countries). While the country is therefore ASEAN countries (8% of DP). The right of transit precarious and Myanmar is one of the poorest Increased revenues from the recovery in customs among the ten highest-ranked countries in Sub- of gas and oil between extraction sites and China ranked countries in the world according to the duties paid by the SACU, as well as from mining Saharan Africa, the lack of any new reforms lies will yield USD 13 million annually. The government World Bank’s Doing Business index (170 out sources, helped reduce the deficit for the 2017/18 behind Namibia’s decline in competitiveness when is set to continue to rely less and less on the of 190). fiscal year. The situation for the following year compared with its competitors in the SADC.

158 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 159 NEPAL NETHERLANDS

COFACE ASSESSMENTS COFACE ASSESSMENTS D A1 COUNTRY RISK COUNTRY RISK C A1 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 3.3 0.4 5.5 4.5 GDP growth (%) 2.3 2.2 3.1 2.6 Exports of goods, as a % of total 28.9 Exports of goods, as a % of total 17.0 Inflation (yearly average, %) 7.6 10.4 6.5 7.5 POPULATION Inflation (yearly average, %) 0.2 0.1 1.3 1.4 POPULATION India (millions of persons - 2016) Germany (millions of persons - 2016) 57% Budget balance* (% GDP) 0.7 1.4 -1.1 -1.2 24% Budget balance (% GDP) -2.0 0.4 0.6 0.9 733 45,658 United States Current account balance (% GDP) 5.0 6.3 -0.3 -1.3 Belgium Current account balance (% GDP) 8.6 8.5 10.0 10.0 11% GDP PER CAPITA 11% GDP PER CAPITA Public debt* (% GDP) 25.2 27.3 25.7 23.2 (US dollars - 2016) Public debt (% GDP) 64.6 61.8 57.4 54.2 (US dollars - 2016) Euro Area United Kingdom 9% *Fiscal year from 15 July: 2018 budget data corresponds to the period July 2017-June 2018 (f): forecast 9% (f): forecast Turkey France 4% RISK ASSESSMENT 9% RISK ASSESSMENT United Kingdom Italy 3% Growth expected to benefit from quality. Spending, which is likely to represent 4% Growth driven by internal demand and growth is picking up due to dynamic growth reconstruction efforts 25.3% of GDP by the end of 2018, should still be by expansionary fiscal policy in Dutch incomes, the trade surplus will likely Imports of goods, as a % of total Despite its impact on dividend repatriation focused on hydroelectric projects and transport Imports of goods, as a % of total Activity is expected to continue to grow at a remain above 10% of GDP. As perspectives and wage conversion by expatriate Nepalese infrastructure. Rising revenues will not offset very dynamic pace in 2018, and is expected to for world trade improved significantly in 2017, India Germany Dutch exports have been boosted as well. Trade 70% workers, India’s demonetisation of notes – these reconstruction efforts and the fiscal 15% be higher than 2% for the fourth consecutive balance is set to continue to show a slight deficit in services, together with transport, tourism, China representing 87% of the money in circulation China year. The biggest growth contributions will 10% (November 2016) – did not prevent the for the second year in a row. However, the public 14% likely be delivered by private consumption and royalties, and services to businesses, will likely remain slightly in negative figures. The net United Arab Emirates Nepalese economy from growing strongly in debt burden will continue to ease. The country Belgium investment, followed by public consumption. 3% 2017. The government’s ambitious objective will still benefit from financial support from the 8% These trends are supported by an expansionary financial account balance is negative, although Euro Area of 7.2% growth during the 2017/18 tax year international community, and donations (12% of United States fiscal policy package, which was agreed on by FDIs in the Netherlands increased over the last 2% notwithstanding, the Nepalese economy is state income during tax year 2016/17) will help 8% the new four-party government. This package two years. On the other hand, Dutch investment Thailand expected to slow in 2018. Consumption will limit the use of borrowing. United Kingdom includes lower income taxes and higher abroad was even higher. Finally, the current 1% continue to be the main growth driver (76.2% With regard to external accounts, Nepal will 5% expenditures in the areas of social affairs, account surplus is expected to increase into of GDP for the 2016/17 tax year) and it should remain strongly dependent on China and defence, and education, and aims to attract double-digit area. Thanks to recurrent current higher private expenditures as well. account surpluses, the country can post a net + STRENGTHS continue to benefit from significant remittances India, as two thirds of its total imports come + STRENGTHS from expatriate workers (27% of GDP). Growth from these two neighbours. The country has a creditor position equivalent to about 70% of GDP. Household consumption is notably driven by Fiscal policy stance has been loosened with the • Remittances from expatriate workers momentum will however be limited by the significant trade deficit due to the pervasiveness • Port activity (Rotterdam, leading European very dynamic growth in employment, with an sustain consumption, the main driver inflationary tensions associated with high of imports of numerous products. Despite port) formation of the new government, but despite of growth approximate 4% decrease of unemployment planned higher government expenditures transport costs and by the high prevalence substantial remittances by expatriate workers • Good competitiveness indicators over the course of 2018. Investment outlays by • Dynamic services sector, especially from 2018 onwards, the general government of poverty. and the substantial rebound in tourism revenues, • Diversified exports and external accounts corporations are driven by the fact that capacity tourism higher imports of capital goods needed in surplus balance is expected to remain in surplus. As a The Nepalese government launched its “Vision utilisation rates reached their pre-crisis levels consequence, general government gross debt • Financial and technical support from India for the reconstruction effort and the weak • High quality infrastructure and China 2030” programme to reduce the poverty rate again. One key issue to observe carefully is decreased below the Maastricht threshold of competitiveness of Nepalese products on the • High levels of household savings: net the Dutch property market in liaison with the • Considerable international solidarity from 23% to 5% by 2030. However, it will take 60% in 2017. a long time to implement, given the persistent international market are expected to result in a financial assets = 200% of GDP development of private household debt: House political instability and uncertainty, and with worsening current account balance. prices went up by more than 20% from mid-2013 and are back to their pre-crisis level. Despite After long negotiations, a four-parties - WEAKNESSES the government still vague about the details. coalition was built up Furthermore, the reconstruction efforts Slow political stabilisation - WEAKNESSES the dynamic increase in house prices, this trend Seven months after the general elections, • Heavily dependent on the agricultural following the 2015 earthquakes are expected to After another period of political instability, • Economy reliant on European economic is probably not debt-driven, as total mortgage sector and vulnerable to weather events continue. These efforts are focused on transport a new coalition was formed in August 2016 cycle debt is hardly growing. Furthermore, household the re-elected Prime Minister Mark Rutte was • Isolated and difficult access to many of infrastructure, severely damaged by the disaster, between Pushpa Kamal Dahal (Communist • Exposure to the UK; Brexit-related risks debt as a percentage of net disposable income is able to build a new government, comprised of his the country’s regions on a downward trend. According to OECD data, liberal VVD party, the left-liberal party D66, and in order to improve the still weak connectivity party), Prime Minister for the first nine months, • Households and banks reliant on property • Vulnerable to natural disasters of this isolated country. Investments will also and Sher Bahadur Deuba (Nepalese Congress, market this ratio stood at 270.1% in 2016. Admittedly, the two Christian parties: CDA and Christenunie. this is a very high level in terms of international This coalition has a majority of only one seat in • Economy strongly affected by the be directed towards hydroelectricity, which centre-left), Prime Minister since June 2017. The • Concentration of wealth in housing and earthquakes of April and May 2015 is largely underexploited. However, progress two parties must organise local, provincial and pension funds; lack of liquidity comparison, but it is almost 24 percentage points the parliament in The Hague; and combined with less than in 2010. The very good macroeconomic wide-spread political interests across the four- • Weak productivity in the secondary sector is slow, with project implementation often central elections by the end of 2018, which raises • Ageing population; high cost of healthcare hampered by bureaucratic inefficiency. Following environment is reflected in the strong downward party government, a premature break-up is • Infrastructure shortcomings, recurrent hopes of greater political stabilisation. However, • High taxation of labour electricity and fuel shortages the almost total interruption of bilateral trade the power sharing arrangements are fragile pressure on business insolvencies. Coface within the realms of possibility. In such a difficult • Recurrent political difficulties and violence triggered by disagreements with India over and subject to tensions between the parties. forecasts a fifth decrease in a row in 2018. political environment, far-reaching reforms are Bankruptcies are expected to fall by 10%, after a highly unlikely. the new 2015 constitution, the resumption of Political equilibrium in the country will, therefore, SECTOR RISK ASSESSMENT trade with India (65% of Nepal’s external trade) remain precarious, and the risk of another period decrease of more than 20% in 2017. should, as in 2017, benefit growth. Finally, at the of instability and violence cannot be ruled out, sector level, activity will benefit from favourable, especially with several minorities denouncing General government and current account but output from the agricultural sector, which the decision to split up some provinces under balance in surplus represents a third of GDP and employs 68% of the 2015 Constitution. The business climate is The Dutch economy is very open regarding the population, will remain low. therefore still poor. trade, with exports of goods and services With regard to external relations, the aid sent accounting for more than 150% of GDP, and the Slight worsening of the fiscal and current by China and India after the earthquake reflects country being among the top ten exporters in account balances the rivalry between the two powers for influence the world. It mainly supplies agrofood products The budget for the 2017/18 tax year continues the over Nepal. Tensions in 2015 with India seem to (plants, flowers, dairy products, meat, fruit spending plans from the 2016/17 budget, whose have lessened, but could be revived over the and vegetables), chemicals, medication and implementation was hampered by the structural question of the Nepalese Madhesi minority, medical equipment, refined oil, IT and telephone weaknesses of the country’s administration. which opposes the 2015 Constitution and is equipment, natural gas, agricultural and This is because the parallel operations of the supported by India because of its cultural and construction machinery, electrical and electronic National Planning Committee and the Ministry historical proximity. components, equipment for printing and semi- of Finance make budget implementation tricky: conductor manufacture. However, half of these a substantial proportion of spending takes place sales are re-exports, as the country acts as at the end of the year, and as a result, budget a hub for European trade. Although import implementation is poorly organised and of a poor 160 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 161 NETHERLANDS NEW ZEALAND

PAYMENT AND COLLECTION PRACTICES IN THE NETHERLANDS COFACE ASSESSMENTS Payment appearing before a cantonal sector judge, debtors Enforcement of a legal decision can represent themselves and plead their cases A2 In the Netherlands, bank transfers are the most If a debtor does not voluntarily comply with a COUNTRY RISK common payment method for both domestic and verbally. After the first plea, it is standard procedure court decision, the creditor can initiate actions to export business-to-business transactions. All Dutch for the judge to schedule personal appearances by enforce the judge’s ruling. As most court decisions both parties to obtain more information and to see if A1 banks are linked to the SWIFT electronic network, become effective immediately, creditors do not BUSINESS CLIMATE which provides low-cost, flexible and rapid processing a settlement is possible. If not, the court can either need to wait for the three month period of appeal to of international payments. Direct debit and different pass judgement immediately or, in more complex expire. Enforcement laws lay down statutory rules centralised local cashing systems are also widely used. cases, give the plaintiff the opportunity to deliver a on coercive measures and how these measures replication (conclusie van repliek). The defendant can can be applied. In the Netherlands, only bailiffs are TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) Online sales are increasingly popular - as most then reply by rejoinder (conclusie van dupliek). These companies now use digital banking software and due authorised to levy enforcements and are instructed GDP growth (%) 3.2 3.6 2.8 2.9 4.7 proceedings take, on average, six to twelve months. by the creditor. Two conditions need to be met Exports of goods, as a % of total to the introduction of the Single Europe Payment Inflation (yearly average, %) 0.3 0.6 2.2 2.0 POPULATION Area (SEPA) within the European Union. As a result, In addition to legal action or claiming retention of title before coercive measures begin. The bailiff must be China (millions of persons - 2016) (if stipulated), a seller of goods can often exercise his in possession of a writ of execution (an original and 19% Budget balance (% GDP) * 0.6 0.9 0.1 -0.1 cash and other payment methods are gradually 38,278 right of reclamation (recht van reclame) for unpaid enforceable judgment) and the party on which the Australia Current account balance (% GDP) -3.4 -2.8 -3.6 -3.8 disappearing. 17% GDP PER CAPITA goods. This requires the sending of a registered letter enforcement will be levied must have prior official Public debt (% GDP) 29.5 29.2 26.4 23.7 (US dollars - 2016) Bills of exchange are not standard business practice to the debtor in which this right is invoked and the notification of the writ. United States and are rarely used in the Netherlands. They are 11% * 2017/2018 fiscal year (1 July to 30 June) (f): forecast contract is terminated. Ownership of the goods at Court decisions rendered by other EU countries generally perceived as a sign of wariness on the part stake is then legally returned to the creditor. This type Japan of the supplier and thus incompatible with the climate benefit from specific enforcement mechanisms, 6% RISK ASSESSMENT of action necessitates the goods being in their original including the EU payment Order and the European of trust needed to maintain a healthy business state. The letter must be sent within 6 weeks of the Euro Area Small Claims procedure. Decisions issued by non- 6% relationship. claim being due and within 60 days following delivery Dynamic growth despite continuing residents. In addition, the country will have to find EU countries can be recognised and enforced on a dangers of the housing market a way of dealing with an increasing deficit in its Cheques are rarely used. As they can only be cashed of the goods. reciprocal basis, provided that the issuing country is Imports of goods, as a % of total Sustained by domestic demand, activity, is social security system (ageing population). if they are covered, they are an unreliable means Winding-up proceedings part of a bilateral or multilateral agreement with the expected to remain firm in 2018. Household The current account is expected to worsen of payment. Issuing an uncovered cheque is not a A third (and often effective) procedure for collecting Netherlands. In the absence of such an agreement, China 20% consumption will likely be boosted by higher slightly in 2018. This is subject to a structural criminal offence, but payees on the receiving end of payment is by filing a winding-up petition at the an exequatur procedure can be carried out in the bounced cheques do incur high bank charges. Under district court. This type of petition must be filed by a Euro Area wages, falling unemployment (4.6% in October deficit due to the income balance deficit (3% Dutch courts. 13% Dutch law, bills of exchange and cheques mainly serve lawyer and the applicant needs to submit evidence 2017), and continuing low interest rates (1.75% of GDP in 2016) linked with the repayment of to substantiate the existence of debt. of a payment default on an undisputed debt and of Australia in November 2017). In addition, lower income external debt (90% of GDP), the low domestic Insolvency proceedings 13% the existence of at least one other creditor having an households will receive increased family savings rate, and the outward transfer of profits Restructuring proceedings United States allowances, a 5% increase in the minimum wage, by foreign firms. Moreover, the balance of trade is Debt collection undisputed claim of any kind (for example, commercial 11% debt, outstanding alimony or taxes). The debtor is Corporate debt restructuring entails using the and a reduction in income tax. Public spending set to remain in deficit (1% of GDP), as the growth Amicable phase suspension of payments (surseance van betaling) Japan is expected to help sustain economic activity of exports will still not cover that of imports. The A debt collection process usually begins and ends by then formally notified by a bailiff that legal action has 7% been initiated. procedure. The debtor is granted temporary relief through investments in infrastructure and social balance of services, however, should be in surplus sending the debtor a registered letter of demand for from creditors, in order to allow them to reorganise, welfare. (1.8% of GDP), mainly thanks to tourism. payment of the principal claim, accrued interest and To avoid bankruptcy, the debtor can choose to continue with business operations and ultimately + STRENGTHS Exports are set to be revitalised, thanks to The New Zealand banking sector is essentially extrajudicial costs. If the interest rates and/or costs appear in court to dispute the claim (or the fact satisfy their creditors’ claims, all under the supervision have not been agreed by contract, Dutch law regulates that there are other creditors), or propose an out the improving terms of trade linked with rising well capitalised, although the low household of a court-appointed administrator. A plan is • Proximity to Asia and Australia milk prices (one-quarter of exports), and savings rate means that banks have to borrow the limits for both. If amicable actions do not result in of court settlement. As most debtors try to reach a proposed and must be approved by two-thirds of • Tourist appeal and large agricultural sector full payment, the creditor can initiate legal action, in settlement, these proceedings are often cancelled by firm external demand. The arboriculture on the financial markets and are thus exposed to the creditors representing three-quarters of the total • Small public debt; balanced public accounts (apple and kiwi) and wood sectors are also their volatility. The level of concentration in the accordance with Dutch civil law. before the date of the court hearing. Otherwise, outstanding debt. and if there is sufficient evidence, the debtor is • Dynamic demographics thanks likely to perform better. However, the level of sector –just four key banks (mainly subsidiaries Fast-track procedures Winding up proceedings to immigration indebtedness among farmers is high due to the of Australian banks) – and high household debt In urgent cases, claims can be submitted for a fast then declared bankrupt. Approximately 95% of all bankruptcies result in no payment being received by The debtor’s assets are liquidated by the court- • Quality of life need to offset losses caused by persistent low levels are also potential areas of vulnerability. track procedure (kort geding). These proceedings appointed trustee. This procedure commences prices, which means that they are vulnerable to resemble those of the regular civil court but, if non-preferential creditors. when the debtor has ceased payments and the price movements and any major climate shocks A new and fragile coalition government convinced of the plaintiff’s arguments, the judge Retention of title and right of reclamation District court has declared the debtor bankrupt. - WEAKNESSES (e.g. droughts, earthquakes). The tourism sector In the September 2017 parliamentary elections, (ruled by the President of the district court) delivers Besides initiating legal action or claiming retention of If a creditor makes a request for the debtor to be is also expected to perform strongly, although its • Economy dependent on foreign the conservative National Party, in office since a verdict within a very short period of time - usually title (if stipulated), sellers of goods can often exercise declared bankrupt, there must be at least two contribution to growth will likely be smaller. investment 2008, lead the vote at 45% (56 seats out of 120), between 2 to 4 weeks. Using this somewhat simplified their right of reclamation (rencht van reclame) for creditors with overdue claims. However, when • High household and corporate debt levels The monetary policy imposed by the central bank but failed to obtain an absolute majority and procedure, the judge often makes a temporary unpaid goods. This entails sending the debtor a liquidation is requested by the debtor, evidence (particularly in the agriculture sector) is likely to be less accommodating in 2018, due to thus form a government. Following five weeks or provisional ruling for more urgent matters. If, registered letter which invokes this right. The contract of additional creditors is not mandatory. subsequent to this provisional decision, the parties is thus terminated and by law, ownership of the goods • Dependence on demand from China the goal of maintaining inflation at its target level of negotiations, the centre-left Labour Party do not reach a final settlement on all issues, they then returns to the creditor. This recourse of action does The trustee establishes a list of creditors, the • Shortages of skilled labour (1-3%). The slowdown in the property market and (second place with 46 seats) formed a coalition debtor’s assets are auctioned and the proceeds in credit will help limit the risks associated with need to obtain a final judgement in a ‘regular’ civil suit however required the goods to be in their original • Housing shortage government with the support of the populist New then distributed between the creditors. higher financing costs. The housing market is (bodemprocedure). state. The registered letter must be sent within 6 • Weakness in R&D Zealand First party (9 seats) and the Green Party expected to contract because of the reduction (8 seats). Led by the new Prime Minister, the The fast track procedure in the Netherlands differs weeks of the claim being due and within 60 days of in demand linked with the excess cost of housing, Labour Party’s Jacinda Ardern, the government’s from the (European) payment order procedure used the goods being delivered. the high levels of household indebtedness policies are expected to be less welcoming in in many other European states. It always requires (170% of disposable income) and the reduction terms of immigration and foreign investors, the assistance of a lawyer and personal appearances NUMBER OF CORPORATE FAILURES in immigration. The construction sector is likely and to be more expansionist regarding the by all parties before the judge. As this makes the fast Total Estimate (e) / Forecast (f) Yearly growth to feel the effects of this slowdown, and also to budget. Nevertheless, disagreements between track procedure rather expensive, it is seldom used in suffer from a labour shortage. the coalition member parties could derail the regular collection cases. 14,000 25% 19.1% 12,451 coalition, especially as the National Party will be a Ordinary proceedings 20% Strong budget situation and current powerful opposition force in Parliament. 12,000 11,348 The regular civil court procedure is the most 15% 9.7% account deficit under control In economic terms, the reduction in business frequently used recourse of action. Claims of EUR 9,669 10% The budget is expected to be very close to failures looks set to continue, and the business 25,000 or less are heard in a cantonal court, while 10,000 9,490 9,531 balance. Spending on social and health care is climate is strongly positive, with the country claims in excess of EUR 25,000 are presented before 5% set to continue to be the main expenditure item, situated at the top (out of 190 countries) of the a civil law judge. The main difference in the civil law 8,000 7,338 0% especially as these are due to rise under the World Bank “Doing Business 2018” rankings. sector is that both the plaintiff and the debtor have to 0.4% -6.0% 6,127 “Family Income” programme. This covers income be represented by a lawyer, whereas in the cantonal -5% 6,000 tax exemptions for those on very low incomes, sector, parties are permitted to argue their own -10% 4,779 4,492 as well as increases in family allowances. cases. Both types of procedures begin with a bailiff -16.5% 4,000 -15% Substantial infrastructure investments are also serving the debtor with a writ of summons. In most expected, notably with the reconstruction of the cases, debtors do not contest the claim or appear -20% 2,000 roads and railways damaged in the November in court. This results in a judgment by default being -25% -22.3% -22.0% 2016 major earthquake. The increase in spending given, usually within four to six weeks. If the debtor -24.1% 0 -30% should be limited, however, and offset by a slight does appear in court, the judge sets a date for them 2010 2011 2012 2013 2014 2015 2016 2017(e) 2018(f) increase in revenues. Public debt, already low, or their lawyer to prepare a written statement of will likely fall, but will continue to be held by non- defence (conclusie van antwoord). However, when Source: Statistics Netherlands (CBS), Coface

162 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 163 NEW ZEALAND NICARAGUA

PAYMENT AND COLLECTION PRACTICES IN NEW ZEALAND COFACE ASSESSMENTS Payments placing a charge on the debtor’s property. Foreign Creditors’ compromise judgments must first be recognised by the Court Another option is to enter into a creditors’ C The primary payment methods are card (debit card COUNTRY RISK and credit card) and electronic credit or debit (direct under the Reciprocal Enforcement of Judgments compromise with the debtor. A creditors’ debits and credits, automated bill payments and Act 1934, or common law. compromise is a binding agreement between a debtor company and its creditor(s) regarding the C electronic transfers). There is a rapid growth in the BUSINESS CLIMATE use of contactless payments, mobile phone-based Insolvency proceedings payment of its debts, with terms and conditions that are less exacting than the strict legal rights applications and on-line payments. Although cash Bankruptcy remains important, its use is rapidly reducing and of creditors. A compromise may involve payments If the creditor does not receive payment after over time, deferred payments, or accepting a lesser cheque usage halved between 2013 and 2016. TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) obtaining judgment and the debtor is an individual, sum in full and final settlement of the debt. Once a Wire transfers and SWIFT bank transfers are the the creditor can issue a bankruptcy notice. Failure GDP growth (%) 4.9 4.7 4.5 4.3 6.2 most commonly used payment methods for creditors’ compromise is approved by the required Exports of goods, as a % of total to comply with a bankruptcy notice is an act of majority of creditors, or the Court, the compromise Inflation (yearly average, %) 4.0 3.5 4.0 5.0 POPULATION domestic and international transactions. Most of bankruptcy. United States (millions of persons - 2016) the country’s banks are connected to the SWIFT binds all creditors. 52% Budget balance* (% GDP) -2.2 -2.4 -2.3 -2.2 Statutory demand 2,151 network. Voluntary administration Mexico Current account balance (% GDP) -9.0 -8.6 -8.5 -8.5 If the debtor does not make payment pursuant to 14% GDP PER CAPITA The debtor company may go into voluntary Public debt (% GDP) 40.7 41.9 41.5 40.0 (US dollars - 2016) the letter of demand and the debtor is a company, administration to maximise the chances of an El Salvador Debt collection * Including grants (f): forecast a further potential step is for the creditor to prepare insolvent company continuing to operate, or if 6% General process and serve a statutory demand for the amounts that is not possible, to allow for a better return for Venezuela The debt collection process begins with the serving outstanding. A statutory demand can only be creditors than immediate liquidation. It enhances 6% RISK ASSESSMENT of a letter of demand, in which the creditor notifies issued if there is no substantial dispute over the the existing creditors’ compromise procedure as an Euro Area 5% the debtor of his payment obligations - including debt. Once served, the debtor has 15 working days alternative to liquidation, by imposing a moratorium Growth still performing well The current account deficit is likely to remain any contractual interest due – with a time limit to to pay the debt, or to enter into an arrangement on creditors taking steps to enforce their debts. Nicaragua is still characterised by relatively substantial but stable. Imports (manufactured make the payment. for payment which is agreed by the creditor. If the Imports of goods, as a % of total high growth; above the average for Latin products, oil, food) are set to continue to grow debtor company does not make payment pursuant Other alternative processes as domestic demand grows, while exports (food, Summary judgment proceedings The Disputes Tribunal conducts an informal United States America. In 2018, growth is expected to remain If the creditor does not receive any payment to the statutory demand, the creditor has a further 20% resilient, against a background of recovery in textiles, machinery and equipment) will bounce 30 working days begin to liquidation proceedings and confidential process run by a referee to back only weakly, given the modest growth following the letter of demand, summary judgment encourage both sides to reach an agreement, China the agricultural and tourism sectors, still buoyed against the debtor company, due to non- 15% momentum in the United States in a context proceedings can be issued. This procedure is or make a binding decision if both sides cannot by robust domestic demand. It will above all be intended for situations where the debtor has no compliance with the statutory demand as evidence Mexico sustained by private consumption, thanks to of the growing risk of protectionism (risk of of the debtor’s inability to pay its debts. However, agree. This can be a less costly option, as it avoids 10% uncertainty regarding the ALEC free-trade real defence against the claim. An application can be lawyers. The Disputes Tribunal can only hear higher incomes, in particular due to inflows of made to the District Court or High Court, depending a debtor company can make an application to set Costa Rica remittances from expatriate workers and lower agreement). The financial flows from Venezuela aside a statutory demand within 10 working days claims for disputed debts of below NZD 15,000 or, 8% will continue to decline further, while access to on the value of the claim. A statement of claim if both parties agree to extend the financial limit, unemployment – even if purchasing power will must be filed, along with a notice of proceedings, an of being served with it. The Court may set aside the Guatemala decline slightly because of higher inflation. This official multilateral loans, highly concessional in to up to NZD 20,000. 7% application for summary judgment and a supporting statutory demand if there is a substantial dispute is expected to rise, not only because of internal nature, could reduce (cf. NICA Act). By contrast, affidavit by the creditor (or in the case of an entity, on whether or not the debt is due, if the debtor Arbitration or mediation (often less expensive dynamics, but also because of higher energy the transfer balance will be sustained by the company has a counterclaim, set-off or cross- than court proceedings) may be used to resolve still substantial remittances from Nicaraguans an individual with personal knowledge of the facts), + STRENGTHS prices and the controlled devaluation of the which sets out the facts of the claim. A summary demand, or if there are other adequate grounds. disputes and obtain more rapid out-of-court cordoba (intended to improve the country’s working abroad. However, these will still be judgment typically involves a hearing, which lasts Liquidation settlements. • Mineral (gold) and agricultural competitiveness). Investment in the public exposed to a potentially more restrictive US around one day (if the matter is defended), with Liquidation involves the realisation and distribution (coffee, sugar, meat) resources sector (infrastructure projects) is expected to immigration policy, which could result in a evidence given by way of affidavit rather than of a debtor company’s assets when the company is • Membership of Central America/United continue to boost productivity and attract FDIs, reduction of these payments (50% of which are requiring witnesses. If the application is successful, insolvent, or does not expect to remain in business. States and Central America/EU free which are also favoured under the law on PPPs of from the US). trade zones the Court may enter a judgment in favour of the A liquidator is appointed who takes over the 2016, but will be less dynamic due to budget cuts. creditor. If the application is undefended, judgment management of the company, realises its assets, • Cautious economic policy External demand is likely to weaken, because of Stronger interventionist policy and may be entered by default in favour of the creditor, pays its creditors and distributes the remainder to • Stable financial system modest growth in the United States and loss of worsening business climate without the need for a hearing. If the defendant is its shareholders. • Supported by the international community competitiveness of the maquiladora industry. President Daniel Ortega of the Sandinista able to show an arguable defence, the Court may • Low crime rates compared with other By contrast, with Nicaragua’s highly dollarised Liberation Front party (FSLN) won a third decline summary judgment and direct the matter countries in the region economy (almost 90% of the banking system is consecutive term in the November 2016 to be heard as an ordinary proceeding. in foreign exchange) financial conditions could elections and remains very popular. His position Ordinary proceedings tighten due to an expected strengthening of was reinforced following the November 2017 Ordinary proceedings are initiated by filing a notice - WEAKNESSES the dollar as US monetary policy becomes more municipal elections. FSLN’s victory was of proceeding and a statement of claim. Depending • Highly vulnerable to natural disasters restrictive, recognized by international observers, despite on the value of the claim, these proceedings can (cyclones, earthquakes) post-electoral violence that claimed several take place in the District Court (up to NZD 350,000) • Healthcare and education shortcomings Budgetary policy neutrality and exposure to victims. The opposition, which is divided, has or the High Court (claims of a higher amount). and persistent poverty rate American politics little influence on the political scene and State Unlike summary judgment, an ordinary defended interventionism continues, with the desire for • Inadequate infrastructure The budget deficit is expected to remain proceeding may involve additional processes, such (energy, transport) reform remaining weak. The country faces stable. This is because, despite the growing as discovery, hearing of evidence and interlocutory numerous challenges. Despite a favourable • Structurally large current account deficit need to fund the social security system (INSS) applications. • Dependence on international aid, security climate, the country’s performance with NUMBER OF CORPORATE FAILURES and the reduction in financial flows from regard to the business climate is the worst in Appeals particularly from Venezuela Venezuela – which have notably been used to Central America (127 out of 190 according to the The High Court determines appeals from the Total Estimate (e) / Forecast (f) Yearly growth • Institutional failings: concentration of finance certain social programmes (housing Doing Business 2017 rankings). District Court. The Court of Appeal has jurisdiction power within the executive and the 500 80% Sandinista party, corruption subsidies) – the government looks set to to hear appeals from the High Court, but this is benefit from rising revenues, thanks to strong Externally, relations with Costa Rica and generally restricted to appeals on questions of 450 61.0% 434 Columbia are still characterised by tensions, 60% economic performance and cuts in investment law. Appeals to the highest appellate court in New spending aimed at controlling the deficit. Even especially with Costa Rica due to differences over 400 373 Zealand, the Supreme Court, can only be heard with if the public debt is considered sustainable, the the maritime and land borders, and the situation 34.8% 40% leave of the Court. Leave will be granted if the Court 350 322 developments in public finances remain exposed is unlikely to change much. is satisfied that it is necessary in the interests of 284 to economic changes in Venezuela. Moreover, if 300 14.7% 20% justice to hear the appeal. 7.8% the NICA Act is approved (Nicaragua Investment 250 Conditionality), the United States will make all 200 0% Enforcement of a legal decision 200 future loans to Nicaragua conditional on the 164 165 country’s respect of democratic principles, which If the Court enters judgment in favour of the -23.9% 143 150 -20% creditor, there is no appeal, or all appeal avenues -14.1% would have a major impact on the public finances have been exhausted, the creditor can apply to 100 and would send a negative signal to investors. the High Court, or District Court (depending on the -40% 50 -37.3% value of the claim), to seek enforcement action, -49.6% which can include a deduction from the debtor’s 0 -60% wages or benefits (if the debtor is an individual), 2010 2011 2012 2013 2014 2015 2016 2017(e)* seizure of property, garnishee proceedings, or Source: Ministry of Business Innovation and Employment, Coface * 12 months ending in October

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COFACE ASSESSMENTS COFACE ASSESSMENTS C D COUNTRY RISK COUNTRY RISK C D BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 4.0 5.0 5.1 5.2 GDP growth (%) 2.7 -1.6 0.8 2.0 Exports of goods, as a % of total 18.2 Exports of goods, as a % of total 183.6 Inflation (yearly average, %) 1.0 0.2 1.0 0.7 POPULATION Inflation (yearly average, %) 9.0 15.7 16.4 14.4 POPULATION Euro Area (millions of persons - 2016) India (millions of persons - 2016) 33% Budget balance (% GDP) * -9.1 -6.2 -5.4 -5.0 34% Budget balance (% GDP) -3.4 -4.7 -5.0 -4.5 412 2,208 Thailand Current account balance (% GDP) -18.0 -15.5 -18.6 -18.3 Euro Area Current account balance (% GDP) -3.2 0.7 1.0 0.8 12% GDP PER CAPITA 20% GDP PER CAPITA Public debt (% GDP) 41.0 46.3 51.5 52.8 (US dollars - 2016) Public debt (% GDP) 13.2 17.6 21.3 22.8 (US dollars - 2016) Malaysia United States 11% *Grants included (f): forecast 9% (f): forecast Nigeria South Africa 9% RISK ASSESSMENT 6% RISK ASSESSMENT Mali Canada 6% Growth stimulated by infrastructure to the WAEMU (West African Economic and 5% A weak recovery increased receipts from oil exports. This is investments despite a difficult security Monetary Union) and the CFA franc exchange After exiting recession in 2017, the tentative because demand for imports is set to grow Imports of goods, as a % of total situation rate is fixed against the euro, depreciation Imports of goods, as a % of total recovery should be confirmed in 2018, chiefly more rapidly as growth recovers, however is unlikely and Niger’s debt is, therefore, not sluggishly. Transport is likely to continue to put Euro Area Growth in 2018 will likely be stimulated by China underpinned by the oil sector. This is because, 35% infrastructure investments, higher agricultural significantly exposed to exchange rate risk. 20% affected by the sabotage of petroleum a strain on the balance of services deficit, while profit repatriation by foreign companies will China productivity, as well as relative rises in the price With regard to the external accounts, the balance Euro Area infrastructure and the collapse in the price per 16% of uranium which will boost production. of goods and services is largely in deficit (19.7% of 19% barrel in recent years, the sector is expected widen the income balance deficit. Remittances from expatriate workers will make a positive United States The implementation of an Extended Credit GDP in 2016). Niger’s poor economic conditions United States to continue the recovery begun in 2017. Firmer 8% 8% contribution. Facility arrangement with the IMF in January will continue to weigh heavily on activity. Higher prices will sustain revenues provided production Nigeria exports of commodities will not be sufficient United Kingdom is spared any new disruptions. However, the The introduction of a currency window for 6% 2017 (DTS 100 million over three years) will 4% help stimulate investment in infrastructure, to offset the increase in imports associated sabotages by rebel groups in the Niger Delta investors and exporters in April 2017 has helped Thailand with infrastructure projects. Remittances from India have eroded private investor confidence. More stimulate capital flows and take the pressure off 6% reassure investors and provide a framework 3% for development aid. Focused chiefly on energy expatriate workers and foreign budget aid are set generally, the climate of insecurity, political the foreign exchange reserves. Nonetheless, (Kandaji Dam; the Agadem oil pipeline project to help bring the current account deficit down to uncertainty, the complexity of the exchange these could start to diminish again as there is + STRENGTHS to connect with the existing Chad-Cameroon 15.5% of GDP. This deficit is financed primarily by + STRENGTHS rate system and ongoing high interest rates still a significant gap between the official rate pipeline) and transport (Niamey interchange), FDIs (7.6% of GDP), as well as by grants and loans (14% since July 2016) will put pressure in private of the naira and that of the parallel market. A • World’s fourth largest producer of uranium these different projects should help fill the intended for project financing (6.8% of GDP). • Leading African power in GDP terms and investment. Public investment’s contribution devaluation of the naira in 2018 is still a possibility. the most populous country in Africa • Net exporter of oil products and gold infrastructure gaps and, at the same time, attract to growth will still be curtailed because with This decision could increase the vulnerability of a • Drive to invest in agriculture and more investment and boost production capacity. A degraded security situation • Significant hydrocarbon resources and almost 60% of state revenues used for debt banking system weakened by the deteriorating infrastructure considerable agricultural potential interest payments, implementation of the quality of its assets. Higher uranium prices (31% of exports in 2015) Niger’s political situation is characterised by • Fairly low public and external debt ambitious infrastructure programme under the • Member of the West African Economic and President Mahamadou Issoufou’s (Nigerien Monetary Union should attract new investment and stimulate Economic Recovery and Growth Plan (ERGP production, especially with the rise in yields from Party for Democracy and Socialism) control over Growing political and security tensions • Financial support from multilateral lenders 2017-2020) will be constrained. Recovery in the the Madaouela (GoviEX) mine, which is due to various institutions since his party’s victory in - WEAKNESSES construction sector will, therefore, be slow at The political capital enjoyed by Muhammadu Buhari become fully operational in late 2018. However, the presidential and parliamentary elections in best. Erratic electricity supply will continue to and his party, the All Progressives Congress (APC), business climate failings put pressure on the February/March 2016. Although marginalised, • Heavy reliance on oil revenues (90% of in power since the 2015 elections is gradually - WEAKNESSES be an obstacle to growth in the manufacturing implementation of these projects and threaten the opposition is very critical of the president’s exports, two thirds of tax receipts) being eroded. This is because while the economic • Insufficient energy production/ industries. The rains, expected later in 2018, could • Economy vulnerable to weather events their completion. Meanwhile, agricultural repressive actions, and could catalyse public impact agricultural yields. As a result, household environment remains difficult, the slow pace of and to fluctuations in commodity prices infrastructure development projects, associated discontent. However, the main threat lies in the distribution capacity reforms is resented by a population exasperated • Ethnic and religious tensions consumption, dependent on this sector of • Economy still largely dependent in particular with the 3N Initiative (Nigeriens highly degraded security situation: terrorist activity, already hit by high inflation, poverty and by imperceptible progress on living standards. on subsistence agriculture Nourish Nigeriens), should help boost agricultural groups in the region (Boko Haram, AQMI, Al- • Insecurity and corruption putting pressure Specifically, in 2017 the reforms were delayed by on the business climate unemployment, will expand only moderately, • Inadequate system for collecting tax productivity. Murabitoun) find Niger to be fertile territory which could, however, sustain services amid a President Buhari’s six-month medical leave. The and customs duties Domestic demand is expected to remain firm, for recruitment (high poverty rate and few favourable base effect. president’s ability to govern is a source of growing • Porous borders, favouring illegal stimulated by fairly stable public spending and prospects), and its porous borders favourable to concern at a time when the country is dealing immigration and trafficking their campaigns. Inflation, if it continues to fall, will remain high with renewed ethnic and separatist tensions. private consumption, associated with strong because of consistently high food prices. • Rapid population growth and high rate demographic growth and price stability, with International cooperation should continue 50 years after the unilateral declaration of Biafra’s of poverty inflation still below the 3% target set by the to strengthen among the Sahel G5 countries independence, which sparked a violent civil war • Deteriorating security situation and WAEMU central bank. However, these growth (Mauritania, Mali, Niger, Chad and Burkina Faso) Ongoing budgetary pressures (1967-1970), separatist tensions have resurfaced terrorist threats prospects are still subject to security, climate, attempting to stem the unrest observed in The draft 2018 budget provides for a 16% increase in the southeast of the country. Moreover, militants and humanitarian risks in a country that already neighbouring countries (especially Nigeria). This in spending on infrastructure investment. While in the Niger Delta, responsible for the attacks on has one of the highest poverty rates in the world. international action is, however, under threat stabilisation at production level is confirmed, oil infrastructure since 2016 in their search for a after the death of four US soldiers in October the reduction in the fiscal deficit will be mainly greater share of the country’s resources, declared an end to the ceasefire in November 2017. They are Investment projects putting a strain on 2017, which could prompt Donald Trump to review down to oil revenues boosted by firmer oil prices. his cooperation policy. This uncertain security However, as in the 2017 budget, forecasts for again threatening oil production as well as political the public and current accounts, but the stability and security. Activity by the Islamist restructuring drive underway situation is putting pressure on the business non-oil revenues seem very ambitious, given the climate, in which the risk of abduction targeting weak levels of economic activity. As in previous Boko Haram movement is still a major threat as Contributions from international donors have foreign nationals is still high. years, once implemented, projects could be evidenced by the numerous attacks carried out in helped reduce the public deficit (from 11.0% to slowed for lack of revenues. The sale of certain the northeast of the country in 2017. 6.2% of GDP in 2016). Higher revenues, thanks state assets could help resolve the financing This political and security environment is to the growth in commodities exports, will concerns, especially as interest payments affecting perception of the business climate, probably only partially offset the strong rise on domestic debt have increased rapidly. The despite the efforts made following the setting in public spending on investment and security. government thus intends to make more use of up of a Presidential Council in July 2016 to Nevertheless, the drive to collect taxes and external concessional loans to finance its deficit improve the business climate. The country customs duties under the aegis of the IMF in 2018. The pressure on financing the deficit has has, in particular, jumped 24 places in the Doing should facilitate continued deficit reduction. In led to a deterioration of the debt profile which Business 2018 rankings (145th out of 190) thanks this context the public debt is likely to continue nonetheless remains stable. to progress on getting credit and starting to increase, as three quarters of it is held by a business. foreign public-sector creditors and is mostly Still showing a surplus, the current account concessional. However, because Niger belongs balance is expected to worsen slightly, despite

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COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN NORWAY Payment which should be denominated in Norwegian judgment from the enforcement authorities, A1 kroner (NOK). which will then seize the debtor’s assets and COUNTRY RISK Bills of exchange and cheques are neither widely used nor recommended, as they must meet a The Conciliation Board then allows the debtor funds. A1 number of formal requirements in order to be a short period to respond to the claim lodged Even though Norway is not part of the EU, BUSINESS CLIMATE valid. In addition, creditors frequently refuse to before hearing the parties, either in person for awards issued by EU countries, particular accept cheques as a means of payment. As a rule, or through their official representatives and advantageous enforcement mechanisms both instruments serve mainly to substantiate (stevnevitne). At this stage of proceedings, will be applied, such as EU payment orders or the existence of a debt. lawyers are not systematically required. The the European Enforcement Order, under the TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) Conversely, promissory notes (gjeldsbrev) are agreement therefore reached will be enforceable “Brussels Regime”. For decisions rendered GDP growth (%) 1.6 1.0 1.9 2.4 5.3 much more common in commercial transactions, in the same manner as a judgement. by non EU members, they will be enforced on Exports of goods, as a % of total a reciprocity basis, provided that the issuing Inflation (yearly average, %) 2.2 3.6 2.1 2.0 POPULATION and offer superior guarantees when associated Legal proceedings Euro Area (millions of persons - 2016) with an unequivocal acknowledgement of the country is party to a bilateral or multilateral 45% Budget balance (% GDP) 5.9 3.1 4.5 4.6 Ordinary proceedings 70,553 sum due that will, in case of subsequent default, If a settlement is not forthcoming, the case agreement with Norway. United Kingdom Current account balance (% GDP) 8.7 4.9 5.5 5.7 21% GDP PER CAPITA allow the beneficiary to obtain a writ of execution is referred to the court of first instance for Public debt (% GDP) 29.2 33.1 34.8 35.9 (US dollars - 2016) from the competent court (Namrett). examination. However, for claims found to be Insolvency proceedings Sweden 7% (f): forecast Bank transfers are by far the most widely used valid, the Conciliation Board has the power to Out-of court proceedings United States means of payment. All leading Norwegian banks hand down a decision, which has the force of a Private non-judicially administered 4% RISK ASSESSMENT use the SWIFT electronic network, which offers court judgement. reorganizations are common in Norway; Denmark a cheap, flexible and quick international funds A case which is referred to the higher court will even though there are not regulated by law. 4% Growth supported by local demand 27% to 24% between 2015 and 2018). Remaining transfer service. commence with a summons to appear before the Debtors and creditors are free to make any tax measures, including lower income tax, will In 2018, activity would be boosted by private Centralising accounts, based on a centralised municipal or District Court. The summons will be kind of arrangements, but in practice the Debt be financed by an increase in VAT on transport Imports of goods, as a % of total consumption and investment. Private local cashing system and simplified management served on the debtor with an order to give the Reorganization and Bankruptcy Act is often and tourism-related activities (from 10% to consumption will benefit from the gradual of fund transfers, also constitute a relatively court notice of intention to defend if he so wishes. applied. A third party (a lawyer or an accountant) Euro Area 12%). The fiscal rule limiting withdrawals from 35% decline in unemployment (4% in October 2017). common practice. Where a defendant fails to respond to the can handle the process if the parties wish it so. Household disposable income is expected to the sovereign fund to 3% of its value again will Sweden Electronic payments, involving the execution of summons in the prescribed time (about three Restructuring the debt 12% increase due to higher wages, combined with be respected. Nevertheless, the non-oil deficit payment orders via the website of the client’s weeks) or fails to appear at the hearing, the Board This procedure can only be initiated by a wiling China lower income taxes and low inflation. The slight will amount to 7.8% of GDP in 2018, illustrating bank, are rapidly gaining popularity. passes a ruling in default, which also has the force debtor. His financial situation is assessed with 11% appreciation of the Norwegian krone in 2017 the country’s dependence on oil revenues and of a court judgement. The length of proceedings a court-appointed supervisory committee United States will help contain it, thanks to the drop in the dividends from its sovereign fund. The public debt varies from one court to another. and a composition proposal is prepared. If the 7% price of imported goods. In addition, residential should increase slightly, while remaining very Debt collection sustainable insofar as the country has one of the Court agrees, a composition committee as well Denmark investment will be negatively affected by the Amicable phase More complex or disputed claims are heard by 6% largest sovereign funds in the world in terms of as a court appointed trustee will manage the significant indebtedness of households (221% The collection process commences with the the court of first instance (Byret). The plenary assets (nearly $1 trillion under management). debtors’ operations and formulate a composition of disposable income) and the stabilisation of debtor being sent a demand for the payment proceedings of this court are based on oral evidence and written submissions. The court agreement. A debt settlement proceeding + STRENGTHS real estate prices, due to the rapid increase in the The current account surplus is expected of the principal amount, plus any contractually examines the arguments and hears the parties’ may result in a completed debt settlement, housing supply and the rising rates on property to remain strong in 2018, reflecting the agreed interest penalties, within 14 days. composition or the commencement of a • Current accounts and public finances loans (change of legislation). Investment improvement in the balance of goods and witnesses before delivering a judgment. Where an agreement contains no specific bankruptcy proceedings. sustained by oil and gas despite fall in world outside the oil and real estate sectors should be income. The dynamism of exports will offset penalty clause, interest starts to accrue 30 days Norway does not have a system of commercial prices particularly dynamic due to a higher utilization that of imports. The surplus of the primary Bankruptcy proceedings after the creditor serves a demand for payment courts, but the Probate Court (Skifteret) is • Discovery of new oil fields rate of production capacity, as well as loan revenue balance, thanks to the increase of the Proceedings can be opened by court decision and, since 2004, is calculated at the Central Bank competent to hear disposals of capital assets, • Broad political consensus conditions which are still very favourable (rate interest collected in connection with foreign either from the debtor or creditor. The latter of Norway’s base rate (Norges Bank) in effect estate successions, as well as insolvency • Well capitalised banking system of interest at 0.5%). The industrial sectors will investments, will be offset by the deficit of the must guarantee for expenses related to the as of either the 1st January or the 1st July of the proceedings. • Large sovereign fund benefit greatly from this improvement, especially transfer balance, related to the contribution of proceedings. The court will appoint a trustee relevant year, raised by seven percentage points. and assess the need for a creditor committee the pharmaceutical sector, fisheries, metallurgy the country to the European budget, as well as to Enforcement of a legal decision and forestry. The energy sector (mainly oil the aid granted to developing countries. In the absence of payment or an agreement, prior to issuing a bankruptcy order and given - WEAKNESSES and gas), which accounts for 20% of GDP, 30% creditors may go before the Conciliation Board A domestic judgment is enforceable for ten the creditors time to file their claim (three to six of investments and 55% of total exports, will Government renewed but weakened (Forliksrådet), a quasi-administrative body. years if it has become final. If the debtor does weeks). All of the debtor’s assets are confiscated, • Budget deficit excluding oil and gas improve in 2018. The moderate rise in oil prices by dissension within the coalition To benefit from this procedure, creditors must not comply with the judgment, the creditor the debt is evaluated and a list of claims is revenues will encourage investment in the development of submit documents authenticating their claim, can request compulsory enforcement of the established. • High household debt and high housing oil fields that have already been discovered, such After the parliamentary elections of September prices as Johan Sverdrup, whose entry into production 2017, the centre-right coalition, in power since • Significant wage costs is planned for early 2019. On the other hand, 2013 and composed of the Conservative Party, • Shortage of skilled labour in certain low hydrocarbon prices would still weigh on the Progress Party, the Christian Democrats sectors investments in the exploration of new deposits. (KrF) and the Liberals, has a sufficient number The dynamism of external demand, especially of seats to maintain a majority in Parliament from the euro zone, will lead to trade having a (88 seats out of 169). Although the centre-left positive contribution to growth. However, the parties won the popular vote, they do not have a majority in Parliament, as the electoral system slowdown in UK activity (23% of exports) could NUMBER OF CORPORATE FAILURES limit this contribution. gives rural areas proportionally more seats than densely populated regions. Nevertheless, Total Estimate (e) / Forecast (f) Yearly growth the formation of the new government was 20% A very comfortable budget and external made difficult by the reluctance of the KrF and 4,000 17.7% situation the Liberals to renew their support for the 3,434 3,500 3,328 15% 3,253 3,228 3,222 Fiscal policy will remain focused on improving government, even though they did not already 3,161 3,174 3,125 competitiveness and diversifying the economy, have any posts. Negotiations have therefore 3,000 10% in order to reduce the country’s dependence been postponed until early 2018, after the vote 2,763 on the energy sector. Nevertheless, the 2018 on the budget. It therefore seems likely that Erna 2,500 5% 0.4% 5.6% budget will be less expansionary than the Soldberg’s government will include members -0.2% previous ones, making it possible to clear a of both parties in order to avoid any potential 2,000 -3.0% 0% very comfortable surplus. In fact, most of the political deadlock. 1,500 -5% exceptional measures taken in 2016, aimed at -3.1% -3.0% redirecting the jobs destroyed in the oil industry towards construction, will be abolished due to 1,000 -10% the low unemployment level. In addition, public 500 -15% investment will be limited to transportation -12.9% infrastructure (roads, public transportation and -17.1% 0 rail networks). However, the government will -20% 2010 2011 2012 2013 2014 2015 2016 2017(e) 2018(f) maintain its investment attraction policy by pursuing the reduction of corporate tax (from Source: Statistics Norway (SSB), Coface

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COFACE ASSESSMENTS COFACE ASSESSMENTS C C COUNTRY RISK COUNTRY RISK A4 C BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 4.2 3.0 -0.3 3.8 GDP growth (%) 4.0 4.5 5.2 5.5 Exports of goods, as a % of total 4.0 Exports of goods, as a % of total 193.6 Inflation (yearly average, %) 0.1 1.1 1.6 3.2 POPULATION Inflation (yearly average, %) 4.5 2.9 4,1 4,8 POPULATION China (millions of persons - 2016) Euro Area (millions of persons - 2016) 42% Budget balance (% GDP) -15.7 -21.6 -13.0 -12.0 23% Budget balance (% GDP)* -5.3 -4.4 -5.6 -5.4 16,535 1,441 United Arab Emirates Current account balance (% GDP) -15.5 -19.0 -14.3 -13.2 United States Current account balance (% GDP) -1.0 -1.7 -3.9 -4,9 11% GDP PER CAPITA 16% GDP PER CAPITA Public debt (% GDP) 15.3 33.6 44.0 50.0 (US dollars - 2016) Public debt (% GDP) 64.1 67.5 67.9 68.6 (US dollars - 2016) South Korea China 7% (f): forecast 8% *2018 fiscal year: from July 2017 to June 2018 (f): forecast Saudi Arabia United Kingdom 4% RISK ASSESSMENT 7% RISK ASSESSMENT Japan Afghanistan 4% Towards a return to growth Scale of twin deficits generating risk of 7% One of the most dynamic economies of share of manufactured products. Increased Low oil prices and the commitment to a 5% cut instability South Asia competition from low cost countries in the region Imports of goods, as a % of total in production, as agreed with OPEC, have not The fall in oil revenues caused a worsening Imports of goods, as a % of total Economic momentum should be maintained in has led to slow export growth, which comes on top of strong Pakistani economic demand United Arab Emirates been offset by the 2.5% growth in the non-oil in public deficit to the worrying level of -19% China 2018 thanks to still dynamic domestic demand. 49% and gas sectors, leading to a virtual standstill in at the end of 2016, compared with a budget 29% Despite the fall in remittances from expatriate resulting from growing economic activity and investments associated with the CPEC. However, Euro Area growth in 2017. Growth is, however, expected surplus that was almost 5% before 2014. The United Arab Emirates workers in 2017, because of the slowdown 7% to be positive in 2018, thanks to an upturn in budget consolidation, together with increased 13% in construction in the GCC countries, which remittances from expatriate workers will China the oil and gas sector, and the continuation of a tax revenues, will likely make it possible for Euro Area accounts for 62% of the total, consumption was continue to offset the trade deficit. The remaining 5% moderate growth rate in other sectors. The slight the Sultanate to reduce the deficit, but not to 8% still the main contributor to the economy (92% deficit, associated with services and outgoing India upwards movement in barrel price, investments achieve the target of 10% of GDP in 2018. These Indonesia of GDP). In 2018, the recovery of growth in the dividends and interest payments, is financed 5% aimed at reducing the breakeven point for oil factors have placed question marks against 4% UAE (22% of flows) should lead to firmer growth. through borrowing, drawing on reserves (down United States production – which is the highest of the Gulf public investment projects, as well as the state’s United States Investment also picked up in 2017, benefiting by the equivalent of two months of imports in 5% producing countries at USD 73 per barrel -, and, ability to provide aid to the banks, which could 4% from renewed business confidence following late 2017) and, increasingly, by FDIs linked to the above all, the Khazzan Project managed by BP face liquidity pressures and an increase in credit completion of the IMF assistance programme at Economic Corridor. + STRENGTHS and Oman Oil Company Exploration & Production risks because of the budget consolidation. As a + STRENGTHS the end of 2016. FDIs increased despite a tough that is set to boost the country’s gas output by result, the three leading credit rating agencies business climate and should continue to increase Persistent insecurity on the eve of elections • Strategic location on the Strait of Hormuz 25%, will together likely offset the restrictions have downgraded Oman’s rating to one level • Large internal market buoyed by dynamic in 2018. The China-Pakistan Economic Corridor 2017 was marked by heightened political demographics • Increasingly diversified economy on oil production. Exports should improve with above “junk”, with a negative outlook. Part of (CPEC) set up between the Chinese region of uncertainty following the dismissal of Prime (petrochemicals, port operations, tourism) the restarting of trade with Iran, and the ongoing the finance for the deficit comes from currency • Substantial remittances from expatriate Xinjiang and the Port of Gwadar (southwest Minister Nawaz Sharif by the Supreme Court workers • Solid banking system and openness to Qatar diplomatic crisis could help Oman recover reserves (28%) and the rest through increased Pakistan) is expected to bring in substantial flows and that of the Finance Minister on suspicion of foreign investments market share in the trade and tourism industries. recourse to international bank loans (67%). • Inexpensive and plentiful labour of Chinese investment thus improving transport corruption. The Prime Minister was replaced by • Significant tourism potential However, the rate of growth in the non-oil The current account deficit reflects the • Positive outlook for economic corridor infrastructure and electricity generation. This Shahid Khaqan Abbasi, also from the Pakistani with China and gas sectors is largely dependent on public country’s overexposure to fluctuations in oil is reflected not only in strong momentum in the Muslim League-Nawaz (PML-N). This climate spending. The reduction in oil revenues, which and gas export revenues. The balance of trade • Important provider of Islamic finance construction sector, but also in services (60% of of uncertainty is expected to continue until - WEAKNESSES in 2016 accounted for 70% of State revenues, highlights the level of dependency on oil and GDP) and industry. Inflation will edge upwards the September 2018 elections. The election necessitated the implementation of budgetary gas to offset imports of consumer and capital but will continue to depend on fluctuations in the results will depend on the performance of the • Exposure to oil price fluctuations; - WEAKNESSES production cutbacks consolidation measures: goods. The country’s currency reserves have rupee and oil prices. Nawaz government, which strengthened by a • Shortages of qualified local labour, leading · a reduction in energy subsidies, in public improved, following a number of years of • Very tense geopolitical environment comfortable parliamentary majority, will need to 20% youth unemployment and reliance employee wages, and in security and defence decline, and should hold steady in 2018 at around and high degree of domestic insecurity Weak public and external accounts to defend its record. The elections will take place on imported external expertise spending and pension; eight months of imports, which is adequate to (terrorism) Thanks to the measures recommended by the in a climate marked both by terrorist attacks • Ongoing uncertainties around succession support the balance of trade and guarantee the • Widespread informal economy by the Pakistani Taliban and the rise in Islamic · the scheduled imposition of VAT in 2018, jointly IMF, the budget position improved markedly to Sultan Qaboos dollar pegging. Although there remains a risk (40% of GDP) and weak fiscal resources during the period of the latest financing fundamentalism. This was illustrated in late • Income inequalities exacerbated by cuts to with all the other Gulf Cooperation Council, and of speculation, and despite the decision not to (16% of GDP) November 2017 by the resignation of the Justice an increase in corporation tax (from 12 to 15%). agreement between 2013 and 2016. The fiscal social subsidies apply the uplift in the key lending rate by the US • Energy dependency deficit (excluding grants) fell from 8.5% to 4.6% minister following the blockade of Islamabad by These measures will likely have a negative impact Federal Reserve in June 2017, monetary policy • Inadequate sanitation, agriculture and of GDP. However, this trend has reversed. This several thousand Islamist militants unhappy on investment and household consumption. will remain restrictive (rates are expected to be education infrastructure is explained by a less sustained increase in tax with the change to the oath taken by all election In addition, the introduction of a 5% VAT rate, raised gradually) and the pegging of the Omani • Province of Balochistan is lagging receipts (both at federal and provincial level) candidates. It is also reflected in the success in as well as the slow rise in the price of oil and in rial to the dollar will continue in 2018. far behind on development as is the the mid-term elections of the parties close to countryside generally linked to higher spending in the run-up to the basic commodities, is set to stimulate inflation, impending parliamentary elections. This could Islam and the outbidding between the traditional increasing the pressure on the pegging of the • Frequent shortages of electricity parties (PML-N, Pakistan Movement for Justice Fragile political stability in a menacing and water be temporary with fiscal efforts likely to resume Omani rial to the dollar. As part of the ninth five- external context after the elections. The public debt, mainly or Tehreek-e-insaf led by Imran Khan and the year plan (2016-2020), huge investments have • Underdeveloped financial system Pakistan People’s Party). The army, which has Although there are no immediate political dangers, domestic and denominated in the local currency, been made in education and the creation of • Poor sectoral diversification and will remain high in 2017-18 and continue to put stepped in several times in the past, remains public sector jobs (a plan to create 25,000 jobs there are genuine concerns around the stability of concentration in a few low value-added the ultimate arbiter, while the external situation the Sultanate. The fragile health of Sultan Qaboos, sectors pressure on the banking system leading to a was announced in October 2017) as part of the crowding out of private business investment. remains precarious. Although relations with fight against unemployment (17.5% at the end of the keystone of the regime, is again generating • 40% of labour force works in agriculture India will remain tense over Kashmir, China will 2016) and a dependence on foreign labour. The questions regarding his succession. The context and thus depends on the weather and The current account deficit deepened in 2017 continue to be the main economic partner with on world prices Tanfeedh Program, launched in 2016 with the aim of economic slowdown and budget consolidation because of an increase in the trade deficit. a growing number of projects included under the of enhancing economic diversification, focuses also gives rise to dangers in the social arena, While exports declined, imports of oil and China Pakistan Economic Corridor. In the west, on developing tourism, industrial manufacturing, echoing the raised social expectations of 2011, with goods needed for implementing the Economic relations with Afghanistan are characterised and logistics. The reforms are thus aimed at youth unemployment at 20% in a country in which Corridor increased. The current account deficit is by flare-ups in tension, as in 2017 following attracting foreign investment and improving 40% of the population is under 25. On top of this, expected to widen again in 2018. The trade deficit Pakistan’s mass expulsion of Afghan refugees. bureaucratic processes. the country is in an increasingly hostile regional remains the main contributor to the imbalance. situation, with the worsening of events in Yemen This is explained by weak Pakistani exports constituting a direct threat to its internal security. (less than 10% of GDP), of which more than half are comprised of textile products (home linen, clothing, cotton), the rest broken down between agricultural products (cereals) and a small

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COFACE ASSESSMENTS COFACE ASSESSMENTS D A4 COUNTRY RISK COUNTRY RISK D A4 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) -0,2 4,3 3,5 3,4 GDP growth (%) 5.8 4.9 5.6 5.7 Exports of goods, as a % of total 4.8 Exports of goods, as a % of total 4.0 Inflation (yearly average, %) -0.2 1,4 1,1 1,5 POPULATION Inflation (yearly average, %) 0.1 0.7 1.6 2.0 POPULATION Israel (millions of persons - 2016) Euro Area (millions of persons - 2016) 90% Budget balance (% GDP) * -11,4 -8,1 -9,7 -9,4 25% Budget balance* (% GDP) -2.3 -2.2 -1.7 -1.3 2,781.5 13,670 Jordan Current account balance (% GDP) ** -9,9 -13,1 -13,2 -13,4 United States Current account balance (% GDP) -7.3 -5.6 -5.5 -4.0 5% GDP PER CAPITA 21% GDP PER CAPITA Public debt (%) 40,4 36,1 36,9 38,9 (US dollars - 2016) Public debt* (% GDP) 38.8 38.8 38.0 36.5 (US dollars - 2016) United States Costa Rica 1% * Excluding grants ** Including grants (f): forecast 6% * Excluding the Panama Canal Authority (f): forecast Euro Area China 1% RISK ASSESSMENT 6% RISK ASSESSMENT United Kingdom Taiwan 1% Weak growth in 2018 and 80% of exports. Palestine exports mainly 4% An acceleration based content of imported investments. FDI (consisting After a recession in 2014 and 2015 because of very low value-added products such as stone on the new canal’s activity mainly of reinvested profits) should remain Imports of goods, as a % of total the war in Gaza, the Palestinian economy is (for construction) and agricultural products. Imports of goods, as a % of total Panama has the most dynamic economy in Latin dynamic and finance the current account deficit, The trade deficit, one of the largest in the world, but would be vulnerable to a change in United Israel recovering. In 2018 the growth rate is expected United States America, and remains an attractive destination 58% to be the same as in 2017 - the Palestinian is explained by the difficulty the agricultural 26% for financial and transport services. Growth States (US) corporate tax rules. The income balance will remain negative because of interest Euro Area economy continuing to suffer the consequences and industrial sectors have in penetrating Euro Area should continue to be supported by local demand. 11% of the war. The unemployment rate in Gaza the external market as well as the difficulties 10% Household consumption should remain dynamic payments on debts held by foreign lenders Turkey is 42%, whereas the national average is 27%, resulting from Israeli and Egyptian restrictions. China due to the continuing and very favourable job and the outflow of dividends taken by foreign 8% evidence of the strong disparities between the The lack of a national currency creates a 9% market, the country’s first participation in the companies. China West Bank and Gaza. Economic growth in the dependency on Israeli monetary policy and the Mexico football World Cup, and the development of 8% south is mainly driven by reconstruction efforts Shekel’s appreciation in recent years has reduced 5% credit, in a context where inflation remains A fragile parliamentary majority Jordan while in the West Bank the main component of the very low price competitiveness of Palestinian Costa Rica moderate. Nevertheless, this credit dynamic and progress in terms of transparency 3% 4% economic activity is private consumption (+5% producers. The 18% drop in FDIs in the first half of is expected to weaken due to the continued post-”Panama Papers” 2017 means it will not be possible to offset the expected in 2018), which benefits from easier tightening of monetary policy related to the rise President Juan Carlos Varela of the centre-right current account deficit. + STRENGTHS access to credit (+22% in 2017) for individuals. + STRENGTHS in US rates. The Panamanian banking system, Partido Panameñista (PP), in power since 1st July Assuming the peace process will still be blocked acting as the effective financial sector for the 2014, was obliged to reach an agreement with the • Observer State status at the UN since in 2018, restrictions on trade as well as on access Towards status quo in 2018 • Interoceanic canal and related infrastructure region, should prove resilient. Private and public centre-left Partido Revolucionario Democrático late 2012 (ports, airports, roads, railway tracks) to resources will still apply. Since April 2017, Re-elected in November 2016, Mahmoud investment (45% of GDP) should perform well, (PRD) opposition party, and subsequently • Very young population the population has had only limited access to • Fully dollarised economy and financial although to a lesser extent than in the past obtained a parliamentary majority with 49 seats Abbas (82 years), president of the PA and of stability • Substantial remittances from the diaspora electricity and water treatment stations are only the Palestinian Liberation Organisation PLO), (completion of the canal’s expansion) thanks to out of 71. The president’s popularity is declining, partially operational. The agricultural sector is in • Colón Free Trade Zone, world’s second- the activity generated by the construction of and the next legislative and presidential elections controls the West Bank while Hamas, led by largest import-export platform decline and the situation is unlikely to improve Ismail Haniyeh has controlled the Gaza strip subway lines, a fourth bridge over the canal, the will take place in May 2019 (outgoing presidents - WEAKNESSES in 2018 This is because only 21% of cultivable • Regional banking and financial centre completion of the airport, and the development are ineligible for re-election). Income inequalities since being democratically elected in 2007. In served by excellent telecommunications land is in use due to structural problems relating April 2017, the PA decided to no longer pay for of a copper and gold mine. In addition, the canal’s are very strong, and redistribution is hampered • Lack of geographic, political and economic • Tourism potential activity should be favoured by the resumption unity to irrigation, Israeli restrictions on the import of Gaza’s electricity because of its disagreement by the scarcity of budget incomes (9% of GDP). fertilisers and subsidised Israeli competition. of foreign trade resulting from the economic • Very high unemployment rate with Hamas, resulting in a serious humanitarian From an external perspective, whereas the Public investment remains weak, at a level close recovery in Latin America, and world trade crisis. In September, the leaders of Hamas “Panama Papers” scandal of April 2016 sparked • Restrictions on movement in the West to 2% of GDP according to the UN, and depends - WEAKNESSES more generally. This should be accompanied Bank imposed by Israel, and blockade were ready to negotiate a peace deal with Rami many international reactions to the Panamanian almost exclusively on international aid. Private by a development of financial, logistics, and of the Gaza Strip by Egypt and Israel Hamdallah’s government in order to break the • High exposure to North and South tax system, the reputation risk does not seem investment is higher, even if the level remains tourism services. • Stalemate in the peace process with Israel deadlock after a decade of tension between the American economies to have significantly affected the country’s stable (16% of GDP in 2015 and 2016), mainly two main political forces. Following a meeting • Deficiencies in education and vocational attractiveness, given the significant number driven by reconstruction activities. Inflation is in Cairo, in October, Hamas agreed to stop training Deficits should fall thanks to the canal’s of multinationals that have set up their regional expected to remain weak in 2018, thanks to the managing public affairs in Gaza and talks aimed • Wide disparity between the canal zone expansion and the recovery of world trade headquarters in the country in connection with appreciation of the Shekel. at reconciliation and the establishment of a and the rest of the country The public finance situation should continue to the exempt status of multinational regional government of national unity were launched. The • Corruption and nepotism; bureaucracy improve, remaining within the framework of headquarters (MRH). The country has increased The public and external accounts remain Israeli government then declared that it was not meeting the budgetary targets defined by the by financial transparency and the fight against fragile prepared to negotiate with the Palestinians until the budget and social responsibility law. The 2018 tax fraud, notably by signing the convention on The Palestinian Authority’s (PA) public finances Hamas had laid down its arms and recognised the draft budget, presented in July 2017; shows a 7.9% mutual administrative assistance (MAA). As a remain dependent on relations with the Israeli Jewish State. increase compared to 2017, which represents an result of this progress, Panama was removed government. Spending on wages is high, The status quo is therefore expected to prevail increase in revenues of 6.9% (related in particular from the OECD’s list of uncooperative countries accounting for 59% of total spending in 2017. in 2018, as the Fourth Netanyahu government is to canal toll revenues) and expenses of 4.2%: in June 2017, and the country is now included in The drive to rationalise spending will continue in opposed to the creation of a Palestinian State and almost 50% of the budget has been allocated the category of countries that “largely meet the 2018, but the PA has less room for manoeuvre a resolution of the conflict is not a priority for US to social programs, but significant investment criteria” required by the organisation. However, in a chaotic humanitarian context. Moreover, President Donald Trump who is not committed to expenditures are planned, particularly for the the standards of contract enforcement and international aid, a major source of finance, is a two-state solution. completion of lines 2 and 3 of the subway. Debt insolvency management are not satisfactory likely to remain at relatively low levels, having Regarding the business climate, according should thus remain moderate and continue according to the World Bank’s surveys. fallen by 38% between 2014 and 2016 and by to the World Bank’s Doing Business 2017, to decrease. Furthermore, Panama – one of the most 12% in 2017. Nevertheless, the fiscal deficit is the Palestinian Territories are ranked 140th The current account deficit should fall in 2018 due competitive countries in Latin America – Panama expected to stabilise in 2018, thanks to the major (out of 190). to the canal’s activity, boosted by its expansion has signed numerous free trade agreements contribution made by weak spending on electric and the recovery of world trade. Latin America’s (Peru, US, Canada, Colombia, EFTA area, Mexico) power (Gaza Strip). In 2018, the PA is expected strongest growth should promote exports, as well as the important EU-Central America to finance a growing proportion of its deficit by despite the moderate dynamism of the United association agreement. A materialisation of the borrowing from domestic banks. States and the appreciation of the US dollar, the protectionist risk could nevertheless have a The external accounts remain dependent on currency used in Panama. In addition, exports significant impact on the economy. Israel’s economic cycle. The reason is that trade are set to further diversify with the opening with Israel accounts for over 70% of imports of a new copper mine. Nevertheless, imports should remain significant taking into account the

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COFACE ASSESSMENTS COFACE ASSESSMENTS B C COUNTRY RISK COUNTRY RISK C C BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 9.2 2.4 3.0 3.2 GDP growth (%) 3.0 4.1 4.1 3.9 Exports of goods, as a % of total 7.9 Exports of goods, as a % of total 6.9 Inflation (yearly average, %) 6.3 7.0 7.5 6.0 POPULATION Inflation (yearly average, %) 3.1 4.1 4.0 4.1 POPULATION Singapore (millions of persons - 2016) Brazil (millions of persons - 2016) 23% Budget balance (% GDP) -5.1 -4.4 -2.7 -2.4 35% Budget balance (% GDP) -1.3 -1.0 -1.2 -1.1 2,589 4,003 Australia Current account balance (% GDP) 19.6 15.3 15.9 14.2 Argentina Current account balance (% GDP) -1.1 0.6 1.2 0.1 22% GDP PER CAPITA 10% GDP PER CAPITA Public debt (% GDP) 30.4 33.5 33.1 33.0 (US dollars - 2016) Public debt (% GDP) 24.0 24.7 25.8 25.1 (US dollars - 2016) Japan Euro Area 13% (f): forecast 10% (f): forecast China Russia 11% RISK ASSESSMENT 8% RISK ASSESSMENT Euro Area Chile 7% Slightly improved growth prospects Ongoing improvement in the public 6% Resilient growth in 2018 contained, even if financing it will still broadly be Growth is expected to rally slightly in 2018, but, accounts Activity is expected to remain firm in 2018, through external finance, in particular via the Imports of goods, as a % of total hit by weak mining product and hydrocarbon In 2017, the country was hit by a drop in Imports of goods, as a % of total buoyed by domestic demand and agricultural issuance of dollar-denominated bonds. Australia prices, will remain below the levels observed up budgetary resources associated with low China exports. The latter will benefit from the improved Economic recovery in Brazil and Argentina is 36% to 2015. Foreign trade will still be the main growth commodity prices. Nevertheless, the fiscal 27% economic situation in both Brazil and Argentina, expected to stimulate agricultural and energy China driver, with higher exports of oil and liquefied deficit is expected to narrow further, as a result Brazil the country’s main trading partners, as well as (mainly hydroelectric) exports, excluding any 15% natural gas (LNG). Nonetheless, this dependence of the government’s drive to cut spending. The 24% from the moderate rise in the price of soya (42% negative weather events. The trade surplus Singapore on foreign trade makes the country extremely government is not set to significantly increase Argentina of exports). Nevertheless, the contribution of (5% of GDP) will be moderated by strong import 8% sensitive to world price movements and demand its revenues, in large part due to ineffective tax 14% external trade to growth will be limited because growth associated with dynamic private Malaysia from its trading partners. Moreover, investment collection. In addition, LNG export income was United States of the lively pace of imports. The healthy state of consumption and infrastructure investments. 7% is expected to bounce back, especially in the lower than expected because of low LNG prices. 7% the agricultural sector will benefit the industrial Meanwhile, changes in terms of trade will Japan oil and LNG sectors, where new projects are There are risks of budget slippages, as during the Euro Area sector, mainly centred on processing agricultural continue to be a key factor in the current account 4% under way. However, they will not significantly parliamentary campaigns in summer 2017, Prime 7% products like soya (oil, flour) or beef (mainly balance. Under these conditions, FDI flows, improve the country’s infrastructure deficit, Minister Peter O’Neill committed to increasing leather). The dynamism of the automotive chiefly in the agricultural and infrastructure parts assembly and textiles segments within sectors, will help maintain foreign exchange + STRENGTHS especially in terms of transport. This is public spending on the sectors prioritised for + STRENGTHS because resources are limited by low levels of expansion (education, healthcare, infrastructure the country’s maquilas (foreign-built factories, reserves at a satisfactory level (seven months • Abundant natural resources: minerals national savings, inefficient public spending projects, and support for small- and medium- • Well-developed agricultural sector typically in free zones) and of the construction of imports). (copper, gold, nickel, cobalt), hydrocarbons programmes and public-sector companies, sized enterprises). Finally the public debt, though (soya and beef) sector should help support private consumption (oil, gas) and agricultural products (wood, • Abundant hydroelectric resources by creating jobs. Households will also benefit coffee, cocoa, palm oil) and the ongoing political risk affecting the limited, is not expected to fall significantly. Political difficulties in advancing the reforms country’s attractiveness for foreign investors. from the higher minimum wage. Higher public • Prudent fiscal and economic policies The next presidential and parliamentary • Construction of liquefied natural gas The agricultural sector, hit by poor weather spending will underpin activity, but political production facilities Social and political tensions with the elections are due to be held on the 22nd April conditions in 2016 and 2017, is expected to disagreements could delay the implementation • Foreign investment in raw materials sector re‑election of Peter O’Neill 2018 and are expected to be won by a member rebound, but will still be largely informal with - WEAKNESSES of some infrastructure projects (roads, metro, of the Colorado party, the party of the current • Financial support from multilateral low productivity and providing only subsistence Peter O’Neill (People’s National Congress) was airports). Private investment will be limited by institutions president, Horacio Cortes, who is ineligible agriculture for the population. Household re-elected to the position of Prime Minister by • Inadequate infrastructure (river transport, the still underdeveloped infrastructure, despite roads, electricity power lines) to stand having withdrawn his proposed consumption, representing only 48% of GDP, is Members of Parliament in August 2017, after an attractive fiscal policy for foreign investors. amendment to the Constitution allowing expected to suffer from a continued high level of his party won the legislative elections that took • Dependent on the agricultural sector Inflation is expected to settle in the middle of the - WEAKNESSES and a small number of trading partners for presidential re-election. This proposal unemployment, especially among young people, place between June and July 2017. Allegations of central bank’s target range (2-6%). The central (in particular, Brazil and Argentina) hampered the implementation of reforms, as and ongoing high inflation. Effectively, even if it fraud during these elections dealt a blow to the bank will tighten monetary policy if there are • Highly exposed to natural disasters • Weak governance (corruption and it was heavily contested by the opposition, comes down with the depreciation of the kina Prime Minister’s already declining popularity. strong inflationary pressures, particularly on • Poor infrastructure network patronage) as well as by members of the Colorado Party. coming to an end, inflation will stay above the There are likely to be many anti-government food prices. It will also intervene to stabilise the • Low literacy rate • Large informal market (40% of GDP) Several members of the Colorado Party (PC) also central bank target of 5%. The central bank’s demonstrations, and political stability remains guarani, the local currency, if it depreciates too • Lack of skilled workforce criticised President Cortes’ reform programme, ability to intervene remains constrained by its fragile. Given this enduring situation, the strongly following a fall in the price of soya or an which was based on opening up the capital of • Significant governance shortcomings lack of independence and political interference. government could try to use the police and increase in the price of oil. Meanwhile, the banking • Rapid growth of private sector external the army to strengthen its position, at the system remains fragile, as it is highly dollarised state-owned enterprises to private participation debt risk of triggering deadly clashes between the and the multiplication of infrastructure projects Fragile current account surplus in the face and heavily dependent on the agricultural sector, population and the law enforcement agencies as which represents most of the loans granted. in private/public partnerships. It is therefore of weak commodity prices in July 2016. likely that the new government will be more The current account balance has shown a large The country still suffers from significant reluctant to raise funds from the private sector surplus since 2015 with the start of operations Prudent budget policy and balanced to finance infrastructure developments, which governance shortcomings and failings regarding external accounts at new facilities for the exploitation of natural the separation of powers. While he has could adversely impact FDI flows. Meanwhile, the resources such as LNG. However, the drop committed to fighting corruption since coming The government is expected to continue with the business climate remains difficult, particularly in exports of mining products substantially to office in 2012, the Prime Minister was himself implementation of the budget reforms approved because of corruption and the size of the informal reduced the current account surplus in 2016, involved in a corruption scandal in 2014. The at the end of 2013, which include a law on fiscal economy. and this position is unlikely to change in 2018, country was ranked 136th out of 176 countries responsibility, limiting the deficit to 1.5% of GDP, given the low momentum in commodity prices. on the corruption perception index, established tax reforms, and a framework permitting public/ Additionally, the current account surplus will by Transparency International in 2016, and the private partnerships (PPP). In 2017, the budget decline slightly, affected by steady capital flight, business climate remains poor. Finally, social deficit remained below the limit fixed by law and slower Chinese growth, high consumption of tensions remain high, fuelled by inequalities this position is expected to last until 2018. The raw materials, and still high imports, with the and poverty. lively pace of economic activity should help boost country dependent externally for many goods. tax receipts and offset the increase in public The services and income balance is expected to spending, mainly on infrastructure. However, continue to show a deficit. the country is expected to widen its tax base, one of the narrowest in Latin America, in order to more easily reach its fiscal deficit targets, while developing its infrastructure. Given the fiscal prudence, the public debt is expected to remain

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COFACE ASSESSMENTS: PAYMENT AND COLLECTION PRACTICES IN PERU Payment taxpayers and other formal obligations. In Peru, order is not complied with during the five-day A4 the UIT is set at the beginning of the year by the period, the judge must order the seizure of the COUNTRY RISK Cheque use in Peru is in decline due to the increasing preference for electronic payment Economic Ministry. debtor’s assets in order to sell them at auction. B for both high-value and low-value transactions. Two fast-track proceedings are available in For foreign awards, creditors located in Peru BUSINESS CLIMATE Post-dated cheques are commonly issued Peruvian law: must file a claim before the Superior Court in Peru. Simplified proceedings (proceso sumarisimo) located in the debtor’s place of domicile. Credit transfers are used for both high-value concern to cases provided by Peruvian law and The Court will consider whether the foreign and low value payment transactions. There for cases which the value is below 100 Unidades judgment is compatible with Peruvian law and TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) is a minimum transfer amount for high-value de Referencia Procesal. Juzgados de Paz have any international treaties between the two GDP growth (%) 3.3 4.0 2.6 3.8 31.5 transactions (PEN 5000 or USD 2000) for third jurisdiction for amounts between 50 and 100 countries.. If it is found to conform, the judge shall Exports of goods, as a % of total authorize the enforcement of the judgment in the Inflation (yearly average, %) 3.5 3.6 3.1 2.5 POPULATION party transfers. The majority of low-value Units. Defendants have five days to file a dispute China (millions of persons - 2016) electronic credit transfers in Peru continue to after they received the notification from the Peruvian Jurisdiction. 23% Budget balance (% GDP) -2.1 -2.6 -2.9 -3.4 6,204 be made between accounts in the same bank, judge. Within ten days, the judge organises United States Current account balance (% GDP) -4.8 -2.7 -1.6 -1.7 known as intrabank or “on-us” transactions. hearing for discovery, conciliation, evidence and Insolvency proceedings 17% GDP PER CAPITA Public debt (% GDP) 24.0 24.4 26.0 28.0 (US dollars - 2016) judgment. Euro Area Bills of exchange are a commonly used payment Peru’s insolvency law allows for involuntary 12% (f): forecast instrument for debt collections. According to Peruvian law, shortened proceedings or voluntary liquidation proceedings as well as Switzerland (proceso Abreviado) concern cases in which for reorganization. The Instituto Nacional de 7% RISK ASSESSMENT Debt collection the value is between 100 and 1,000 Unidades Defensa de la Competencia y de la Proteccion Canada de Referencia Procesal. Juzgados de Paz have de la Propriedad Intelectual (INDECOPI) is the 5% Recovery in activity in 2018 which remains below the legal ceiling of 30%. The Legal proceedings jurisdiction for amounts between 100 and 500 Units specialized administrative agency that deals with 1% deficit target for 2021 remains achievable. The Peruvian judicial system is structured and Juzgados Civiles have jurisdiction in cases for insolvency proceedings. Activity in 2017 suffered partly as a result of hierarchically. The Corte Suprema (Supreme Imports of goods, as a % of total the floods, landslides, and disruption to the The current account deficit will likely continue at a amount above 500 Units. The defendant has ten Out-of-court proceedings: preventive proceeding Court) is the highest court, followed by days to file a dispute from the admission of the China communications infrastructure triggered by moderate level. The trade surplus – generated notably courts that specialise in civil law, criminal law, Preventive proceedings aim to provide a forum 23% the 2016-2017 El Niño costero weather events by metal sales – expatriate worker remittances and petition by the judge. Discovery and conciliation will for debtors to reach a consensual restructuring constitutional law and labour law. These sit above be examined during one hearing. If the conciliation United States phenomenon, and partly due to the suspension tourist income are set to partly offset the repatriation the Corte Suprema in each judicial district, which agreement with their creditors. It is intended 19% of public investment in the light of the Odebrecht of profits by foreign investors and foreign transport was not successful, the judge mentions the to be a fast track process that only debtors can deal with civil and commercial law cases. The disputed points and evidence to be provided or Euro Area corruption scandal. A sharp recovery in domestic services. This deficit is well-funded thanks to foreign Juzgados Especiales (specialised judges) are initiate. 10% updated. Within 50 days of the conciliation hearing, demand is expected in 2018, in a context of a investments, which enables the central bank to located in major cities in the country and deal Reorganisation Brazil continuation of the positive economic policy. increase its already substantial currency reserves the judge sets up an evidence hearing. 6% with matters concerning, among others, civil and If creditors decide to allow their debtors to Construction work, such as the building of the gas (around fifteen months of imports) which give it the commercial law. Following this is the professional Executive proceedings restructure, they will be asked to approve a Mexico pipeline in the south of the country, is expected to ability to intervene to prevent excess volatility in the When creditors are owed an undisputed 5% Juzgados de Paz (peace judges), located in reorganisation plan within 60 days from the resume.. Construction of the second Lima subway sol. Although in decline, dollarisation still covers 45% major cities in the country, and in charge of low and certain debt, they can start executive decision to proceed with reorganization. Both line and the infrastructure for the hosting of the of deposits and 30% of outstanding credit. A sharp economic value cases and other minor issues. proceedings. The debtor has five days from the the decision to reorganise and the organisation + STRENGTHS Pan-American Games in Lima in 2019 will likely depreciation would endanger what is otherwise a solid Finally, Cortes de Paz (peace courts) are located notification to submit his defence. The judge will plan must be approved by more than 66.6% of also continue, alongside the modernisation of the banking system. in cities with lower populations, comprised of render a judgment, after which each party has up the allowed creditor claims. During the process, • Membership of the Pacific Alliance Talara refinery by Petroperu. With the recovery – one judge who may or may not have the status to three days to file an appeal. creditors decide whether to allow the debtor’s • Mineral, energy, agricultural, and fishery albeit slow – in raw material prices, investment in Reforms being held up in struggle between of lawyer. Ordinary proceedings management, to continue operating the resources mining is starting to pick up. In addition, a three- the Executive and Legislature Amicable phase Ordinary proceedings apply to cases whose business, or to replace the debtor’s management. • Low level of public debt year plan for the rebuilding of damaged roads, value is over 1,000 Units of Procedural Reference. Once the reorganisation plan is approved bridges, housing, and schools was approved in In 2016, Pedro Pablo Kuczynski of the centre-right The amicable phase in Peru is characterised • Independence of its central bank; strong Peruvians for Change party won a narrow victory in The plaintiff sends a written petition to the court. and all the pre-publication claims are paid banking sector September 2017. by phone calls, written reminders, visits, and Peru’s Presidential elections (50.1% of votes) over meetings, with the goal of settling the debt The defendant can file a defence expressing according to their terms, then INDECOPI grants • Tourist destination Household consumption is expected to feel the his rival Keiko Fujimori – daughter of imprisoned between two parties without triggering legal the facts on which he intends to argue, within a decision declaring the formal conclusion of the • Youthful profile of the population benefits of the new jobs created as investment former President Fujimori, of the conservative proceedings. 30 days from the service of the writ. If the reorganization proceeding. increases, as well as the slowing in inflation resulting Fuerza Popular (FP) Party. President Kuczynski’s claim is complete (i.e. includes all the relevant Liquidation from slower rises in food prices, and the expected Conciliation Proceedings information), the judge sets up a hearing for programme includes both social inclusion and the Prior to judicial proceedings, Peruvian law If the creditors decide to liquidate, then a - WEAKNESSES slight depreciation of the sol. Reduced inflationary encouragement of private (foreign) investment, conciliation. If the parties reach an agreement, liquidator will be appointed at the Creditors’ pressures will make it possible for the central bank requires the initiation of a conciliation process it has the same effect as a judgment. If an • Dependence on raw materials and (including within areas that are traditionally public) in order to reach a debt settlement agreement. Meeting from the list registered with INDECOPI. demand in China to hold the key lending rate (3.5% at the end of via the loosening of administrative formalities agreement is not reached, the judge organises a The will be asked to approve a liquidation plan for October 2017) just above inflation. Exports are set The process constitutes two hearings, to which hearing within 50 days of the conciliation hearing. • Exposure to climate shocks; and deregulation of the labour market, alongside both parties are summoned, with the aim of the debtor and decide whether the debtor should seismic events to increase, but at a slower rate than in the previous fiscal incentives – all the while, maintaining the The proceedings end when the judge delivers his be authorized to continue its business during the two years. This will apply to copper (29% of sales), reaching an agreement. If an agreement cannot or her decision. • Underdevelopment of credit (40% of GDP) essential equilibrium. His party has only 17 out of be reached, the proceeding ends, and both liquidation. Whether voluntary or involuntary, gold (19%), oil and gas (6%), zinc (5%) and lead (4%), the 130 seats in congress, meaning the government The length of proceedings depends mainly on the liquidator must follow a mandatory order in • Inadequate infrastructure, health care, and which benefited in 2017 from a (weak) recovery in parties have to sign a conciliation act, which is education systems has to rely on the support of the FP (77 seats). then presented at the beginning of the judicial the nature of the conflict, the number of parties the payment claims. prices and increased production. Sales of seafood, involved, the complaints that occur, and the • Huge informal sector (70% of jobs) which fruit (grapes, avocados, pineapples, mangoes, In September 2017, the government was defeated in process. To conclude the liquidation process, the liquidator impedes training and productivity a motion of censure relating to changes to the status caseload of the judge in charge of the process. files a petition before the Public Registry in berries, etc.), as well as fish-meal (5%) are Fast-track proceedings Based on these criteria, a first-instance judgment • Regional disparities (poverty in the expected to do well, excluding any extreme climate of teachers. The President formed a new Council of The below text makes reference to the Unidad order to register the extinction of the company. Andean and Amazonian regions) Ministers, headed by Mercedes Aráoz and comprising in a typical commercial litigation case may take However, if creditors remain unpaid, then the events. However, as imports will increase in line with de Referencia Procesal (Unit of Procedural approximately twelve to eighteen months. • Scale of coca growing and cocaine the strength of domestic demand, the contribution six of the nineteen previous ministers, which got Reference), which is a reference value according liquidator must file a petition before a civil judge production of trade to growth could be slightly negative. a vote of confidence in October. In the event of to Peruvian law: each Unidad de Referencia to obtain a judicial bankruptcy declaration. another motion of censure, the president will have Procesal is 10% of the Unidad Impositiva Enforcement of a legal decision the right to call fresh elections – a possibility clouded Tributaria (UIT), which can be used in tax A domestic judgment becomes final and Comfortable budget margins and current with uncertainty, both for the FP, whose leader may account deficit financed by FDI regulations to determine tax bases, deductions, enforceable once all venues for appeal have been be implicated in the Odebrecht scandal, and the limits of affectation and other aspects of taxes exhausted.. The first instance judge is in charge The government is expected to continue its relaxed President, who narrowly survived an impeachment that the legislator deems appropriate. It may of enforcing judgments, and will issue a writ of budget policy in 2018, with a particular focus on vote over corruption charges related to the same also be used to apply sanctions, to determine execution ordering the relevant party to comply infrastructures, education, healthcare, access to affair in December 2017. Given the weakness of the accounting obligations, register in the register of with the judgment within five working days. If the drinking water, and sewage systems. However, executive and the FP’s sensibility to interest groups, the government does seem to have – at least reforms will be hard-fought. Nevertheless, the task temporarily – abandoned tax cuts for companies would be facilitated if the head of the Council of whose goal was to incite small and mid-sized Ministers was granted special powers by Congress companies to submit the necessary declarations, to speed up the process. It is with this method that with the aim of reducing the scale of the economy’s some progress has already been achieved relating informal sector and increase fiscal revenues (23% to administrative matters. There is now an anti- of GDP). The authorities have triggered the hardship corruption decree that prohibits anyone involved in clause in the budget regime. This approach is made any corruption from being employed in a national, easier thanks to the small relative size of the debt, provincial or local public body.

176 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 177 PHILIPPINES POLAND

COFACE ASSESSMENTS COFACE ASSESSMENTS A4 A3 COUNTRY RISK COUNTRY RISK B A2 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 6.1 6.9 6.8 6.5 GDP growth (%) 3.9 2.9 4.3 3.6 Exports of goods, as a % of total 104.2 Exports of goods, as a % of total 38.0 Inflation (yearly average, %) 1.4 1.8 3.2 3.6 POPULATION Inflation (yearly average, %) -0.7 -0.2 1.9 2.3 POPULATION Japan (millions of persons - 2016) Germany (millions of persons - 2016) 21% Budget balance (% GDP) 0.6 -1.5 -2.0 -2.0 27% Budget balance (% GDP) -2.6 -2.4 -2.5 -2.7 2,927 12,361 United States Current account balance (% GDP) 2.5 0.2 -0.2 -0.2 United Kingdom Current account balance (% GDP) 0.1 0.2 -0.6 -1.2 15% GDP PER CAPITA 7% GDP PER CAPITA Public debt (% GDP)* 44.8 42.8 41.2 41.0 (US dollars - 2016) Public debt (% GDP) 51.1 54.4 54.6 55.2 (US dollars - 2016) Hong Kong Czech Republic 12% * central government (f): forecast 7% (f): forecast China France 11% RISK ASSESSMENT 5% RISK ASSESSMENT Euro Area Italy 10% Growth expected to remain strong tax rates for higher income brackets. Despite 5% The growth peak has been passed falling within the remit of the European Excessive In 2018, the economy is expected to maintain its growing government spending, strong growth Although Poland is expected to record a solid growth Deficit Procedure remains a priority. Imports of goods, as a % of total momentum, buoyed above all by domestic demand. should help stabilise the public debt to GDP ratio. Imports of goods, as a % of total rate in 2018, it will likely be a slower expansion than Most of this debt, around 67% of the debt held by China Household spending (70% of GDP) will again be the Germany that of 2017. A rebound of investments experienced Deterioration of the political and social 17% main growth driver, as it will benefit from significant domestic creditors. 28% last year was gradual. This has so far been situation Japon remittances from expatriate workers, mainly in the Externally, the current account balance should China predominantly fuelled by higher public investments, The conservative Law and Justice (PiS) party won 11% United States and the Gulf States. The depreciation be close to equilibrium in 2018. The trade deficit 8% especially at the municipal level. a majority of seats in the Sejm (the lower house United States of the peso and the creation of the Overseas (above 10% of GDP) is driven by strong domestic Netherlands Household consumption remains the main growth of Polish parliament) in the legislative elections of 8% 6% Filipino Bank – which will not deduct a commission demand and imports for use by industry, especially driver, thanks to the buoyant labour market. The October 2015, with 37.6% of votes, ahead of Civic Thailand – are set to boost the value of these remittances. electronics and IT outsourcing. This deficit is Russia Platform, the main opposition party. Its leader, 7% 6% unemployment rate is the lowest in 27 years, wages Moreover, the income tax payment threshold covered by the services surplus (business process are set to keep growing at fair rates, the central Jarosław Kaczyński, gave the post of Prime Minister Euro Area will be raised. Finally, credit will likely continue to outsourcing, tourism), remittances from expatriate Italy 6% 5% bank’s rate is at its lowest point in history, and to Beata Szydło – moderate in image, but with grow strongly, as the central bank will maintain its workers and yields on Filipino investments abroad. consumer sentiment indicators have broken new significant influence over the government agenda. accommodative monetary policy with inflation still Foreign direct investments are limited and almost heights. Exports (automobiles, machines, white Since taking office, the PiS conducted a series + STRENGTHS in the centre of its target. Investment (25% of GDP) equal to those by Filipinos abroad. This reluctance + STRENGTHS goods, consumer electronics, food and furniture) of disputable reforms that have undermined the is expected to grow moderately. Businesses will to invest is the consequence of both restrictions are expected to benefit from the continued recovery country’s democratic institutions and worsened the • Large population that is young, qualified, be under pressure to invest because of the high and political uncertainties. In total, the balance of • Market of 38 million people in global trade and higher demand in the country’s relationship with the EU. The European Commission and has a command of English production capacity utilisation rate, but will favour payments shows a slight surplus, which explains • Proximity to West European markets leading markets (Eurozone countries). However, as has triggered Article 7 of the Union Treaty which • External accounts in balance continued caution because of political risk and the low level of external debt (24% of GDP), • Price competitiveness / qualified and imports – driven by increased consumption – will could provide for the suspension of certain rights, • Diverse geographic and sectoral origin uncertainties over reforms. While infrastructure exceeded by Filipino assets abroad, the weak cheap labour force increase faster than exports, the contribution from including the right to vote, in case of a clear risk of of remittances from expatriate workers levels remain inadequate, the government has depreciation of the peso and foreign exchange • Integrated into the German production foreign trade to growth is likely to be negative. serious violation of the rule of law. Such actions have (10% of GDP) reaffirmed its intention to increase public spending reserves equivalent to nine months of imports. chain Although the labour market situation is beneficial also generated social discontent within segments • Thriving Business Process Outsourcing on infrastructure to 6% of GDP. This should help to • Leading beneficiary of European structural of the population, and have polarized public opinion. (BPO) sector boost the country’s growth potential. funds for households, companies have perceived it as a Presidential promises facing reality check constraint. Labour shortages have become a barrier In December 2017 Deputy Prime Minister Mateusz Exports, 70% of which are towards Asia, are • Diversified economy (agriculture, variety of Morawiecki, who had been in charge of finance and Rodrigo Duterte was elected to the presidency industries, services) in current business activity and its further expansion, - WEAKNESSES expected to perform well, especially exports of in May 2016 for a term of six years, succeeding and have been reported by an increasing number of development policy, was nominated to become the • Resilient financial sector electronic components (19% of the total), business Benigno Aquino. His ethos is twofold: law and order, companies across all sectors. A lack of workforce is Prime Minister, replacing Beata Szydło. The switch has • Low rates of investment and outdated services (16% including notably call centres and and combatting inequalities. Like his predecessor, • Coal reserves especially evident in the construction sector, which not yet resulted in a change of political or economic infrastructures content control for the American internet giants), he intends to introduce universal healthcare means that its gradual recovery is likely to be limited. course of the government. • Governance shortcomings: bureaucracy IT equipment (5%) and timber (5%). Exports will (currently 93%) and free education from pre-school The tightness of the labour market will continue to Although the current government has successful and corruption likely be driven by favourable economic conditions up to basic university degree level. Combating drug - WEAKNESSES affect businesses in Poland, and it remains one of achieved a higher collectability of taxes, the political • High levels of income inequality in core markets. However, as internal demand and trafficking, maritime piracy and Islamist terrorist • Inadequate level of investment / Domestic factors making a further boost of growth impossible. climate is relatively gloomy. It has contributed to a • Problematic security situation in depreciation simultaneously drive up the import groups (Abu Sayyaf and Maute groups) is the other savings rate too low In addition, the insolvency law enacted in 2016 has higher level of uncertainty compared to previous the Muslim regions of the South bill, trade’s contribution is expected to remain priority. In this regard, the country is building closer • Weakness in R&D favoured the increase in business insolvencies in 2017. years, and has also affected investors’ attitudes. • Strict bank secrecy and casinos facilitate slightly negative. Business process outsourcing ties with its neighbours, Indonesia and Malaysia. • Developmental lag of Eastern regions On the other hand, stable fundamentals, the Polish money laundering (BPO), tourism, and trade will continue to be the Relations with China have improved significantly integration into Western European chains, and main beneficiaries. Industry is another beneficiary • Rigidity of the labour market encouraging Social measures are expected to widen under Mr. Duterte, but some tensions remain informal economy the budget deficit attractive yields have convinced foreign entities as regards construction materials (cement, surrounding disputes in the South China Sea. In to not withdraw their investments from Poland. glass, metals and wood), agrofood, furniture, • Structural unemployment and low level After having narrowed to 2.4% in 2016 – its lowest November 2017, the army ended a 6-month siege of female employment Nevertheless, the increased volatility of exchange telecommunication devices, transport, and office in Marawi on the southern Island of Mindanao by level since 2007 – the general government deficit rates confirmed that political instability and policy equipment. groups close to Islamic State, killing their leaders. has remained stable in 2017, supported by reduced deterioration have worsened the external perception investment activity of public entities in a period Moreover, the peace process with the Moro SECTOR RISK ASSESSMENT of Poland. The country’s financial position National Liberation Front (MNLF) and the Moro of switching to a current EU financial perspective. remains sound Islamist National Liberation Front (MILF) who have Although improved tax collection has brought sizeable and positive effects to the Polish budget balance, The central government deficit is expected to long battled with government forces on Mindanao and in the chain of islands towards Borneo. this has been offset by costly social measures, such stay close to 3% of GDP (2% for the whole public as child benefits and the lowering of the statutory sector) in 2018. However, spending is expected to Despite these successes, the president’s high retirement age in 2017. An extension of higher VAT rise by 12%, with a focus on infrastructure (roads, popularity ratings have tumbled (50% in approval rates’ validity has generated additional revenues, but bridges, railways, health, and education) and ratings from late 2017) following the drug-related the government is likely to look to implement further social programmes (child vaccinations, assistance extrajudicial executions carried out by the armed measures. The introduction of the retail distribution to poor families, extension of health insurance forces, allegations of corruption against allies of the tax, revised downwards under pressure from the cover, primary education). The deficit is unlikely to president and the slow pace of reforms. European Commission, was initially delayed until increase, as revenues will grow thanks to a series Socio-economic circumstances make it 2018 and then to 2019. The government has also of tax reforms announced by the government in necessary to boost State revenues (14% of GDP) expressed intent to abolish the upper limit on pension 2017. These include levying excise duties (fuel, failing which there will be a worsening of the contributions and therefore increase revenues of the automotive products, alcohol and tobacco), public accounts. Social Security Fund. Nevertheless, the public deficit broadening the VAT base, and implementing higher is not likely to break the 3% threshold, and avoiding

178 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 179 POLAND PORTUGAL

PAYMENT AND COLLECTION PRACTICES IN POLAND COFACE ASSESSMENTS Payment Legal proceedings involvement and where the sum of the disputed Fast-track proceedings debt does not exceed 15% of total claims. The A3 Standard bills of exchange and cheques are not COUNTRY RISK widely used, as they must meet a number of Creditors can seek an injunction to pay (nakaz debtor will continue to manage its estate but formal issuing requirements in order to be valid. zaplaty) via a fast-track and less expensive it will be required to appoint a supervisor, who procedure, provided they can produce positive will prepare a restructuring plan. The creditors A2 Nevertheless, for dishonoured or contested bills BUSINESS CLIMATE and cheques, creditors may resort to fast-track proof of debt (such as unpaid bills of exchange, approve the proposal through a vote. procedures resulting in an injunction to pay. unpaid cheques, weksels in blanco, or other The second type of restructuring proceedings acknowledgements of debt). If the judge is not There is, however, one type of bill of exchange is the Accelerated arrangement proceedings. convinced of the substance of the claim – a These are also available if the sum of the TRADE EXCHANGES Main economic indicators 2015 2016 2017(p) 2018(f) that is commonly used - the weksel in blanco. decision he alone is empowered to make – he This is an incomplete promissory note bearing disputed debt does not exceed 15% of total GDP growth (%) 1.8 1.5 2.6 2.1 10.3 may refer the case to full trial. claims. The procedure is simplified in relation to Exports of goods, as a % of total only the term “weksel” and the issuer’s Inflation (yearly average, %) 0.5 0.6 1.6 1.9 POPULATION signature at the time of issue. The signature As since 2010, the district court of Lublin the allowance of claims carrying voting rights. Spain (millions of persons - 2016) has jurisdiction throughout Poland to handle Creditors can only make reservations via a list 26% Budget balance (% GDP) -4.4 -2.0 -1.4 -1.4 constitutes an irrevocable promise to pay and 19,821 this undertaking is enforceable upon completion electronic injunctions to pay when claims are of claims prepared by the court supervisor or France Current account balance (% GDP) 0.1 0.7 0.4 0.3 13% GDP PER CAPITA of the promissory note (with the amount, place indisputable. The clerk of the court examines the administrator. The debtor’s estate will continue Public debt (% GDP) 128.8 130.1 126.4 124.1 (US dollars - 2016) merits of the application, to which is attached the to be managed by the debtor-in-possession, but Germany and date of payment), in accordance with a prior 12% (f): forecast agreement made between the issuer and the list of the available evidence. He then, using an a court supervisor will be appointed to supervise electronic signature, validates the ruling granting its management. United Kingdom beneficiary. Weksels in blanco are widely used, 7% RISK ASSESSMENT as they also constitute a guarantee of payment the injunction to pay. This procedure appears, at The “standards arrangement” proceeding is first glance, to be fast, economic and flexible, but United States in commercial agreements and the rescheduling available for disputed debts exceeding 15% of 5% Slight slowing of growth in 2018 expected to be more expansionary which earned the of payments. in reality the sheer number of cases mean that the total claim. With these proceedings, the The positive eurozone economic situation continues Portuguese government a rebuke from Brussels with this process can be slow and drawn out. court secures the debtor’s estate by appointing Cash payments were commonly used in Poland to help boost the Portuguese economy, which the presentation of the budget. The government plans Ordinary proceedings a temporary court supervisor. Imports of goods, as a % of total by individuals and firms alike, but under the benefited from increased external demand and a to cut taxes for middle income households and raise Ordinary proceedings are partly written Spain 2004 Freedom of Business Activity Act (Ustawa Finally, “remedial” proceedings offer the 33% recovery in investment in 2017. Companies have taxes on companies. The differential will also be made and partly oral. The parties file submissions o swobodzie działalności gospodarczej), broadest restructuring options and scope replaced capital equipment in order to satisfy the up by means of new taxes on consumption (taxes accompanied by all supporting case documents Germany companies are required to make settlements via of protection of the debtor’s assets against 13% growth in demand, while the production capacity on cured products). Capital expenditure is expected (original or certified copies). Oral pleadings, with bank accounts for any transaction exceeding the creditors. The appointment of an administrator utilisation rate returned to close to that of 2008. The to rise whilst current spending should contract. The the litigants, their lawyers and their witnesses France equivalent in złotys of EUR 15,000, even when to manage the debtor’s estate is mandatory. 8% growth in exports was confirmed during the year and public deficit will stabilise whilst remaining above the are heard on the main hearing date. During payable in several instalments. This measure has Italy there was an increase in the market share captured by 2% mark. Although the primary balance is expected these proceedings the judge is required, as far Bankruptcy proceedings been introduced to combat fraudulent money 5% equipment exports. Exports of services were in turn to remain in surplus, the reduced cost of debt made as possible, to attempt conciliation between the Bankruptcy proceedings can only be declared laundering. when a debtor has become “insolvent”. There Netherlands boosted by a rise in the numbers of tourists. These possible thanks to low interest rates (2.8% in 2018) parties. 5% Bank transfers have become the most widely are two test of insolvency - the liquidity test and two growth drivers have made up for the reduced should help reduce the cost of the debt servicing. used payment method. Since phases of Standard court procedures can be also fast the balance sheet test. Both aim to liquidate the contribution to growth from household consumption As a consequence of the upgrading of the country and effective when the creditor can provide privatisation and consolidation, leading Polish estate of the bankrupt company and distribute + STRENGTHS which, whilst positive, has tended to slow since 2016. by Standard and Poor’s (S&P) from “BB+” to “BBB- documents which clearly show the amount of banks now use the SWIFT network, which offers the proceeds among its debtors. The entire Activity will likely gradually slow during 2018. ”, Portugal was taken out of the “junk” investment debt and the confirmation of delivery of goods a cost effective, fast and flexible solution for the procedure is court-driven, although the 2015 • High-quality infrastructures The increase in employment and the reduction in category in which it had been placed back in January (or proper performance of services), especially if transfer of domestic and international funds. reform has given creditors holding major claims • Tourist destination taxes on middle class households will help sustain 2012 and should see a reduction in the yields of the documents have been signed by the debtor. a right to influence the choice of (or a change to) • Beginning of sectoral and geographic consumption, while investments by companies will government bonds. The level of the public debt Debt collection The court issues an order for payment which the court-appointed trustee. diversification of exports, research and be restrained by higher corporation taxes. Public however remains high but is on a downwards states that the debtor should pay the amount innovation capacities trajectory that is expected to accelerate in 2018 and Amicable proceedings investment is, however, expected to take the strain: of the debt in two weeks, or return a written • Lower labour costs and reforms the 2018 budget forecasts a +0.4 GDP point increase reach 124.1% (6 pp less than in 2016). In addition, Amicable debt collection is the first step of implemented argument within the same period of time. in this. Despite the slowdown expected in the whilst under control, the scale of the debt gives rise to the debt recovery procedure in Poland. These However, in standard procedures, it is quite easy concerns about its viability which depends in part on actions include reminders or/and demands for United Kingdom and Spain, exports should remain for the defendant to postpone the case. When strong, – notably automotive exports, which will be its eligibility for the European Central Bank’s purchase payment. These communications usually serve the defendant argues the order of payment - WEAKNESSES programme. The announcements from the Central to obtain repayment of outstanding debt, to warn boosted by the increase in production capacity at during this kind of procedure, it can take a long • Limited size of its manufacturing industry, Autoeuropa. The company should reach a production Bank seem to be indicating a gradual reduction in the the debtor of further official actions, to obtain time to obtain the final verdict, due to the lack of volume of asset purchases. In 2018, this should drop acknowledgment of the debt, to conclude an specialisation in low and medium added capacity of 200,000 units in 2018 (85,000 in 2016). judges and large backlog of cases. value areas (fuels, food products, chemical from EUR 60 bn to EUR 30 bn. agreement between the creditor and the debtor Unemployment should continue downwards to reach products, vehicles, clothing and metals) 8.6% in 2018. The current account balance will remain at equilibrium, based on the acknowledgment of its debt and to • High levels of public and private debt obtain a commitment to the repayment agreed. Enforcement of a legal decision The uptick in growth in 2017 was positive in terms underpinned by the vitality of manufactured exports • Inflexibility of labour market and lack When all appeal venues have been exhausted, of company insolvencies, which - despite recording and tourism which will offset the increase in energy As since 2004, interest can be claimed as from of internal competition, low levels of and capital goods imports. the 31st day following delivery of the product or a judgment becomes final and enforceable. If investment a significant reduction – remain at pre-crisis levels. service, even where the parties have agreed to the debtor does not comply with the judgment, • Decline in the quality of bank portfolios The deleveraging process for the private sector is the creditor can request that the court orders continuing, but the level of company indebtedness is The leftist coalition holds firm longer payment terms. The legal interest rate • Youth unemployment rate at 25% st a compulsory enforcement mechanism of the no lower (137% of GDP in September). The banking The municipal elections of 2017 confirmed the will apply from the 31 day until the contractual • Slow-functioning legal system payment date. Thereafter, in the case of late decision, through a bailiff. sector is also extremely fragile. Low profitability, as strength of the Portuguese left following a difficult payments, the tax penalty rate will apply. This is For foreign awards rendered in an EU country, a result of the high level of bad debt, will continue to year for the government of António Costa. The very often greater than the legal interest rate, specific enforcement mechanisms such as the slow the internal recapitalisation of the banks. This leftist coalition which includes the Socialist Party, unless the contracting parties have agreed on a EU Payment order or the European Enforcement will restrict their abilities to lend to viable companies. the Communist Party and the Green Party, was higher interest rate. Order can be used for undisputed claims. Awards While the credit situation for companies remains shaken by a number of scandals involving several of rendered in non-EU countries are recognised and weak, with companies preferring self-financing, the the government’s Secretaries of State. The Galpgate A bill to implement the 2011/7/EU directive of situation for households is improving. 2011 on “combating late payment in commercial enforced, provided that the issuing country is scandal named after the oil company that had invited transactions” provides the contracting parties party to a bilateral or multilateral agreement with three Secretaries of State to Paris to watch European with maximum payment terms of 60 days. Poland. Continuation of budgetary consolidation Championship football matches brought about a Similarly, default interest is due the day after the The improved economic situation, the reduction in ministerial reshuffle. At the same time, the tragedy deadline, without the need for a formal notice. Insolvency proceedings the cost of servicing the debt, and reduced public of the Pedrogão fire that resulted in the death of 64 investments made it possible to reduce the public people and more than 250 injured, also damaged By implementing the EU Directive, Poland Restructuring proceedings the government’s popularity. The Prime Minister introduced new rules regarding compensation The 2015 reform on polish insolvency law deficit to 1.4% in 2017, 0.6 percentage points below that in 2016. With the public accounts under control, has however so far succeeded in managing people’s for payment defaults in commercial transactions. introduced four new types of restructuring expectations by ending the austerity programme, These rules oblige debtors to pay the costs of proceedings which aim to avoid the bankruptcy the country was able to officially end the excessive debt procedure initiated by the European Union in whilst continuing to comply with the commitments recovery when the payment term expires. The of insolvent or distressed businesses. The made to the European Commission, although his defined amount is a lump sum of 40 euros – but it “arrangement approval proceedings” is available 2009. In addition, the favourable market borrowing conditions and investment spending below the political are pressing for a negotiated debt reduction, is possible to demand a larger amount if the costs to debtors who are able to reach an arrangement which could make the job of the executive much more of recovery prove to be higher. with the majority of creditors without court level forecast in the budget enable the government to make an early reimbursement of an instalment complicated. of USD3bn to the IMF. In 2018, budget policy is

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PAYMENT AND COLLECTION PRACTICES IN PORTUGAL COFACE ASSESSMENTS Payment Ordinary proceedings Foreign awards rendered in other EU countries In cases of disputed claims, creditors can benefit from specific enforcement mechanisms, A4 Cheques are frequently used in Portugal and it COUNTRY RISK is common practice to establish payment plans initiate formal, but more costly, “declarative such as the European Enforcement Order with post-dated cheques which are payable proceedings” (acção declarativa), to obtain a (which can be used if the claim is undisputed), or ruling which establishes their right to payment. the European Small Claims Procedure. Awards A3 on presentation. If the bank account is not BUSINESS CLIMATE sufficiently provisioned, they are borne by the Once the claim is filed with the court and the rendered in non-EU countries must be party to a bank, up to a maximum amount of EUR 150. In the debtor notified, a defence can be filed within 30 bilateral or multilateral agreement with Portugal case of bounced cheques, an individual person or days. Failure to reply entitles the court to deliver on the recognition and enforcement of court a default judgment. If the judge rules in favour decisions. a company is prohibited from receiving or issuing TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) of the creditor, the court may order damages, if further cheques for a maximum term of two GDP growth (%) 3.6 2.7 3.4 3.0 2.6 years (or eventually six years, if there is a court requested by the demanding party. They then Insolvency proceedings Exports of goods, as a % of total need to initiate “executive proceedings” (acção Inflation (yearly average, %) 1.8 2.7 0.9 4.8 POPULATION decision). Out-of court Japan (millions of persons - 2016) executiva) to enforce the court’s ruling. 19% Budget balance (% GDP) 5.6 -3.9 -1.0 0.5 Bills of exchange are commonly used for A special extrajudicial administrative procedure 59,514 commercial transactions in Portugal. In order to Under the revised Code of Civil Procedure, any (“RERE – Regime Extra Juditial de Recuperação South Korea Current account balance (% GDP) 8.4 -4.9 2.3 1.0 16% GDP PER CAPITA be valid, they are subject to stamp duty, the rate original deed established by private seal (i.e. de Empresas”) came into effect on 1 July 2017. Public debt (% GDP)* 34.9 56.5 54.4 54.4 (US dollars - 2016) any written document issued to a supplier) in This procedure for restructuring company debts India of which is set each year in the national budget. At 13% *General government gross debt (f): forecast the time of writing, the rate of stamp duty is 0.5% which the buyer unequivocally acknowledges is carried out by specialised mediators. It has his debt, is deemed to be an agreement which is been designed to enable creditors and debtors China of the amount of the bill, with a minimum value of 8% RISK ASSESSMENT one euro. enforceable by law. Since 2013, when the most to reach a compromise, in a confidential and recent revision of the Code of Civil Process was United Arab Emirates A bill of exchange is generally deemed consensual manner. 7% Negative impacts of the diplomatic rift Certain non-hydrocarbon sectors, such as independent of the contract to which it relates. made, written signed payment plans can only be used to initiate “executory proceedings” when Restructuring proceedings contained so far tourism and transportation, will particularly In the event of a payment default, creditors are they have been recognised by a notary. The reforms implemented in 2012 included Imports of goods, as a % of total The Qatari economy posted a disappointing suffer from the sanctions. Expansion of the crisis not required to issue a protest notice before the introduction of a special rescue procedure growth figure in the second quarter of 2017. would result in higher costs for Qatar, which In the scope of the recent restructuring of (Processo Especial de Revitalizaçao, PER). Euro Area would impede growth in the construction sector, bringing an action to court, but such a notice 21% Real GDP increased by 0.6% year-on-year in can be used to publicise the matter and thus put Portuguese courts which has been ongoing since The aim of this new procedure is to ensure the and would push prices up due to the higher costs 2014, more courts specialising in commercial United States the second quarter – a slowdown from the pressure on debtors to honour their obligations, recovery of debts from debtors that are in a 14% 2.4% year-on-year recorded in the first quarter. of building materials. Growth in the tourism issues have been created. The number of ‘difficult economic situation’ without starting sector is expected to slow as well, as nearly albeit belatedly. China However, this decline in growth performance Courts of First Instance has been reduced to an insolvency procedure. The management 40% of tourist arrivals into the country originate Cheques, bills of exchange, and promissory 10% was mainly due to the floundering oil sector and 23 (in each district capital), while there are now is obliged to request permission from the from the Gulf region. Any decline in energy notes offer effective guarantees to creditors United Arab Emirates subdued energy prices. The mining and quarrying 21 sections specialising in commercial issues provisional judicial administrator in order to prices will also drag down growth performance. against defaults, as they are legally enforceable 9% sector, which accounted for almost half of GDP secção de Comercio (Secções de Competência perform “particularly relevant acts”. During this Additionally, rate hikes from the US Federal instruments which entitle debt holders to initiate Japan on constant prices, shrank by 2.7% year on Especializada). These sections deal specifically process, the administrator prepares a recovery 7% Reserve is expected to force Qatar’s central “executory proceedings”. Under this process, year in the second quarter of 2017, following a with insolvencies and commercial company plan which must be approved by the creditors bank to tighten its monetary policy due to the creditors can petition the court to issue a writ contraction of -0.4% year on year during the matters. During this same period, 16 sections and a judge. currency peg regime. of execution and notify the debtor that this has specialising in Enforcement Procedures (Secções + STRENGTHS first three months. The OPEC agreement, which been done. When debtors still fail to settle their Especializadas) have also been created. Bankruptcy includes production cuts by major oil producers, The liquidity of the Qatari banking system will debts, the creditors may request that the court Insolvency law in Portugal also provides • Third largest gas reserves in the world has negatively affected the sector. Non-oil continue to be an important topic to monitor. officer issues an attachment order against the Legal actions in Portugal can take several for insolvency proceedings (Processo de • World’s leading exporter of liquefied natural sectors showed a growth of 3.9% year-on- Banks are likely to rely more heavily on debtors’ property. years, depending on the complexity of the Insolvência). The main goal of these proceedings gas (LNG) year in the second quarter of 2017, decelerating government funding and extra regional funds. case. Enforcement proceedings can be faster, is to obtain payment for the company’s creditors • Development of non-oil sector thanks to from 5.2%. This could represent a challenge, as international Electronic transfers via the SWIFT network are depending on the existence of assets. through the implementation of an insolvency the diversification strategy investor confidence could rapidly be hurt by widely used by Portuguese companies and are a On a quarterly basis, non-oil activity remained plan. Insolvency plans can be established under • Hosting of World Cup 2022 that sustain higher volatility in energy prices or an escalation quick, reliable and economic means of payment. flat, indicating that the economy has been Enforcement of a legal decision which the company is restructured and can infrastructure and construction activities in diplomatic uncertainties. Qatar’s substantial If the buyer fails to make a transfer, the legal affected by the Gulf crisis. Nevertheless, impacts continue to operate. Should this prove unfeasible, • Huge financial buffers financial buffers should be able to help mitigate recourse is to institute ordinary or summary Once all avenues of appeal have been exhausted, have remained under control so far as the the insolvent’s estate is liquidated, and the these risks, but it should be noted that Qatari proceedings, based simply on an unpaid invoice. a judgment normally becomes final and can be government stepped in to support the economy. enforced. If the debtor fails to comply with the subsequent proceeds are distributed among the It has deposited billions of dollars into the local authorities have already warned banks to tap decision, the creditor can request compulsory creditors. - WEAKNESSES banking system to prevent liquidity from drying international markets for raising funds, rather Debt collection than over-relying on public funding. enforcement mechanisms before the Court • Limited flexibility of the monetary policy up, as Gulf residents have started to withdraw Amicable phase – either through an Attachment Order, or by due to the currency peg regime their deposits. It also reorganized supply chains in Amicable collection begins with the debtor allowing payment of the debt to be obtained from • Dependence on foreign labour cooperation with other regional and international Domestic political scene remains stable being sent four demands for the payment of the a third party which owes money to the debtor actors. On the other hand, Qatari banks have Tensions within the GCC should not represent a principal amount. Interest on the principal can be • Possible negative impacts of longer-than- (Garnishee Order) expected diplomatic rift showed resilience since the start of the crisis, major risk in terms of domestic political scene in requested - but this is normally difficult to collect mainly thanks to rising public funds. Banks also Qatar as long as growth momentum continues in Portugal. Payment agreements subsequently • Rising geopolitical turmoil enjoy funding from regions outside the Gulf and living conditions remain the same. With the made between creditors and debtors can include Cooperation Council (GCC), such as Asia and government efforts to support the economy guarantees to ensure payments will take place as Europe, which is helping them to offset sanctions. through its huge financial assets, a possible agreed. public discontent would be unlikely. So far, Qatar NUMBER OF CORPORATE FAILURES Interest rates are set by the Treasury Department. Prolonged crisis may weaken growth has responded to the quartet’s (Saudi Arabia, The rates are published in the Diário da República Total Estimate (e) / Forecast (f) Yearly growth dynamics UAE, Bahrain and Egypt) demands by enforcing during the first fortnight of January and July So far, the main impacts of the crisis have its relations with Iran instead of curbing them. each year, and are applicable for the following 18,000 46.0% 50% been felt in the construction, retail trade, and Although the country is expected to remain six months. These interest rates are applied by 16,000 15,405 15,546 transportation sectors which contracted on a politically stable in the upcoming period, higher default, unless the parties involved in a commercial 15,095 40% 14,235 quarterly basis by 4.1%, 2.6%, and 7% respectively regional turmoil may undermine this stability agreement have contracted otherwise. 13,489 14,000 over the April-June period. A continued crisis through the emergence of new alliance and 30% Legal proceedings will drag down the pace of growth, as it will conflicts in the region. 12,000 11,114 11,388 Fast-track procedure 10,551 11,160 negatively weigh on consumer and investor The order to pay procedure (Injunção), which 10,000 20% confidence. The fact that headline inflation has is applicable to uncontested commercial 20.9% 11.9% remained subdued so far can be considered as claims, was established in March 2003. These 8,000 10% a positive development but further increase in proceedings, whatever the amount involved, 6,000 prices would result in a reluctance of consumers are heard by the court in whose jurisdiction the -2.0% 0% from spending further. obligation is enforceable, or the court where the 4,000 0.9% debtor is domiciled. Since September 2005, these -5.1% -10% injunctions can also be served electronically. 2,000 -5.7% -20.0% The National Injunctions Office (Balcão Nacional -13.2% 0 -20% de Injunções, BNI) has exclusive jurisdiction 2010 2011 2012 2013 2014 2015 2016 2017(e) 2018(f) throughout the country for the electronic processing of order to pay procedures. Source: Racius, Coface

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COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN ROMANIA Payment use of standard forms, approved by Minister with Romania. If this is not the case, exequatur A4 of Justice. These include the request form, the proceedings will ensue in front of domestic COUNTRY RISK Bank transfers are becoming the most common payment method in Romania. The main Romanian form for completion and/or rectification of the courts, as stated under Romanian private banks are now linked to the SWIFT electronic request form and the response form. Romanian international law. A3 legislation expressly states that only documents BUSINESS CLIMATE network, which provides low-cost, flexible and rapid processing of domestic and international can be presented as evidence. Insolvency proceedings payments. The decision of the court can be submitted to Out-of-Court proceedings Professionals often choose to use cheques as appeal within 30 days under common law, except According to the 2014 insolvency law, the TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) a payment method for the equivalent value of for requests relating to debts with a maximum concordat preventiv consists of an agreement GDP growth (%) 3.9 4.8 6.0 4.5 19.8 purchased and received goods and services. amount of RON 2,000. By way of derogation from with the creditors whereby the debtor proposes Exports of goods, as a % of total the common law however, the exercise of appeal Inflation (yearly average, %) -0.4 -1.1 1.2 3.1 POPULATION Although cheques are considered to be a secure a business recovery plan, which includes a Germany (millions of persons - 2016) method of payment, the beneficiary of the does not suspend the enforcement procedure. payment scheme for the creditors ’receivables. 22% Budget balance (% GDP) -0.8 -3.0 -3.1 -3.0 9,493 cheque can only present it to the bank and cash- Ordinary proceedings By signing this agreement, the creditors confirm Italy Current account balance (% GDP) -0.6 -2.4 -2.8 -2.9 in the amount designated. Common Law procedure their support in helping the debtor to overcome 12% GDP PER CAPITA Public debt (% GDP) 38.0 37.6 39.5 40.6 (US dollars - 2016) The judge orders the communication of the its financial difficulties. The procedure is managed France While promissory notes are mainly used as a 7% (f): forecast means to guarantee a professional’s trade debts, request to the debtor, who must submit a by a special receiver, who draws up an offer to statement of defence within 25 days of the the creditors. This must be approved by at least Hungary in practice they are often used as a payment 5% RISK ASSESSMENT method. In Romanian law, promissory notes petition. The creditor is obliged to submit an 75% of the creditors within 60 days from the date when they receive it. It is also subject to the United Kingdom represent a credit instrument under private answer within ten days, while the debtor must 4% Lively domestic demand Twin deficits signature, created by the issuer as debtor, by acknowledge the answer. Within three days approval of a syndic judge. of the date of the answer to the statement of After increasing to a buoyant level in 2016, GDP growth Costly fiscal measures resulted in a significant which the issuer promises to pay a fixed amount Insolvency proceedings defence, the court establishes the first trial date, strengthened even further in 2017. The main driver widening of budget deficit. Cutting the standard VAT of money on a certain date, or upon presentation This is a preliminary procedure, which can be Imports of goods, as a % of total where both parties will be summoned within of growth continues to be domestic demand, with rate by an additional one percentage point, abolishing to another beneficiary acting in the capacity of followed by a reorganisation procedure, or a Germany a maximum period of 60 days. This process 21% household consumption (70% of GDP) as the leading the extra excise duty on fuel, and the special a creditor. bankruptcy procedure. is somewhat lengthier, as further evidence is element: private consumption increased by nearly construction tax – led to an even higher deficit in Italy Both cheques and promissory notes become considered such as accounting expertise, cross- Reorganization proceedings 10% 10% over the first three quarters of 2017 compared to 2017. Moreover, additional wage hikes in the public enforceable titles once signed by both parties. If examination of the parties involved and hearing The judicial reorganization procedure requires the same period in 2016. Once again, households are sector will contribute to this as well. Nevertheless, Hungary they are not cleared due to the absence of cash, the witnesses). Following these deliberations, the drafting, approval and implementation 8% set to benefit from employment increases, increases in late 2017, the government announced its intent forced execution proceedings can be initiated the court renders a legal decision. Appeals can of a reorganization plan aimed at the debtor France in wages and pensions – both in the private and public to keep the general government deficit below 3% against the debtor. be made to the upper court within 30 days of the successfully redressing its activity and 6% sectors –, and from falling tax rates. of GDP. Measures have included cutting public decision being rendered. Extraordinary remedies performing the repayment of its debts, in Poland expenditures for investments, as well as a request for Although set to remain the main growth driver, Debt collection are the appeal, the appeal for annulment accordance with an agreed payment schedule. 5% transferring state-owned companies’ profits to the consumption is, however, likely to slow this year Fast-track proceedings: and revision. The plan can provide for the financial or because of the declining impact of the tax cuts treasury. The government will strive to ensure that operational restructuring of the debtor’s the 3% deficit threshold is not exceeded, so as not Summons for payment (art. 1013-1024 NCPC) + STRENGTHS and the return of inflation, which is connected to This procedure applies to certain liquid and eligible Enforcement of a legal decision activity, corporate restructuring by modifying the overloading of existing production capacities. to come within the scope of the European Excessive the share capital structure, or selling assets. The • Large domestic market Deficit Procedure. debts with a value exceeding RON 10,001 (approx. The enforcement procedure implies the Wages are being driven by the increasing scarcity of EUR 2,200), resulting from a civil contract. reorganisation plan is subject to the approval • Significant agricultural potential: wheat, labour, which is a result of emigration and an aging The trade and current account deficits widened existence of a valid and legally rendered of the general meeting of creditors. During this barley, colza, etc. These include contracts concluded between a enforceable title. It necessitates the failure of the population, despite the financial incentives being used further in 2017, Exports increased strongly but professional and a contracting authority, with period, the debtor is represented by a special • Limited energy dependence (23%) thanks to encourage mobility among the unemployed and imports surged even higher. Wage increases, which debtor to execute its obligations, the existence of administrator. to coal, oil, gas and uranium the exception of debts registered in a statement an enforcement procedure request formulated reduce long-term unemployment. Labour shortages have surpassed productivity growth, are a threat for of affairs, within an insolvency procedure. Bankruptcy proceedings • Large-scale renewable electricity remain a concern for companies and trigger further the country’s competitiveness position – however, by the rightful creditor to a bailiff and finally the production (37%) The debtor will be summoned to pay the due fulfilment of conditions within the execution In the event that no reorganisation agreement compensation increases. labour costs levels still remain significantly lower than amount within 15 days of receipt. The ordinance is reached, the debtors will enter bankruptcy. • Diversified and competitive industry thanks those in Western Europe. procedure. The enforcement procedure to cheap labour Investment (24% of GDP) has been relatively stable. is enforceable even if a request for cancellation commences at the request of a creditor through The purpose of bankruptcy proceedings is to • Leu stable against euro However, a gradual recovery of the projects co- is brought against it. Nevertheless, the debtor convert the debtor’s assets, for the repayment of Political tensions various means such as sequestration and sale of financed by the EU funds is taking shape, given may raise an appeal against enforcement, under tangible or non-tangible assets creditors’ receivables. During this procedure, the the context of low interest rates and positive The December 2016 elections brought to an end common law. debtor is represented by the judicial liquidator. For judgments rendered in EU countries, special growth prospects. These will likely be supported by the transitional technical government installed in The latter will perform the clearance of all the - WEAKNESSES Summons of a lower value enforcement mechanisms are at the creditor’s construction, telecommunications and IT. Investment November 2015, following the resignation of Social- assets of the debtor and the sums obtained This procedure was designed as an alternative to disposal. These include EU Payment Orders and • Demographic decline: low birth-rate and aid (0.52% of GDP) is favourable to SMEs. Despite Democrat Prime Minister Romania Victor Ponta, will be distributed to the creditors, based on emigration of educated youth common law proceedings and to the ordinance the European Enforcement Order. Awards issued weak demand, due to bureaucracy and administrative implicated in a corruption scandal. The Social- the priority ranking as documented in the final procedure. Its aim is to enable a fast resolution by non-EU members are normally recognised • Serious regional disparities in terms of failures at the local level, European funds will help Democrats of the SDP won 46% of the votes – a consolidated debt table. education, vocational training, healthcare to patrimony litigations, when the value does not and enforced, provided that the issuing country maintain moderate growth in public investment, victory over the Liberals – and retained their majority and transport; rural regions lag behind exceed RON 10,000 and does not refer to matters is party to a bilateral or multilateral agreement but will not be enough to fill infrastructure gaps. In in Parliament. However, the conflict related to the excepted by the law. The procedure entails the • Low participation rate for Hungarian addition, the large labour deficit in the construction and Roma minorities, young people and fight against corruption, which led to street protests women in the economy sector could hinder the growth of capital investment in early 2017, contributed to the replacement of and, hence, the full recovery of the sector. The • Large informal economy (28%) the Sorin Grindeanu cabinet after just six months government will continue to vouch for half of all new • Inefficient agricultural sector (11% of GDP) in office. In June 2017, Mihai Tudose became the buyer loans to encourage credit and lower costs. prime minister of the new cabinet led by the Social • Slow bureaucratic and legal processes, Given the high percentage of bad loans (8.3% in the corruption Democratic Party (PSD), although the real power still second quarter of 2017), which shows a gradual lies in the hands of party leader Liviu Dragnea. The • Weak public revenues and tax evasion decline, and difficulties to put collateral in place, latter cannot participate in the government due to caution is still required within banks, of which 90% a suspended two-year sentence for ballot-rigging. are subsidiaries of an Austrian, Dutch, French or SECTOR RISK ASSESSMENT In November 2017, Mr Dragnea has been indicted Greek group. These will continue to repay their debts for alleged fraud of EU funding, which is the third file to parent companies while constituting a national opened by the National Anti-Corruption Directorate deposit base. Exports (39% of GDP) will probably (DNA) against him. increase at a reasonable pace, but lower than that of imports in the face of strong domestic demand. Sales of cars (Dacia and Ford) and tires (a quarter of exports), as well as wood, fertilizers, metals, drugs, machinery and clothing will benefit from any increase in European demand. Exports of grains and oilseeds will depend on harvests.

184 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 185 RUSSIA RUSSIA

COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN RUSSIA Payment hearing. There is no specific time frame during External administration B which defendants must submit their defense, The objective is to restore the debtor’s solvency COUNTRY RISK Bank transfers in Russia are among the most popular instruments used for non-cash but it must generally be done before the hearing by applying special measures under an external payments, for both international and domestic on the merits). The court can set a deadline for administration plan, and to replace the debtor’s C submitting a statement of defense – if this is not chief executive officer (CEO) with an independent BUSINESS CLIMATE transactions. This is because they are fast, secure, and supported by a developed banking submitted, the court will consider the case on the external manager. Once the procedure begins, network. basis of the available materials. The preliminary the court appoints a receiver known as the preparation period ensures that the case can external manager, who must draft an external Despite this, cash is still one of the most TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) be resolved on its own merits during one court administration plan setting out the measures widespread payment instruments used by both hearing. Cases must generally be resolved necessary to restore the debtor’s solvency GDP growth (%) -2.8 -0.2 1.8 1.8 businesses and individuals. Exports of goods, as a % of total 143.4 on their merits within three months after the within the period of the external administration Inflation (yearly average, %) 15.5 7.0 3.8 3.5 POPULATION respective statement of claim is received by the procedure. At the end of the period, the manager Euro Area (millions of persons - 2016) 36% Budget balance (% GDP) -1.5 -3.7 -2.3 -1.5 Debt collection court. More complex commercial disputes can prepares and submits a report to the creditor’s 8,946 China Current account balance (% GDP) 5.0 1.9 2.4 2.2 Amicable phase take considerably longer. The courts will normally meeting, together with a proposal of one of the 10% GDP PER CAPITA award remedies in the form of compensatory following four options: Public debt (% GDP) 15.9 16.3 15.6 15.0 (US dollars - 2016) Amicable settlement between debtors and Belarus creditors allows for funds to be repaid without damages or injunctions but punitive damages are · to either end judicial proceedings, if all creditors 5% (f): forecast pursuing extensive legal action. The phase begins not available. have been settled) Turkey with the creditor contacting the debtor, either · extend the period 5% RISK ASSESSMENT via written correspondence or phone calls. If an Enforcement of a legal decision · end external administrator, as the debtor is now South Korea agreement is reached, a payment plan can be solvent 4% A judgment is enforceable for three years Confirmation of modest recovery of pensions and wages to inflation, as well as offered to the debtor. · enter administration and file for bankruptcy. the desire to maintain transfer payments and provided that is has become final. If the debtor Modest recovery has been taking place since Amicable arrangement subsidies. In 2019, a new fiscal rule will come into Charging interest is legally allowed but hard to fails to satisfy the judgment, the creditor Imports of goods, as a % of total the end of 2016 in connection with the positive Debtors and creditors may make an amicable effect. It stipulates that primary expenditures (in enforce unless an agreement to pay said interest can request compulsory enforcement of the influence of the rise in oil prices on confidence arrangement to adjust debtors’ liabilities on Euro Area other words excluding interest) cannot exceed currently exists between the debtor and the judgment from the court’s bailiff services. 29% and domestic demand. Household consumption negotiated terms during any rescue procedures. the sum of oil revenues calculated on the basis of creditor. Any such agreement must be additional Foreign judgments must be recognized as a China will again be the main contributor to growth Generally, an amicable arrangement ends USD 40 per barrel and non-oil revenues. Surplus to any standing agreement between the parties. Arbitrazh Court through 21% in 2018. Households will maintain confidence, domestic decision by the the powers of court-appointed receivers. If a oil revenues will go into the Reserve Fund, which Legal proceedings the Russian exequatur procedure. Although United States benefiting from higher incomes, the revival debtor fails to comply with terms of an amicable has been heavily depleted between 2015 and The Russian judicial system is comprised of three Russia has signed a small number of reciprocal 6% of credit and moderation of inflation based on arrangement, creditors are entitled to ask for a 2017, keeping public debt at a low level. Combined branches: recognition and enforcement agreements with Belarus food prices and the stabilisation of the ruble. bailiff to execute the agreement. 5% For the same reasons, the investment should with those of the National Provident Fund, assets · the regular court system foreign countries, domestic courts are reluctant Insolvency Japan remain well oriented. The rise of the ruble, account for just over 5% of the GDP. · the arbitration court system, headed by the to recognize foreign jurisdiction clauses. The purpose of insolvency is to sell the debtor’s 4% which accompanied that of oil prices, makes the The current account surplus could remain Supreme Court property and use the proceeds to pay creditors’ importing of capital goods cheaper. However, above 2% of the GDP in 2018. It is based on the · the Constitutional Court: a single body with no Insolvency proceedings claim in proportionate amounts. The court may shortcomings in the business environment and considerable trade surplus linked to hydrocarbon courts under it. + STRENGTHS Supervision initiate the process during supervision, financial the weight of sanctions on external financing exports (60% of total exports) which largely - In Russian constitutional law this function Commercial Courts initiate the supervision rehabilitation, or external administration. It • Abundant natural resources (oil, gas and will hinder growth in some sectors. If inflation offsets the deficit in services and revenues (oil is known as “constitutional control” or process to evaluate the debtor’s financial appoints a receiver (insolvency manager) to metals) remains below the 4% target, the central bank and gas engineering expenses, Russian stays “constitutional supervision”, and deals with situation and to secure the debtor’s property. replace the debtor’s CEO. The court and the • Floating exchange rate of the ruble since could continue to lower its key rate (8.5% in abroad, foreign corporate dividends, transfers a certain number of disputes where it has After examining a filed insolvency claim, the creditors control the activity of the insolvency November 2014 November 2017). Nevertheless, higher wage of foreign workers). The increase in hydrocarbon original jurisdiction court initiates the supervision process. The manager, who must provide progress reports. At • Political stability growth than productivity and high inflationary sales does not translate into an increase in the The regular courts have a four-tier hierarchy and debtor can autonomously request a court to the end of the proceedings, the court reviews the • Trained workforce expectations will encourage caution. In addition, surplus, as the domestic economic upturn is are responsible for civil and criminal cases: initiate supervision if settling some creditors’ list of satisfied and unsatisfied claims. If they are • Low public debt, comfortable foreign while bank profitability, which fell to zero in reflected in an increase in imports. Despite the · The Supreme Court of Russia claims would make it impossible for the debtor fully satisfied, the court rules the proceedings exchange reserves and current account 2015, is on the rise, private banks (slightly less efforts made since the application of sanctions, · Regional Courts surplus to fulfil other obligations, if execution on the complete and the debtor is liquidated. If they are than half of the assets, but the largest number the substitution of domestic products for · District Courts • Ongoing purge of the banking sector with debtor’s property means the debtor’s business not satisfied, proceedings are terminated, the of institutions) are lagging behind. Moreover, imports has had little success, except in the agri- · Magistrate Courts reduction in the number of institutions has to cease, or if the debtor’s business is debtor company is dissolved, and unsatisfied the increase in oil revenues should allow a food sector. The financial account is negative, • Maintained regional and energy power Arbitration courts review cases dealing with a insolvent. A receiver is appointed, known as a creditor’s claims are to be written off. slight relaxing of the fiscal policy at the social as the Russian private sector makes financial wide matter of contractual issues, such as rights temporary manager, who must approve certain programme level, even if public consumption and real estate investments abroad, while new of ownership, contract changes, performance transactions during the supervision, such - WEAKNESSES is still expected to stagnate. Finally, the foreign investment in Russia is low. However, of obligations, loans, bank accounts and buying or selling more than five percent of the contribution of trade to growth may no longer funds are coming back to Russia in the form bankruptcy. accounting value of the debtor’s property. • Dependence on the price of hydrocarbons be negative if the catch-up effect in imports of of foreign loans, often by those who have put • Declining demography, except in major consumer goods and equipment recedes. The money in there. For this reason, private external The highest court of appeal is the Supreme Court Financial rehabilitation cities manufacturing sector (agri-food, chemistry/ debt (35% of the GDP) must be put in perspective, of the Russian Federation. The aim is to carry out any necessary measures • Absence of commercial agreements pharmaceuticals, automotive) should benefit especially since reserves represent more than Fast-track proceedings to restore debtors’ solvency and settle their beyond its immediate neighbours from the proper orientation of domestic demand. 16 months of imports. Russian law provides for simplified proceedings debts. The court and the creditors control • Dependence on foreign capital goods and for certain types of cases, in which the creditor the process. The application must include a technology In the absence of progress in resolving the seeks to recover no more than RUB 300,000 rehabilitation plan that ensures the debtor’s • Weak infrastructure aggravated by lack of Ukrainian conflict, Western sanctions targeting Political stability but deficient business obligations will be met. The court appoints a investment leading figures and the energy, defence and environment from a legal entity or RUB 100,000 from an individual entrepreneur. receiver to be the administrative manager, who • Regional disparities despite redistribution finance sectors through restrictions on travel, The crisis in Ukraine, sanctions and aggressive supervises and controls the debtor’s affairs • American and European sanctions trade, investment and financing should continue. international activism have strengthened the Under Russian law, judges are to consider during the period of the financial rehabilitation. • Mediocre business climate This will maintain the lack of investment, popularity of Vladimir Putin, who can, in addition, cases through simplified proceedings within a The administrative manager examines the debt hampering the development of offshore fields claim economic recovery. Vladimir Putin, who maximum of two months form the day when the repayment schedule and monitors any financial and innovation, likely to offset the maturation has been in power for seventeen years, is Arbitrazh court receives the statement of claim restructuring plans. SECTOR RISK ASSESSMENT of many fields and increase the growth potential expected to win the March 2018 presidential or application. Once the deadline for submissions estimated at 1.5%. of evidence has passed, cases are reviewed on At least one month before the period of financial election in the face of weakened opposition, rehabilitation expires, the debtor must provide boosted by controlled media and the Internet, their merits by judges, without the parties being called to appear. the administrative manager with a report on Low budget and current account deficits and whose main figure, Alexei Navalny, is under the results of the financial rehabilitation. Once The public deficit is expected to fall to 1.5% fire for various legal proceedings and cannot Ordinary proceedings report examined, the manager must prepare an in 2018, and to 7% of the GDP excluding run. Ksenia Sobchak, a media personality and Proceedings are initiated when a creditor files a opinion on the extent to which debts have been hydrocarbon revenues. The 2017-2019 triennial daughter of a former mayor of St. Petersburg, statement of claim with the competent Arbitrazh paid and the financial restructuring plan has been budget provides for a 1% annual decrease in could capitalize on her novelty. The issue of the court. The court must decide within five working achieved. The opinion is submitted to the court, the non-oil deficit. Dividends paid by public election will lie more in participation. Reforms days whether to accept the statement, and which examines the results and either ends the companies will reach half of their profits, excise are likely to occur after the election, which would subsequently schedule a preliminary hearing. proceedings, orders external administrator to duties on tobacco and alcohol will increase, as will improve a poor business environment marked Debtors are usually notified of claims when manage the company, or declares the debtor taxation on extractive businesses. Expenditure by state interventionism, the random execution they are served with a copy of the statement bankrupt. control will be more difficult given the indexing of contracts, favouritism, relative respect for of claim, which includes the data of the initial property rights and administrative delays.

186 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 187 RWANDA SÃO TOMÉ-AND-PRÍNCIPE

COFACE ASSESSMENTS COFACE ASSESSMENTS B C COUNTRY RISK COUNTRY RISK B D BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 8.9 5.9 5.1 6.3 GDP growth (%) 3,9 4,0 4,5 4,9 Exports of goods, as a % of total 11.5 Exports of goods, as a % of total 0.2 Inflation (yearly average, %) 2.5 5.7 5.3 4.8 POPULATION Inflation (yearly average, %) 5,2 5,4 3,2 3,0 POPULATION Kenya (millions of persons - 2016) Euro Area (millions of persons - 2016) 22% Budget balance (% GDP) * -5.3 -3.8 -4.3 -3.9 49% Budget balance (% GDP) -6,2 -2,8 -5,4 -4,6 729 1,689 United Arab Emirates Current account balance (% GDP) -13.4 -14.4 -10.2 -11.2 Taiwan Current account balance (% GDP) -12,9 -7,9 -8,5 -6,7 21% GDP PER CAPITA 9% GDP PER CAPITA Public debt (% GDP) 36.4 44.5 45.7 47.1 (US dollars - 2016) Public debt (% GDP) 82,2 92,8 97,1 96,0 (US dollars - 2016) Switzerland Angola 13% * * Last fiscal year from July st1 2017 to June 30th 2018 (f): forecast 7% (f): forecast Congo DR South Korea 10% RISK ASSESSMENT 5% RISK ASSESSMENT Euro Area Dominican Republic 6% Solid growth outlook will not offset the higher import bill for capital 5% Tourism and infrastructure projects as still weighing on the trade balance, with only a Hit by drought conditions at the beginning of the goods needed for the construction of Bugesera drivers of activity modest price rise expected in 2018. The trade Imports of goods, as a % of total year and the completion of major projects driving airport. By excluding these imports linked to Imports of goods, as a % of total Activity is expected to pick up momentum in balance will continue to show a large deficit in Bugesera airport, the import substitution policy connection with higher commodity prices and China the construction sector, growth, although still Euro Area 2018, buoyed by investments in the tourism 21% firm, moderated in 2017. Activity is expected with products “Made in Rwanda” should help 65% sector and public infrastructure projects, even dynamic capital goods imports. The improvement bring the bill down. This policy is an integral in the services balance, through tourism, will Uganda to pick up again in 2018, bolstered, primarily, by Angola if this will not be enough to significantly improve 11% more favourable weather conditions. A better part of Rwanda’s strategy to reduce external 15% the population’s living conditions:, the IMF be the main factor behind the reduction in the Euro Area harvest should support the increase in exports imbalances in the years ahead. Financed for many China considers that 6% growth is needed to have an current account deficit. 11% of tea and coffee (almost 25% of exports) and, year with international donor assistance, the 5% impact on the poverty rate. Meanwhile, the reasonable level of foreign Kenya accordingly, enable these items to make a larger current account deficit is now also financed by Japan exchange reserves (5.1 months of imports) will 8% FDIs and borrowing. Investments agreed by the 2% Private consumption is likely to be sustained contribution to growth in 2018. Private as well by the development of tourism, which will bring help maintain the dobra’s peg to the euro in the India government in recent years have led to a rapid United States as public investment in infrastructure projects, down unemployment and boost household short term. 7% including that of Bugesera airport, should help the increase in this deficit. However, the risk of over- 2% indebtedness remains limited and adjustments to income, and by moderate inflation. Nonetheless, construction sector resume momentum after the rise in household disposable income will A favourable political context but with several consecutive quarters of contraction. the budget and external accounts are intended to + STRENGTHS guarantee future debt sustainability. + STRENGTHS be limited by the introduction of new taxes diplomatic tensions These investments will also contribute to the (in particular VAT) and by cuts to civil service • Geological potential: cassiterite, coltan, gold expansion of manufacturing industries and to the • Considerable oil potential The absolute majority obtained by the IDA salaries. Public spending will be concentrated on (Independent Democratic Action) in the October • Tourism potential strength of the services sector, which accounts Attractive business climate despite regional • Prospects for expansion of the tourism infrastructure (transport, energy) as well as on for almost 50% of GDP. Finally the resumption tensions sector 2014 elections brought political stability. Prime • Skilled labour, good infrastructure other sectors like tourism or agriculture, in order Minister Patrice Trovoada could, therefore, • Significant progress on governance and of credit growth, buoyed by a relatively President Paul Kagamé secured a third • Supported by international donors to foster employment and competitiveness and accommodative monetary policy is expected to with his party, be the first government leader to the business climate consecutive term in office in August 2017, • Links developed with Portugal and accordingly reduce the poverty rate. Tourism will complete his term of office (in 2018) since 1990. result in a rebound in household consumption, officially winning almost 99% of the votes Portuguese-speaking countries also benefit from the modest increase in activity which will also benefit from moderate inflation, (Angola, Brazil) Further, the July 2016 presidential elections cast. Silencing all dissent and having lifted all in the euro zone, the country’s leading trading confirmed this stability, as it was Evaristo below the 5% target fixed by the National Bank • Dobra pegged to the euro - WEAKNESSES constitutional obstacles beforehand, the regime and tourism partner. The country’s economic Carvalho, a member of the IDA, who was elected of Rwanda. But high unemployment (about 17%) of Paul Kagamé and the Rwandan Patriotic activity is, however, likely to be curbed by its • Heavily dependent on commodity prices and still low incomes from agriculture will limit the to lead the country. In this semi-presidential (tea, coffee) and international aid Front (FPR), attacked in July 2017 in an Amnesty insularity and limited natural resources. regime, the fact that the Prime Minister and growth of private consumption. international report for violations of political - WEAKNESSES • Geographically isolated and exposed to Inflation is expected to remain stable thanks to the President are from the same party gives geopolitical tensions in the Great Lakes After peaking in February 2017, inflation fell freedoms, ensured an election result that came • Heavily dependent on public aid the stabilisation of oil prices forecast for 2018. It the government plenty of leeway to reform the as no surprise. Nonetheless, the poll reaffirmed region sharply during the year due to the mitigation • Economy still dominated by agriculture will also remain well below previous levels (16% country. During the upcoming parliamentary • Strong demographic pressure and of the effects of the drought on food prices and the hold Mr Kagamé and the FPR have on the and fishing in 2010), especially thanks to the pegging of the elections in 2018, the IDA is expected to hold country. Often criticised by the international population density among the highest weak internal demand. Prices are, however, • Poor business climate dobra to the euro, introduced in 2010. on to its majority in Parliament, even though it in Africa expected to rise at a more sustained pace in 2018, community for the lack of political freedom, • Underdeveloped and weak banking sector will be narrower due to the unpopular austerity under the combined effects of the central bank’s Rwanda nonetheless stands out in Africa for its measures and the growing strength of the st (non-performing loans ratio of 30%) Large twin deficits despite international aid accommodative stance and higher energy prices. attractive business climate. Ranked 41 (out of opposition. 190 countries) in the World Bank’s 2018 Doing Although remaining very high, the budget deficit Business report, jumping 15 places in one year, is expected to decline in 2018, because a better Diplomatic relations with Taiwan (the country’s Ongoing fiscal and external budget main donor) were broken off because of a port adjustments the country is singled out in the report as having performing tax system will help boost revenues. implemented the most reforms in the past However, weak government revenue means project due to be delivered in 2019 (total cost The more cautious fiscal policy adopted since 15 years. The country has, in particular, risen there will still be a need for international aid, estimated at USD 800 million or 2.4 times GDP) the 2016/17 budget year is set to be continued in to second in the world as regards registering authorised in the form of donations (notably which will be partly funded with financial support order to achieve the goals set by the IMF under property and sixth for getting credit. from Asian countries) or concessional loans (IMF, from China to the tune of USD 120 million. In April its Economic Policy Support Instrument (PSI) World Bank). This aid will represent almost half of 2017, the country even signed a co-operation programme. The public finances will continue Tensions in the Great Lakes region continue to agreement with China, which committed funding be a potential source of instability. Skirmishes total government revenue. The government was to rely heavily on grants (over 20% of net also forced, in July 2007, to accept an austerity over 5 years for infrastructure projects in the revenues), despite a net decline in recent years. between the M23, an armed militia group country worth USD 146 million in exchange operating in the Kivu region (western Congo) and plan proposed by the IMF aimed at reducing a Efforts to broaden the tax base are likely to be proportion of public spending, namely by cutting for recognising the One-China policy to the hampered by the tax incentives introduced in the armed Rwandan group, the FDRL (Rwandan detriment of Taiwan. Liberation Front) make for fraught relations civil service salaries and pensions. Public debt will support of the “Made in Rwanda” policy. With the fall very slightly after several years of climbing Economic Development and Poverty Reduction with neighbouring Congo-Kinshasa. Meanwhile, the government of Congo continues to allege sharply, but will remain at very worrying levels programme (ESDRP II) maturing at the end of given the share of foreign debt (90% of the 2018, capital investment spending is expected Rwandan support for the M23 combatants. Relations with Burundi have also deteriorated total), even though the foreign debt is mainly to fall. The fiscal deficit is, therefore, expected to concessional. narrow gradually. since the outbreak of the Burundian political crisis in 2015. The current account deficit will continue to Despite efforts to reduce the budgetary decline gradually, even though the country imbalance, the current account deficit is remains highly dependent on imports and expected to widen in 2018. This development suffers from a lack of export diversification. will mainly be down to movements in the trade The reason is that the strong fall in cocoa prices balance, as increased coffee and tea exports (the main export product) at the end of 2016, is

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COFACE ASSESSMENTS COFACE ASSESSMENTS C B COUNTRY RISK COUNTRY RISK B B BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 4.1 1.7 -0.5 1.2 GDP growth (%) 6.5 6.6 6.8 7.0 Exports of goods, as a % of total 31.7 Exports of goods, as a % of total 15.6 Inflation (yearly average, %) 2.2 3.6 0.2 4.9 POPULATION Inflation (yearly average, %) 0.1 0.8 1.5 1.6 POPULATION Japan (millions of persons - 2016) Mali (millions of persons - 2016) 14% Budget balance (% GDP) -15.8 -17.1 -8.6 -7.6 18% Budget balance (% GDP) -4.8 -4.2 -3.7 -3.5 20,365 943 China Current account balance (% GDP) -8.7 -4.2 0.6 2.4 Euro Area Current account balance (% GDP) -6.9 -6.1 -7.1 -6.2 14% GDP PER CAPITA 13% GDP PER CAPITA Public debt (% GDP) 5.8 13.0 17.0 20.6 (US dollars - 2016) Public debt (% GDP) 56.9 59.1 61.0 61.4 (US dollars - 2016) India Switzerland 10% (f): forecast 11% (f): forecast South Korea India 10% RISK ASSESSMENT 8% RISK ASSESSMENT United States Ivory Coast 9% Weak recovery in 2018 Continued budget consolidation and return 5% The Plan for Emerging Senegal still supports investment in airport infrastructure, could help The combined effects of reduced oil production oil, to current account surplus growth reduce the services balance deficit. The transfer Imports of goods, as a % of total as a result of the OPEC agreement, and budgetary Given the scale of the public deficit since 2014, Imports of goods, as a % of total Year 3 of the Plan for an Emerging Senegal led balance, thanks to remittances from expatriate workers, should make a positive contribution Euro Area consolidation drove the Saudi economy into recession the Saudis authorities launched a major budget Euro Area to higher economic growth in 2017. In 2018, 20% in 2017. Saudi Arabia agreed in November 2016 to consolidation programme in 2017. Its aim was to 36% the consolidation of economic performance is to the current account balance. Increased FDIs will help finance a proportion of this external United States reduce its oil production by 400,000 barrels, as restore budget equilibrium within a three year target China expected to continue thanks to the completion 15% defined in the Vienna Agreement. This latter, covering with a focus on three elements: a rationalisation of 10% of energy and infrastructure projects and the deficit, which apart from grants and loans to the China both OPEC member and non-member countries, is public spending, the gradual removal of subsidies Nigeria implementation of reforms aimed at improving public sector, is also financed by external debt. 14% expected to be renewed in 2018 applying the same and increasing non-oil budget revenues. Although 8% the business climate and stimulating private Senegal’s vulnerability in the event of an external United Arab Emirates quotas. This means that there will only very limited it resulted in a significant reduction in the size of the India investment. Private investment could, in shock is heightened by falling foreign exchange 5% growth in the volume of production from the Kingdom. large deficit, the negative effects of the measures in 8% particular, be catalysed by the creation of the reserves, which covered 3.5 months of imports Japan In the context of the challenges facing the Saudi terms of economic activity forced the authorities to United Arab Emirates Dakar International Integrated Economic zone in 2017 compared with 4.6 in 2015, in the WAEMU. 5% economy, the Heir Apparent, Prince Mohamed Ben revise their strategy for 2018. The application of VAT 3% (DIIEZ), a logistics and industrial hub located Salman, launched the Saudi Vision 2030 programme across all countries in the GCC and the widening of near the Blaise Diagne airport (inaugurated in The legislative elections were the starting + STRENGTHS in 2016, which started to bear fruit in 2017. This huge the tax base are nevertheless likely to be enforced. + STRENGTHS late 2017). Apart from the construction and gun for the presidential elections in 2019 modernisation programme has three major elements: The reduction in subsidies will however become energy sectors, the extractive and chemicals Often considered a model of stability and • One quarter of world oil reserves and the creation of a Public Investment Fund (PIF) financed more gradual with an objective of 100% of the • Economic momentum linked to the industries are also expected to contribute democracy in Africa, Senegal partly confirmed leading producer in OPEC with the privatisation of state owned companies, prices indexed against world market prices in 2023. implementation of major investment positively to growth, supported by the recovery projects its reputation during the 2017 parliamentary • Major regional economic and political player including 5% of Aramco, the national oil company; the Spending linked with the wage bill and investment is of Industries Chimiques du Senegal, enabling elections. Marked by the return of ex-president • Increasing economic diversification National Transformation Plan (NTP); and the 2020 likely to rise. The financing of the public debt is likely to • Supported by international donors under phosphate production to be maintained at a the Plan for an Emerging Senegal Abdoulaye Wade (2000-2012), the campaign advanced by Saudi Vision 2030 programme Budget Adjustment Plan. This latter includes a freeze continue in the form of bond issues in the international high level. In contrast, the promising prospects was marred by violence and tensions. Winning • Solid financial situation thanks to low debt on bonuses and wages for government employees market in order to avoid the soaking up of all liquidity • Progress on business climate and for hydrocarbons, with projects still at the governance 125 seats (out of 165), the United in Hope (BBY) levels and sizeable assets (67% of the Saudi workforce), reduced energy within the banking system and slow the fall in the exploration phase, are unlikely to be reflected coalition, which supported the president in office, • Solid track record for political stability • Solid banking system subsidies and cuts to public investments. These reserves of the SAMA. in the growth figures before 2019-2020. In Macky Sall, was deemed to have an absolute measures have had a negative impact on demand. • Significant offshore oil and natural gas 2018, higher agricultural output, buoyed by The rise in the value of exports thanks to oil prices reserves majority. However, with no fewer than 13 parties Despite an inflation rate hovering around zero, those and the reduction in imports and foreign worker investments in key sectors (rice, groundnuts, represented and fewer than 3,000 votes - WEAKNESSES sectors linked with household consumption, such as remittances as a result of the slowing in economic horticulture) and the programme for the separating the winning side from Khalifa Sall’s list retail and leisure (8% of GDP) and those dependent Acceleration of Senegalese Agriculture, will be • Level of dependence on oil and gas sector, activity led to a significant fall in the size of the current - WEAKNESSES in Dakar, the victory was not as big a landslide as poor job creator, and growing domestic on public expenditure (construction: 4.7% of GDP) account deficit in 2017 with a diminishing in the risk one of the main growth factors. Services will also the results suggest. While the significant growth energy demand recorded negative performances. Although the linked with the pegging of the rial to the dollar. The • Growth and exports subject to weather be robust thanks to trade and transport. rates are slow to materialise in the form of social • High unemployment rate of local reintroduction of bonuses for the public sector had continuation of these elements in 2018 should help events and movements in commodity progress for the population, dissatisfaction with population only a limited impact in boosting consumption in the return the accounts to surplus. prices Debt control - a priority for managing public the president is growing. He could, therefore, find • Governance failings undermining business second-half of the year, they should prove more • Inadequate infrastructure (energy, resources himself in a precarious position in the run-up to useful in 2018 as purchasing power increases. Whilst transport) climate Emergence of new strongman Ongoing budget restructuring under the IMF- the 2019 presidential elections. With no fewer the increase in oil prices will give the authorities more • Significant twin deficits • Unstable geopolitical context backed Policy Support Instrument is expected than 47 lists for the parliamentary elections, the room for manoeuvre for a more expansionary budget Palace revolution or structural transformation of the • Low per capita wealth, unemployment opposition could however find it hard to get itself • Low rate of participation of women in regime, 2017 was a turning point in Saudi political to result in further fiscal deficit reduction. labour market policy, the rise in inflation following the imposition of and regional disparities sufficiently organised to topple the president at value added tax will work to limit the positive effects history. Mohamed Ben Salman was designated on The strength of the economy combined with • Economy dependent on public spending the polls. of increased public spending on the level of activity. 21 June 2017 as first in the line of succession by King progress on tax collection will boost revenues. The recovery in the non-oil economy is expected to Salman and the royal family’s Allegiance Council This will help to partially finance the investment Political stability continues to be an argument continue gradually in 2018, at the same time as certain to replace his cousin Mohammed ben Nayef. This drive under the Plan for Emerging Senegal. in Senegal’s favour when assessing the SECTOR RISK ASSESSMENT sectors, such as construction, should quickly start nomination with the heir apparent holding power Debt interest payment, which has been higher business climate. The efforts made, particularly feeling the benefits of the restarting of investment in all economic and security matters since 2015 in recent years (rising from 13.5% of fiscal in the context of the Business Climate and projects. Measures aimed at boosting employment highlights the profound transformations taking revenues in 2006 to almost 35% in 2017), will Competitiveness Reform Plan, have been among the Saudi population should help bring down place in the Kingdom’s political configuration from continue to put pressure on spending. Efforts to rewarded with a seven-place jump in the Doing the unemployment rate from its level of 12.8% in an adelphic monarchy to an hereditary regime. The rationalise public spending are expected to result Business 2018 rankings. With progress made 2017. Credit will be less constrained by the contraction fight against corruption that led to the arrest of in a controlled increase in current expenditures. on starting a business and enforcing contracts, in liquidity in the money markets with the slowing more than 200 people including businessmen and Budget restructuring is aimed at controlling the Senegal (140th out of 190) is consolidating its of public debt issues on the domestic market. The members of the royal family sent a strong signal to debt ratio, which has been rising rapidly in recent position above the regional average and is now improvement in financing terms will help boost the Saudi society as well as to the opposition, whether years. Accordingly, there is likely to be less hot on the heels of Ivory Coast. weak recovery in the private sector. tribal, clerical or business. In terms of foreign policy recourse to credit in 2018. The government hopes Islamist terrorist groups continue to pose a the recent rapprochement with the United States to reverse the trend in the debt ratio from 2019. significant threat of destabilisation. In 2017, has encouraged the Kingdom in playing a more The current account, which widened in 2017 due attacks perpetrated in Mali, Mauritania and active role in regional politics and in particular its to the worsening trade balance and repatriation Burkina Faso resulted, in France and the United opposition to the Iranian Republic. Tensions between of corporate profits, is expected to continue to States, in particular, issuing recommendations to the two countries are constantly increasing with show a large deficit in 2018. The trade balance their nationals to be more vigilant. repercussions throughout the region, working to and income balance deficits are expected to undermine the fragile political equilibrium of the whole stabilise. Transport and tourism, stimulated by of the Middle‑East. 190 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 191 SERBIA SIERRA LEONE

COFACE ASSESSMENTS COFACE ASSESSMENTS B D COUNTRY RISK COUNTRY RISK B D BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 0.8 2.8 2.0 3.3 GDP growth (%) -20.5 6.1 5.6 6.1 Exports of goods, as a % of total 7.1 Exports of goods, as a % of total 6.4 Inflation (yearly average, %) 1.4 1.1 3.3 3.3 POPULATION Inflation (yearly average, %) 6.7 10.8 17.2 10.8 POPULATION Euro Area (millions of persons - 2016) Ivory Coast (millions of persons - 2016) 43% Budget balance (% GDP) -3.7 -1.4 0.5 -0.3 32% Budget balance* (% GDP) -4.5 -8.6 -6.4 5.9 5,348 577 Bosnia Herzegovina Current account balance (% GDP) -4.7 -4.0 -5.0 -5.5 United States Current account balance (% GDP) -17.5 -19.9 -21.8 -18.9 8% GDP PER CAPITA 28% GDP PER CAPITA Public debt (% GDP) 74.6 72.5 65.0 64.0 (US dollars - 2016) Public debt (% GDP) 45.3 55.9 59.2 60.8 (US dollars - 2016) Romania Euro Area 6% (f): forecast 22% *including grants (f): forecast Russia China 5% RISK ASSESSMENT 7% RISK ASSESSMENT Montenegro Belarus 5% Growth sustained by internal demand 60% held by non-residents, over half of which are 3% The upturn in the economy is confirmed investment spending, which sustains growth. After a disappointing year in 2017, during which public sector creditors who have offered favourable Economic momentum was held back by high Flows of aid from multilateral and bilateral Imports of goods, as a % of total growth was adversely affected by a tough terms. The authorities have moved to reduce the Imports of goods, as a % of total inflation in 2017, following the twin shocks of partners following the landslide and flooding proportion held in foreign currencies by successfully in the country should help cover repair costs. Euro Area winter and then drought that successively hit Euro Area the Ebola outbreak and the collapse of iron ore 42% construction, agriculture and electricity generation, refinancing it with dinar-denominated bond issues. 17% prices, but growth is now expected to resume The unpopular liberalisation of fuel prices at the pump, promised as part of the earlier agreement China 2018 should see regained momentum. It will, in China its upward trend in 2018. It will notably be buoyed 8% particular, be driven by consumption. Households Current account deficit financed by FDIs 12% by dynamic development in the extractive with the IMF, is unlikely to be implemented before the presidential elections of March 2018, putting Russia will benefit from rising wages, both in the private Trade in goods is running a deficit amounting to United States industries. In particular, iron ore production, 8% and public sector, a 5% increase in pensions on 1st 10% supported by the Tonkolili mine and investment pressure on spending. Tax slippage cannot, 9% of GDP (2016). Exports are dominated by however, be ruled out in the run-up to this major Hungary January, more jobs and growth in credit, which is automotive, agricultural products, metals and India from Chinese businesses, is expected to perform 5% 8% electoral event. expected to get cheaper with key rates cut by 3.5% a wide variety of median to low value-added more strongly. The prospects are equally Poland in October 2017. Thanks to budgetary margins, Senegal favourable for diamonds, with production at The current account, mainly hampered by a 4% manufactured products for export primarily to the 6% the administrations are expected to increase their neighbouring Balkan countries. A large portion of the Tongo and Tonguma mines due to start in sizeable trade deficit, is still expected to show purchases of goods and services. Public investment the deficit is explained by imports associated with mid-2018 under a joint project signed between a large deficit, despite the expected increase + STRENGTHS in the road, rail and irrigation networks will also investments. Dividend and interest repatriation + STRENGTHS Octea Mining and Stellar Diamonds in April 2017. in exports of mining and agricultural products. benefit. While foreign investment in industry, by foreign investors represents about 6% of GDP. The increase of rutile production is also likely to The value of exports should, nonetheless, • Public sector reform in coordination with construction and trade will continue, private The rise in these payments in 2018 plus higher • Significant mineral resources continue into 2018. increase faster than that of imports, which are the IMF and EU (iron, diamonds, rutile, gold) domestic investment should finally benefit from the imports will lead to a slight widening of the current Public capital investment spending should accelerating in connection with the rise in capital • EU accession process under way resumption of lending to businesses, even if credit account deficit. The services surplus (almost 3% of • Coffee, rice and cocoa production benefit other economic sectors, starting with investment spending. Combined with the surplus • Natural resources (carbon, bauxite, copper, will remain limited by the still high non-performing GDP, with tourism) and, in particular, remittances • Tourism potential agriculture, energy, transport and construction. balance of transfers, this should help reinforce zinc, gold) and food self-sufficiency loan ratios, especially at the publicly-owned banks. by emigrant workers (9%) will offset this in part. • International financial support Growth in the construction sector is expected the country’s external position. • Modern automotive industry Exports are expected to pick up momentum on The remaining current account deficit is financed • Significant port activity that is set to be sustained by reconstruction work • Remittances from expatriate workers their well-oriented markets, even if there are some by foreign direct investments, in industry (e.g. Fiat to expand following the August 2017 landslide, which Fragmented opposition opens up concerns over future competitiveness due to the plant in Kragujevac, two thirds of which is owned killed 500 people in Freetown and caused the presidency to the APC juxtaposition of the strong dinar and significant by the State, employs 10,000 people, provides material damage estimated at USD 30 million. inflation. The central bank, aware of the economy’s After two consecutive terms, and contrary to - WEAKNESSES 8% of exports and 3% of GDP) and in transport - WEAKNESSES In 2018, despite an easing of upward pressures, persistent rumours that he intends to circumvent strong euroisation, will maintain the dinar’s stability, and energy infrastructure (China, Russia). Foreign • Massive and inefficient public sector • Vulnerable to weather events inflation will still be high and will continue to the Constitution and stand for a third term, preventing imported inflation from adding to the exchange reserves represent 6 months of imports dampen household consumption; specifically • Country isolated due to inadequate pressures generated by strong domestic demand • Highly dependent on commodity prices President Ernest Bai Koroma will not be standing (September 2017) and together with a Swap consumption by the +70% of Sierra Leonians who for the presidency in March 2018. He will step transport infrastructure and the robust labour market, as well as by higher • Corruption; inadequate protection agreement with China, guard against an exchange live on less than one US dollar a day. Fuelled by aside to allow his successor, Dr Samura Kamara, • Sensitivity to weather events (agriculture, energy prices. At the same time, imports will be rate crisis, which would weaken an economy still of property rights energy) the spectacular depreciation of the leone in late the current Minister of Foreign Affairs, to stand fuelled by vigorous internal demand, cancelling out heavily indebted in euro, despite the dinarisation • Risk of renewed Ebola outbreak 2016 and early 2017, as well as higher fuel prices • Low productivity in extractive and as the All People’s Congress (APC) candidate. trade’s contribution to growth. underway. The external debt burden is easing (71% • Inadequate infrastructure; failing at the pump, inflation could eventually threaten manufacturing industries (excluding in healthcare system While the battle for Mr Koroma’s succession the automotive sector) of GDP in late June 2017), as is that of public sector growth prospects in 2018, especially if the most could have opened the way to power for the Fiscal consolidation to be continued debt which accounts for 57% of the total. • Difficult for small and medium-sized recent fuel subsidies are removed. • Ongoing high non-performing loan ratio enterprises to access credit opposition candidate, divisions within the Sierra (15.6% in September 2017), putting Under the three-year agreement signed with Leone People’s Party (SLPP) have reduced the • Extreme poverty and high unemployment pressure on the banks, 3/4 of which are the IMF in February 2015, the authorities have Good relations with the West and with Russia Reduction in twin deficits at the heart of the likelihood that Julius Maada Bio will assume the foreign-owned succeeded in consolidating the budget resulting Early elections (as in 2014) in April 2016 returned three-year programme with IMF support presidency. In addition, the recent emergence of • Strong euroisation of credit (67%) in balancing and easing the debt burden. They the Progressive Party (SNS) to office with 57% Initiated in 2017, the reduction in the fiscal deficit the Alliance Democratic Party, led by Mohamed • Large informal economy and low female have been helped by the return to growth, which of the seats. Aleksandar Vučić was replaced as Mansaray, could scatter the opposition votes, participation in the labour market will continue in 2018. Sierra Leone, which has mechanistically boosts receipts. Benefitting from Prime Minister by Ana Brnabic in July 2017, after been involved in a new three-year programme rather than threaten the candidacy of the APC. the margins thus generated, they will increase his election as president. He continues to lead the with the IMF since April 2017 under an Extended The climate in which the elections will be held investment, pensions and civil service wages by up SNS. In October 2017, there was talk of holding new Credit Facility arrangement for USD 224 million, will be closely observed, at a time when living to 10% in education, healthcare, justice, the army early elections in early 2018, to coincide with the has embarked on reforms aimed at achieving conditions have become tougher due to high and government finance, partially offsetting the local elections, especially those being organised in a primary deficit objective of 2% of GDP in 2021 inflation. Poverty, unemployment and corruption cuts implemented in 2014. The expiry of the IMF Belgrade where the SNS has been losing ground. (4% in 2017). As agreed with the IMF, efforts are still widespread, and provide grounds for agreement in early 2018 will raise questions about They will probably be won by the SNS against a will be concentrated on boosting revenues as social frustration. Any potential liberalisation of the long-term sustainability of the results, with disunited opposition. The business climate remains a way of reducing the deficit. Measures include fuel prices – which impacts on prices generally – much still to be done. Despite civil service staff cuts, hampered by red tape, corruption and political the removal of tax loopholes, the application could, for example, be explosive in a country that the wage bill remains large. The budget balance rule interference. Negotiations regarding EU accession of a mining tax based on market prices, and the is among the poorest on the continent. is dated. The restructuring of many publicly-owned will continue, even if the normalisation of relations introduction of a customs duty of 20% on luxury The poverty rate is explained, in particular, by a enterprises operating in the transport, energy, with Kosovo is delayed and those with Bosnia vehicles. These steps are included in a new draft extraction and petrochemical sectors, in some very poor business climate, which continues to Herzegovina are complicated by the attitudes of tax administration law submitted to parliament act as a brake on investment and job creation. In cases prior to their privatisation or winding-up in the Bosnian Serbs. In addition, the country wants to in 2017, aimed more generally at improving the the worst cases, is delayed. The workings of the recent years, structural and governance reforms cultivate good relations with both NATO and Russia. efficiency of tax collection. The country is also have been slow to materialise. administration leave much to be desired. Although committed to containing current spending, the debt burden has eased, it is still significant so as to be in a position to accelerate capital with 75% denominated in dollars and in euros and

192 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 193 SINGAPORE SINGAPORE

COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN SINGAPORE Payment Summary Judgment The majority required is three-quarters. To allow A2 If the defendant has entered an appearance and the relevant parties to exercise their votes in an COUNTRY RISK Cheques, cash and bank transfers are all frequently-used means of payment within filed a defence, but it is clear that the defendant has informed manner, every notice summoning the Singapore. Bank transfers, fast and secure, are no real defence to the claim, the plaintiff can apply meeting must contain a statement explaining A1 to court for summary judgment. To avoid summary the effect of the compromise or arrangement. In BUSINESS CLIMATE widely used for international transactions. Standby Letters of Credits and Irrevocable Letters of Credit judgment being entered, the defendant must show particular, it must state any material interests of the are often used in export transactions. that the dispute concerns a triable issue, or that directors and the effect on them of the compromise there is some other reason for trial. An application or arrangement, should it be different from the for summary judgment must be filed within 28 effect on other parties involved. If this procedure TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) Debt collection days of pleadings being concluded (unless the court is not followed and the creditors and members do GDP growth (%) 1.9 1.5 2.7 2.5 5.6 Amicable phase Exports of goods, as a % of total The amicable phase begins with the seller orders otherwise). not have sufficient information on which to make Inflation (yearly average, %) -0.4 -0.2 0.6 1.0 POPULATION an informed decision, the court may, at any stage, China (millions of persons - 2016) contacting buyers in writing, by telephone and, Enforcement of a legal decision 13% Budget balance (% GDP) 2.0 1.5 1.3 0.4 where permissible, by visiting the buyer’s business refuse to approve the scheme, even if it has been 52,961 Writs of Execution approved by the requisite majority. Hong Kong Current account balance (% GDP) 18.1 19 19.9 19.7 premises. If there is no response from the buyer, 13% GDP PER CAPITA A judgment can be enforced by a variety of writs Public debt (% GDP) 103.2 112.9 112.7 111.7 (US dollars - 2016) a site visit and online searches are conducted to Schemes are only binding once they have been Malaysia ascertain the operating and legal status of the of execution. These include a Writ of Seizure approved by the court. These approvals may be (f): forecast 10% buyer. If the buyer does not make attempts to and Sale of movable and immovable property, subject to any alterations or conditions that the Indonesia settle the matter amicably, legal proceedings can a Writ of Delivery and a Writ of Distress. These court deems appropriate. Court approval ensures 8% RISK ASSESSMENT be used to recover payments for goods sold and writs authorise court officials to take appropriate the integrity of voting outcomes at scheme of Euro Area delivered in Singapore. It is, however, prudent to measures to give effect to the judgment. arrangement meetings, as well as the fairness of 8% constancy of the current account balance. In this Stable Singaporean economy ensure that the buyer has sufficient assets to Garnishee Proceedings the proposed scheme. context, the level of foreign currency reserves Economic growth in Singapore in 2018 should satisfy the debt before proceedings are initiated. This can be an appropriate solution when the debtor Judicial Management hold steady despite a slowing in exports to China. will remain high (at around 7 months of imports Imports of goods, as a % of total Legal proceedings is owed a debt by a third party (the garnishee). When When a company is in financial difficulty but has It will be sustained by world economic demand, in 2018). China Singapore is a common law jurisdiction. Its laws are the creditor garnishes the debt, the garnishee must reasonable prospects of being rehabilitated, or in particular in the new technologies sector, Whilst the banking sector is exposed to property 14% principally governed by Supreme Court of Judicature then make payments due to him, rather than to the if preserving all or part of its business as a going with the upturn in exports of semi-conductors market risks, its granting of mortgages has been Malaysia Acts, State Court Acts, other statutes which have debtor. To collect these debts, the creditor must concern (or even that the interests of creditors 11% that started in 2017, in financial services and cautious and remains in line with the regulatory procedural application (or contain procedural first apply for a garnishee order nisi. This can be would be better served than by resorting to a retail sales. The slight rise in oil prices will benefit requirements: the rapid expansion of credit, United States provisions), the Rules of Court, practice directions, filed without the involvement of other parties and winding up), the company or its creditors can 11% exports as Singapore is the world’s third largest combined with very high property prices, is not case law and the court’s inherent powers. leads to “show cause” proceedings. If the garnishee apply to court for an order that the company be Euro Area refining centre. The slow rise in energy prices, expected to present a risk for 2018. Singaporean confirms that there are monies due and owing to the 11% Singapore’s courts comprise State (Subordinate) placed under the judicial management of a judicial a slight upturn in household consumption and banks are also exposed to risks associated with judgment debtor at this stage, the Registrar may manager. Taiwan the government’s expansionary budget policy the high level, although deemed sustainable, of Courts and the Supreme Court. The Supreme Court proceed to make the garnishee nisi absolute. 8% (increased redistributive spending) will give a household indebtedness (the equivalent of 75% is composed of the High Court and the Court of Insolvency Proceedings Appeal (the final appellate court). The High Court Registration of Judgment If an insolvent company is unable to overcome boost to inflation. Household confidence will of GDP in 2017), the slowdown in the Chinese If the creditor is not able to enforce his judgment in however be kept buoyant thanks to the stability economy through trade finance operations, and is a court of first instance, generally used for its difficulties, it can be dissolved. This enables + STRENGTHS claims beyond the jurisdiction of the State Courts Singapore, he may be able to enforce it in a country the liquidation of its assets, so that creditors can of the Singapore dollar (pegged to a mainly the pressures associated with low oil and gas where the debtor holds assets. This can be done by • Significant non-price competitiveness US dollar weighted basket of currencies) and prices. However, the levels of capitalisation and (although the High Court is a court of unlimited be repaid, at least in part. This process is known jurisdiction and may hear any claim. commencing fresh proceedings, or by registering as winding up or liquidation. A healthy company • Development of high added value sectors a falling unemployment rate. In addition public liquidities, the stabilising of bad debt levels, as the Singapore judgment in the foreign country (on can also be subject to winding up if its members (new technologies, finance, chemicals, investments will make a positive contribution well as strong performances in the resistance Ordinary proceedings the basis of reciprocity of enforcement between pharmaceuticals) no longer wish the business to continue. When to growth in this context, in particular through tests carried out by the Singaporean financial The amount of the debt claim decides which court the two countries). • Major regional and international trading hub infrastructure projects such as the high- authorities would indicate that the banking judges the case. a company is wound up, its assets or proceeds and for the financial sector speed rail link between the City-State and sector will be resilient in 2018. Unpaid debts normally have a six-year limitation Insolvency proceedings are first used to pay off any creditors. Following this, any balance remaining is distributed pro rata • Large FDI inflows thanks to the Kuala Lumpur, as well as “future economy” period. A writ action is initiated by the creditor Schemes of Arrangement advantageous tax regime, political stability programmes which, in 2017, involved $8 billion and a summons served on the debtor within six amongst shareholders. and an excellent business climate Stability on political stage Schemes of arrangement begin with an application (approximately 2.5% of GDP), to improve months from the issue of the writ. The defendant to court, for an order summoning one or more • Leading exporter of capital in Asia through The Prime Minister, Lee Hsien Loong, who comes productivity and stimulate innovation in the has eight days from service of the writ (or 21 days, meetings of the creditors, members of the the Temasek and Government of Singapore 23 industries which are already growth hubs. The from the People’s Action Party (PAP), which has if the writ was served out of jurisdiction) to enter an Investment Corporation (GIC) sovereign company, or shareholders of the company. If aim is to achieve growth of 2% to 3% a year for the held power since independence in 1965, was appearance, by filing a Memorandum of Appearance funds elected in mid-2017 for a term of office ending the court agrees to the order, a proposal must next 10 years by improving the competitiveness with the court. This indicates his intention to defend then be tabled before the relevant meetings and of companies and the workforce. In addition, the in 2021. Politics in Singapore are symbolised by the suit. stability and continuity with the PAP successfully approved by the requisite majority (unless the advantageous tax regime will continue to attract Before a writ can be issued, it must be endorsed - WEAKNESSES maintaining its domination of national political court orders otherwise) of the creditors, class significant foreign direct investments, equal to with a statement of claim. If there is no statement life, credited with careful supervision of the of creditors, members or class of members, • Economy dependent on exports 19% of GDP in 2018. of claim accompanying the writ, there can be a active economic policies and the tranquil nature shareholders, or class of shareholders. • Shortages of skilled labour general endorsement, which consists of a concise of the social milieu. Governance in the country • Ageing population statement on the nature of the claim made and Confirmed resilience of financial situation is also excellent, thanks to its effective legal the remedial solution desired. If the writ only has a • Vulnerability to slowdown in the Chinese The budget situation for Singapore will remain system which facilitates debt collection, helping economy general endorsement, an accompanying statement very sound. In 2018, thanks to increased receipts to underpin the business climate, near the top of claim must be served within fourteen days of the NUMBER OF CORPORATE FAILURES by the sovereign funds, the country will continue of world rankings. In 2018, Singapore will hold defendant’s entering of an appearance. to record a budget surplus whilst maintaining its the Presidency of the Association of South Total Estimate (e) / Forecast (f) Yearly growth expansionary budget policy. In addition, whilst East Asian Nations (ASEAN) and intends, in this Defendants who have entered an appearance there is a high level of public debt, this is more context, to work to improve regional security, are required to file and serve their defence on 2,500 20% 14.4% 13.9% than made up for by the size of the financial reinforce economic integration to increase the the plaintiff within fourteen days of entering an appearance, or after service of the statement of 15% assets held by the sovereign funds. The bond attractiveness and competitiveness of the 1,991 issues are not used to finance the public debt region and to promote collaboration in terms claim (whichever is the later). A defendant may 2,000 1,884 10% make a counterclaim in his defence. The plaintiff 1,748 1,757 1,777 1,733 but to develop a local State bond market and to of innovation, and this in particular in the new 1,657 5% support the Central Provident Fund, the leading technologies sector. Finally, Singapore diplomatic must serve the defendant with his reply and 1,536 1,528 6.0% defence to any counterclaim, within fourteen days 1,500 0% Singaporean pension fund. efforts have been working towards improving 1.1% of the defence and counterclaim being served -0.5% In 2018, the current account balance will run a relations with Malaysia. -5% on him. -4.4% large surplus. Whilst the surplus in the balance 1,000 -8.0% -10% of trade will increase, in particular thanks to the Default Judgment slight uplift in energy prices, this trend will be If a defendant fails to enter an appearance or fails to -11.8% -15% file a defence within the time specified in the writ, counterbalanced by a deterioration in the balance 500 -20% of services and income. In addition the opening the plaintiff may enter default judgment against of the City-State, and the matching role as a him. This can be a final judgment or an interlocutory -25% judgment, depending on the nature of the claim. -25.4% regional and international trading hub, explains 0 -30% why the downwards trends in exports are 2010 2011 2012 2013 2014 2015 2016 2017(e) 2018(f) mirrored by fluctuations in imports, and thus the Source: Statistics Singapore, Coface

194 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 195 SLOVAKIA SLOVENIA

COFACE ASSESSMENTS COFACE ASSESSMENTS A3 A3 COUNTRY RISK COUNTRY RISK A2 A2 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 3.8 3.3 3.3 4.0 GDP growth(%) 2.3 3.1 4.1 3.1 Exports of goods, as a % of total 5.4 Exports of goods, as a % of total 2.1 Inflation (yearly average, %) -0.3 -0.5 1.2 1.8 POPULATION Inflation (yearly average, %) -0.8 -0.2 1.5 1.9 POPULATION Germany (millions of persons - 2016) Germany (millions of persons - 2016) 22% Budget balance (% GDP) -2.7 -1.7 -1.2 -0.9 19% Budget balance (% GDP) -2.9 -1.8 -0.8 -0.2 16,499 21,668 Czech Republic Current account balance (% GDP) 0.2 -0.7 0.3 0.2 Italy Current account balance (% GDP) 5.1 6.7 5.9 5.4 12% GDP PER CAPITA 10% GDP PER CAPITA Public debt (% GDP) 52.5 51.9 50.9 49.7 (US dollars - 2016) Public debt (% GDP) 82.5 78.4 75.5 74.0 (US dollars - 2016) Poland Austria 8% (f): forecast 7% (f): forecast France Croatia 6% RISK ASSESSMENT 7% RISK ASSESSMENT United Kingdom Hungary 6% Lively growth based on internal demand The current account balance is expected to 4% Vigorous growth limited by the size namely 40% of GDP, is held by foreign creditors In 2018, growth will receive a boost from continue to show a slight surplus. Despite the of the market and the country continues to be characterised Imports of goods, as a % of total investment (private and public) although substantial increase in imports resulting from Imports of goods, as a % of total Growth reached its highest level in ten years in by an external export debt ratio above 120%. lively internal demand, the trade balance will However, most of this debt is long-term, is Germany household consumption is still the main growth Germany 2017 thanks to growing employment levels and 20% contributor. Households are expected to remain in surplus thanks to momentum in sales 17% rising real wages, which stimulated domestic 70% denominated in euros, and corresponds to of vehicles and automotive parts, electronic, IT private commitments. Czech Republic benefit further from jobs growth and lower Italy demand. Slower momentum in investment 17% unemployment, which will drive up wages. and electrical equipment and in road transport. 13% and private consumption could reduce growth Austria The latter will also be driven up by the growing Nevertheless, poor diversification of export Austria in 2018. Growth is still broadly dependent on The current account surplus will remain 10% shortage of skilled labour in the automotive and products and destinations will expose the trade 10% exports and integration in European value significant balance to reversal in the automotive sector and Poland IT sectors in the west and centre of the country Croatia chains. The over-indebtedness preceding the The economy remains broadly dependent 6% as well as increase to the minimum wage (up Eurozone demand (60% of exports). Interest 5% 2013 banking crisis will continue to put pressure and dividend repatriation, a consequence of the on its impressive trade surplus based on Hungary from EUR 435 to EUR 480). Moreover, low levels China on this sector, despite gradual restructuring and European demand and tourism. 90% of 6% of household debt (70% of disposable income), strong presence of foreign investors, especially 5% low interest rates. Robust foreign investment in the automotive sector, is likely to be only exports, which represent 80% of GDP, go to together with low interest rates will help sustain is limited by an ambivalent attitude on the part neighbouring countries. Integration in German the residential property sector. Nonetheless, partially offset by remittances from Slovak of the authorities towards the privatisation of + STRENGTHS emigrants. The external debt is high, representing + STRENGTHS and Austrian production chains, thanks to the the rise in disposable income will be slowed by state-owned enterprises and cumbersome competitiveness of the automotive, electrical • Eurozone membership higher inflation fuelled by higher food and energy 90% of GDP in 2017 with a third owed by the state • Eurozone membership regulations. Despite everything, investments are and another third associated with FDIs. These and electronics equipment, pharmaceuticals and • Production platform for European prices. Public investment will be boosted by • High level of political and social expected to increase, thanks to vigorous internal domestic appliances sectors is behind half of all automotive and electronics industry greater use of European funds, insofar as the investments, long-term by nature, limit the risk development and external demand, especially in the consumer of massive capital flight. exports. In 2018, the current account surplus will • Satisfactory public and external accounts country has used only 5.3% of the EUR 15 billion • Diversified economy goods and construction industries. They will also continue on a downward trend because of rising • Robust financial system dominated by available under the 2014-2020 programme. The • Integrated in European production chain be buoyed by European financing in 2018. Like imports driven by internal demand and increases foreign groups construction sector will benefit broadly from An eclectic coalition government faced by • Current accounts in surplus at the European level, inflation is influenced by in the import bill for basic and intermediate the increase in infrastructure projects, as well a divided opposition oil price movements. It will be slightly positive in products. as good performance by the residential property Robert Fico has led the government since 2012. 2018, thanks to modest underlying pressure on - WEAKNESSES market. Moreover, private investment will However, after the March 2016 elections, he - WEAKNESSES prices and the gradual closing of the output gap. A fragile coalition government continue to be driven by FDIs in automotive and and his centre-left party, SMER-SD (European • Small economy dependent on European • Small domestic market Miro Cerar, founder of the Modern Centre Party investment and markets energy sectors, with the construction of a Jaguar Socialist Party member), lost their absolute Public sector restructuring under way Land Rover plant in the west of the country majority in parliament and had to form an • Ageing population and demographic in 2014, leads a government based on a fragile • Strong sectoral concentration of exports: and the extension of PSA, Kia and VW plants. growth at a standstill Fiscal restructuring has prompted renewed coalition but which is expected to survive automotives and consumer electronics alliance with the conservative National Party financial market confidence: Moody’s and S&P Exports will be buoyed by strong demand from • Dependent on regional economy and until the parliamentary elections scheduled in • Dependent on Russia for 70% of its energy and the centre-right Most (Bridge) Party. This the main trading partners and by the country’s on automotive industry have upgraded Slovenia’s credit rating. The April or May 2018. The fiscal consolidation the (gas, oil, uranium) coalition has a narrow majority (79 seats out fiscal effort will continue in 2018 via new cuts in growing integration in the European value chain. of 150). Moreover, during the summer of 2017, • Heavy debt burden government is committed to seems to have • Regional development inequalities/the current spending and welfare spending, taking rendered the three parties forming the coalition east lagging behind (infrastructure and Accordingly, trade’s contribution to growth will the National Party threatened to leave the • Inefficient public-sector enterprises into account the ageing population. The deficit unpopular. This political environment is likely training) remain positive and will increase as production government, prompting a renegotiation of • Convalescing banking sector will continue to narrow thanks also to higher tax to slow the pace of economic reforms in 2018. • Insufficient research and development capacity rises. the coalition pact. This new agreement, which • Slow administrative and judicial receipts and social security contributions, as well However, according to voting intentions figures, remains secret, could slow the government’s procedures • Shortage of skilled labour and high long- as lower interest rates. These efforts already led a new multi-party coalition is more likely than a term unemployment Satisfactory public and external accounts centre-left policy, especially the slow fiscal to a primary budget surplus in 2017. The low rates single-party government. Persistent income The public deficit, already modest, is expected to consolidation based on higher taxes on high and the ECB’s monetary easing help reduce the incomes and the regulated sectors. In addition, inequalities between the capital and the rest of continue on a slow downward path. The effort will be public debt burden, which despite everything the country continue to be a central issue in these modest and will chiefly rely on higher tax receipts. the many differences (welcome afforded remains above the target 60% of GDP. The to refugees, on Europe, etc.) threaten the elections. The political challenges of reforming In the first instance, these will benefit from growth recovery in growth relied on the restructuring the public healthcare system and the pension and should also benefit from the fight against tax coalition’s stability and will force the SMER to of indebted state-owned enterprises, reform find a compromise. Nevertheless, even if the system will continue into 2018. The country evasion with the introduction of a tax on company of the banking sector and on attracting foreign enjoys the advantages of being in the EU and in delocalisation, as well as on Slovaks domiciled popular support enjoyed by the SMER has fallen investment in a huge privatisation programme. (25% of the votes cast in 2017 compared with the Eurozone, tokens for fiscal and economic abroad. Against this, personal income tax and In the financial sector, the banks have been stability at times of political ups and downs. corporation tax deductions (particularly for R&D 44% in 2012), the other parties (seven parties recapitalised and restructured at considerable spending) will be increased. Moreover, spending is in parliament in addition to the SMER) do not cost following the banking crisis of 2012-2013. expected to rise modestly despite the recovery in seem to be in a position to offer an alternative, The creation of a bad bank has, since 2016, public investment and another significant increase at least in the short term. Corruption and the helped halve the ratio of non-performing loans. in civil service wages. In this context, the public debt wide inequalities between regions are major However, in order to complete the restructuring burden will remain significant, but below the target challenges, as they are among the most marked of the industrial and banking sectors, of which the threshold set by the Growth and Stability Pact (60% in the Eurozone. However, the business climate State controls about 50% and 44% respectively, of GDP). The debt is denominated in euro and so is remains satisfactory. privatisation should accelerate: the government not vulnerable to exchange rate risk. The strength had committed to the European Union to sell half of the banking sector, dominated by Austrian and its holdings in NLB, Slovenia’s largest bank, but Italian groups, and whose resources comprise local ultimately refused an offer considered to be too deposits, helps keep borrowing costs low. low. No further privatisation is expected before the 2018 elections. Almost 54% of the public debt,

196 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 197 SOUTH AFRICA SOUTH AFRICA

COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN SOUTH AFRICA Payment proceedings, the matter will be determined Business rescue C with reference only to written documents and, The objective of a business rescue is to allow COUNTRY RISK Electronic Funds Transfers (ETF), including SWIFT payments and international transfers, as a general rule, no oral evidence is permitted. financially distressed companies to restructure are used for payments in foreign currencies. Evidence is set out in affidavits and cannot be and reorganise, in order to avoid insolvency. A A4 contested by cross-examination. Although business rescue is initiated by a resolution of the BUSINESS CLIMATE Cheques are rarely used, outdated, expensive to process, and vulnerable to fraud. Cheque motion proceedings were generally quicker and company’s board, adopted by a simple majority. payments are also subject to a clearing period cheaper than actions, applications can now end Supervision and control is conducted by a of ten working days. The majority of businesses up costing more than action proceedings. When business rescue practitioner, appointed by the the court is faced with an application in which it company and licensed by the CIPC. The process TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) no longer use them. Cash payments do still is evident that there is a material dispute of facts concludes when either the court sets aside the GDP growth (%) 1.3 0.3 0.8 1.2 55.6 occur but have the same disadvantages. Exports of goods, as a % of total Letters of credit are issued between banks and between the parties, it will then refer the matter resolution or order that initiated the proceedings; Inflation (yearly average, %) 4.6 6.2 5.4 5.2 POPULATION to trial. the court converts the business rescue into Euro Area (millions of persons - 2016) serve as a guarantee for payments made to a 18% Budget balance (% GDP) * -3.4 -3.3 -4.3 -3.9 specified person under specified conditions, The alternative to court proceedings is to refer liquidation proceedings; the practitioner files 5,302 a notice of termination of business rescue China Current account balance (% GDP) -4.4 -3.3 -2.3 -2.6 including imports and exports. In most cases, the dispute or claim to arbitration, although few 9% GDP PER CAPITA proceedings; the business rescue plan is rejected, Public debt (% GDP) 49.3 51.7 53.7 55.6 (US dollars - 2016) irrevocable credits and confirmed irrevocable parties are willing to agree the required costs. United States credits are issued. The terms and conditions Arbitration can be faster than court processes or the business rescue plan is adopted and a * last fiscal year from April st1 2018 to March 31st 2019 (f): forecast 7% can be onerous and should be fully understood and the costs of proceedings are divided equally notice of substantial implementation is filed. Botswana before acceptance of these letters. Parties can between the parties. Disputes or decisions at the Liquidation 5% RISK ASSESSMENT sometimes secure payment on delivery via bank arbitration hearing can be reviewed through an Liquidation proceedings for a company begin Namibia guarantee. Monies are deposited into a bank application to court. Arbitrations can be made an with either a court order on the request of 5% Constrained recovery The current account deficit is expected to worsen account and the bank, in turn, issues a guarantee order of court by application, for the purposes of any persons and on the grounds set out in the slightly in 2018, in connection with the surplus on In 2018, the economic recovery, brought about by for payment on confirmation of delivery. This execution. Companies Act 2008, a request for voluntary the balance of goods, which is expected to reduce. Imports of goods, as a % of total a bumper harvest following the drought in 2016 type of payment is mainly used in matters liquidation, or an application to court by the This is because even though the global economic Euro Area and a rebound in the mining sector, underpinned pertaining to property transfers. Enforcement of a legal decision shareholders, the creditors, or the company for 24% by more favourable commodity prices, should picture should support a rise in exports, the liquidation (when the company is insolvent). A economic recovery and higher oil prices will lead The High Court deals extensively with execution China continue at a moderate pace. While these two Debt collection liquidator is appointed to wind up the company. 18% sectors are expected to continue to sustain exports to faster import growth. The slight services deficit against property, whether movable or The liquidator collects all the assets and claims United States thanks to more positive world economic conditions, is not expected to wipe out the trade surplus. The Amicable phase immovable. The rules of the Court provide for due to the company, sells them and distributes 7% their respective contributions to growth will current account will, however, continue to show a The “National Credit Act” states that the the attachment and sale of property in order to the proceeds amongst the creditors. It is India moderate. In particular, mining could suffer from deficit, as it will be hit by the impact of significant creditor must try to contact the debtor via satisfy the judgment made on the debt. essential that the creditor lodges its claim with 4% the implementation of a controversial new mining levels of profit repatriation by foreign companies a phone call, before issuing a formal letter of Foreign judgments are enforced in South Africa the liquidator, regardless of whether it has a Saudi Arabia charter. As a result, investments in the sector will holding South African assets on the income demand (outlining the outstanding obligation, by way of provisional sentence proceedings. judgment or a court order. Once all the proceeds 4% be slow, at least until the judicial review at the end balance. To a lesser extent, outgoing transfers in and sent via email, registered post, or delivered They are not directly enforceable. The courts have been distributed, the liquidator files its final of February, which will decide on whether it can the context of the South African Customs Union by hand). Once this is done, the parties attempt which pronounced the judgment must have had liquidation and distribution accounts and makes (SACU) will also be a strain on the accounts. While to negotiate a settlement over an acceptable + STRENGTHS be implemented. More generally, with business the necessary jurisdiction required to entertain any payments set out within it. The liquidator confidence still low, operational costs high and capital flows could be hit by successive downgrades period of time. As creditors are not obliged to the case, according to the principles recognised then advises the Master of the High Court that • Regional/continental economic and political further downgrades on the sovereign ratings at to the country’s credit rating, the external position accept payment in instalments, they can opt to by South African law on the jurisdiction of foreign the administration of the estate is complete. power the end of 2017, private investment is expected is unlikely to be at risk in the short term. However, proceed with legal action to secure a full one- courts. • Rich in natural resources (gold, platinum, to remain weak, continuing to put pressure on the fluctuations in the influx of capital mean the rand time payment. This phase is much less costly will still be volatile. carbon, chromium…) secondary sector. Nonetheless, a modest recovery than immediately proceeding with legal action. Insolvency proceedings • Advanced services sector (especially is expected after the conference to elect a new The credit rating downgrades could put pressure This phase also provides greater insight for Creditor compromise procedure financial) ANC leader in December 2017 provided greater on the banking sector, given the banks’ significant preparing for the litigation phase. Depending A compromise can be initiated by a resolution • Legislative environment provides political certainty. Public investment will be bit by sovereign exposure. However, the sector, which is on the nature and value of the claim involved, of the board of directors, or by direction of a protection for investors a degraded budget profile. Unemployment and still well capitalised, remains sound. it is sometimes possible to skip this phase and liquidator. They can propose a compromise to high levels of inequality will continue to impact proceed immediately to litigation. all creditors, or a specific class of, creditors and on household confidence, but the moderation Legal proceedings Cyril Ramaphosa will need to rebuild must notify the Companies and Intellectual - WEAKNESSES in inflation and higher real wages should sustain The administration of justice and application confidence Property Commission (CIPC) of the proposal. A private consumption. By supporting trade, of law in South Africa is carried out by the civil • Poverty and inequality are sources Returned to power in 2014 after the ANC’s receiver is appointed to supervise the process. of social risk (crime, strikes and consumption will help bring about a cautious and criminal courts. The ordinary courts are the (African National Congress) victory in the general The proposal must be approved by a majority of demonstrations) rebound in services, which saw anaemic growth district and regional magistrates’ courts, the elections, President Jacob Zuma has suffered a at least 75%, in value, of the relevant creditors or • High unemployment (27.7%, 54.3% for in 2017. With inflation back within the central bank provincial divisions of the High Court and the loss of authority within his party and declining proxies present at the meeting. If the proposal those aged 15-24) and shortage of skilled target range (between 3% and 6%), the bank will Supreme Court of Appeal. The Constitutional popularity with the public. Perceptions that is accepted, it can be presented to court for labour benefit from greater flexibility and thus have more Court is the highest court for constitutional corruption is growing under a president, who is also confirmation. Once confirmed, the order must • Infrastructure shortcomings (transport, scope to ease its monetary policy in 2018 so as to matters. Specialist courts have been established the subject of allegations of misappropriation of be filed by the company with the CIPC within energy) support activity. for various legal sectors, including Labour funds and collusion with the business community, five days. • Dependent on volatile flows of foreign Courts, the Land Claims Court, Special Income are fuelling a loss of confidence among foreign capital Tax Courts, and the Electoral Court. Debt trajectory threatened by a degraded investors. Mr Zuma, who is due to step down in NUMBER OF CORPORATE FAILURES budget profile 2019, will leave behind a record marked by slower Determining whether to proceed in a lower court or in the High Court will depend on the type and SECTOR RISK ASSESSMENT Caught up in an economic slowdown and low rates of economic activity, rising levels of unemployment, Total Estimate (e) / Forecast (f) Yearly growth tax collection, the budget outlook is worsening. The poverty and inequalities. These sources of political value of the claim. Decisions of the lower courts 5% growing burden of debt interest payments, which and social instability remain, even after the ANC can be passed for review or brought to appeal 4,500 in the higher courts. Some types of cases can 3,992 use up almost 14% of State revenues, on spending is conference in December 2017 appointed Cyril 4,000 -0.5% only be heard by the High Court, regardless of -1.4% 0% notably the reason for this deterioration. In 2017/18, Ramaphosa to succeed Jacob Zuma as leader -3.4% 3,558 the financial rescue of state-owned enterprises of the party. In addition, this does not resolve all the quantum of the claim. As a general rule, a 3,500 -4.9% (South African Airways and the South African Post of the ANC’s internal turmoil. Externally, if the court will exercise jurisdiction on the basis that -5% 3,000 Office) resulted in a huge overspend. The 2018/19 current vice-President actually succeeds Jacob the defendant is resident or domiciled in the area 2,716 of the court, or if the cause of action arose in -10.9% budget measures, which have still not been fully Zuma as President of the “rainbow nation” in 2019, 2,500 2,373 2,064 -10% signed off, are expected to include a combination rebuilding investor confidence will also require that area. 1,962 1,935 1,950 of budget cuts and higher taxes. Nevertheless, the implementation of structural reforms able to Proceedings in the Magistrates and Regional 2,000 -12.6% -13.0% -15% any consolidation before the 2019 elections will be restore governance credibility. Courts generally involve a trial (action) process. 1,500 cautious. In connection with this fiscal deficit, the The country, ahead of its peers in Sub-Saharan Motion (by way of affidavit) proceedings are -20% debt burden is likely to continue to climb in the next Africa regarding the business climate ten years limited to certain cases only. The High Court can 1,000 few years, thus increasing sovereign risk. On top of ago, continues to fall in the Doing Business ratings, hold both trial (action) and motion (application) -25% 500 this, country’s local currency debt was hit by a rating dropping from 32nd in 2008 to 86th in the 2018 Index, proceedings. In action proceedings, the -23.7% downgrade to “speculative” status by rating agency especially because of the lack of reform to tackle process commences with a summons and is 0 S&P in late 2017. As a result, the cost of credit is -30% red tape. concluded with a trial stage, where witnesses 2010 2011 2012 2013 2014 2015 2016 2017(e)* expected to continue to climb. give testimonies. With application (motion) Source: Statistics South Africa, Coface * 12 months ending in September

198 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 199 SOUTH KOREA SPAIN

COFACE ASSESSMENTS COFACE ASSESSMENTS A2 A2 COUNTRY RISK COUNTRY RISK A1 A1 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 2.8 2.8 3.1 2.9 GDP growth (%) 3.4 3.3 3.1 2.2 Exports of goods, as a % of total 51.2 Exports of goods, as a % of total 46.4 Inflation (yearly average, %) 0.7 1.3 1.9 1.9 POPULATION Inflation (yearly average, %) -0.6 -0.3 2.0 1.3 POPULATION China (millions of persons - 2016) France (millions of persons - 2016) 25% Budget balance (% GDP) 0.0 1.0 0.7 0.4 15% Budget balance (% GDP) * -5.3 -4.5 -3.1 -2.6 27,535 26,565 United States Current account balance (% GDP) 7.7 7.0 5.6 5.5 Germany Current account balance (% GDP) 1.1 1.9 1.7 1.6 13% GDP PER CAPITA 11% GDP PER CAPITA Public debt (% GDP) 37.8 38.3 39.6 39.6 (US dollars - 2016) Public debt (% GDP) 99.4 99.0 98.4 96.6 (US dollars - 2016) Hong Kong Italy 7% (f): forecast 8% (f): forecast Vietnam United Kingdom 7% RISK ASSESSMENT 8% RISK ASSESSMENT Euro Area Portugal 6% Exports and fiscal stimulus support growth In 2018, the current account surplus is expected 7% Gradual slowing in activity contribute to a reduction in the debt servicing burden. momentum to stabilise. The balance of goods is likely to Spain was again one of the most dynamic of the If the budget is applied as planned, the public deficit Imports of goods, as a % of total Although down slightly, growth is expected to remain in surplus, although export growth Imports of goods, as a % of total Eurozone countries in 2017 despite the threat should fall below the 3% threshold in 2018 and allow would be slightly lower than that of imports. The Spain to terminate the excessive deficit procedure China remain robust in 2018 thanks to exports and Germany of secession by Catalonia. Growth was driven 21% budget support. The demand for semiconductors steadying of relations with China is expected to 15% both by internal and external demand. Household initiated in 2009. allow the flow of tourists to stabilise after having Japan should continue to push exports, thus the France consumption, which grew at a slower rate than in Exporting companies have enhanced their 12% secondary sector and South Korean industrial plummeted in 2017. The service deficit is not 12% 2016, remained strong thanks to the continued competitiveness since the 2009 crisis thanks to United States conglomerates (chaebols). The Olympic Winter anticipated to widen in 2018 and could even be China vitality of the jobs market. There is however likely to reductions in their labour costs and the restoration 11% Games in Pyeongchang, as well as an agreement reduced thanks to the Winter Olympic Games. 7% be a gradual slowing in the level of activity in 2018. of their profitability that has enabled them to win Euro Area on improving diplomatic relations with China, Negligible, the primary and secondary income Italy The post-crisis recovery is gradually running out increased market shares. The solid rate of growth in 10% has the potential to boost tourism receipts. The balance should not weigh on the evolution of the 7% of steam. Consumption will increase less quickly, the Eurozone is also expected to help sustain activity Taiwan contribution of exports could nevertheless be current account. Netherlands despite the low level of inflation, as the impact of the but the slowdown in the United Kingdom, Spain’s 4% lower than in 2017 with the slowdown of activity Foreign exchange reserves will remain at a 5% catching up by households with previously delayed fourth largest trading partner, could present a threat in China. Stricter regulation on mortgages should comfortable level, while the rise in the central consumer durable purchases begins to wane. to those sectors exposed to UK demand, such as the + STRENGTHS weigh on investment in construction. In addition, bank’s key interest rate should help mitigate + STRENGTHS Investments however are expected to continue automotive sector (11% of the sector’s exports) and despite the opportunities offered by the ICT sector, the risk of depreciation induced by capital growing and most notably among exporting the production of capital goods. The low level of debt • Diversified industrial base rising labour costs, especially if not accompanied by flight, following the tightening of the Fed’s • Reform measures (labour market, banking companies but these could suffer as a result of interest payments and the cost of energy should • Leader in high-end electronics productivity gains, and corporate taxes could lead to monetary policy. sector, insolvency, etc.) increasing uncertainties and, specifically, political. also help to maintain the current account surplus. • Highly successful educational system a deceleration of private investment. Nonetheless, • Improved competitiveness and The construction sector will remain on its positive strengthened export sectors • High public R&D spending the more expansionary fiscal policy should promote Moon Jae-in facing the North Korean threat track in a context of robust demand and rising prices. Risk of Catalan secession because growth. An increase in public employment, the • Improvement in the financial position of Exports will benefit in part from the vigour within • Increased Korean investment in China, Following the dismissal in March 2017 of Park companies of fragmented parliament Vietnam and India minimum wage and social spending is expected to the Eurozone economies but given the expected support consumption that will remain constrained Geun-hye, embroiled in a corruption scandal, • High-quality infrastructures strengthening of the euro against the dollar, this will After two consecutive parliamentary elections, Moon Jae-in (Democratic Party) was elected the Spanish political landscape was seriously by the weight of household debt (155% of • Significant tourism potential have an impact on the competitiveness of exports President with an economic programme to fragmented. The Spanish government formed at - WEAKNESSES disposable income) and low employment growth, outside the EU as will the negative consequences particularly among the youth. stimulate growth, initiate social reform and arising with the slowdown in the United Kingdom. the end of October 2016 and led by the conservative • Steel, textile and shipbuilding industry reduce the influence of the chaebols. After nearly - WEAKNESSES Mariano Rajoy has a fragile base. Mariano Rajoy was affected by Chinese competition Inflation is expected to stabilise around the 10 years of a Conservative presidency, and Despite the relaxed financing conditions, the growth only able to win a confidence vote in parliament and central bank target (2%). This logic underpins in credit will remain sluggish in a context of ongoing • Weight of commodities imports despite the circumstances of the election, the • High levels of private and public debt, very to bring an end to Spain’s longest governmental the decision of the latter, in November 2017, to transition was smooth. However, with only 40% negative net external position debt reduction within households and companies. crisis thanks to abstentions by a number of • High level of household and small business increase by 25 basis points its key interest rate, The weak state of the credit market in a context indebtedness of seats in the National Assembly, the President • Duality of labour market, high level socialist Deputies. The commencing of the Catalan the first hike since 2011. The monetary policy may encounter difficulties in passing some laws. of structural unemployment of low interest rates will nevertheless continue to crisis with the calling of what was deemed by the • Ageing population is expected to remain accommodative in 2018, undermine the profitability of the banking sector The aggressive attitude of North Korea, which • Large number of relatively unproductive Madrid government of an illegal referendum by the • High youth unemployment despite to avoid strangling the consumption of highly small companies even though its creditworthiness and the quality of Catalan separatists on 1st October 2017, could lead successful education system indebted households. Rising tensions with was marked by new nuclear tests in 2017, will its portfolios have improved. Following the adsorption be the chief risk to political stability. Despite • Fragmented political landscape, unity to a realignment of the polarisation of the political • Unpredictability of the North Korean North Korea, which would erode consumer and of the country threatened by separatist of Banco Popular Espaňol S.A. by Banco Santander regime Moon Jae-in’s calls for dialogue, the threats of chessboard, with the nationalist parties adopting a business confidence, pose a risk to growth. movement in Catalonia for one symbolic euro when it failed the July 2016 united front. Following the “yes” vote and faced with • Weight of chaebols in the economy the Pyongyang regime against Seoul continue stress tests, Spanish banks need to get ready in 2018 to fly. While visiting South Korea in November the determination of the Catalan authorities under The budget surplus persists despite for a fresh round of banking stress tests based on a the leadership of Carles Puigdemont to declare 2017, President Trump reaffirmed the bilateral SECTOR RISK ASSESSMENT more stringent methodology (IRFS9). stimulus security alliance between the United States and independence, the region was placed under central The budget surplus is expected to shrink South Korea. The deployment of the US THAAD government rule. The enacting of this exceptional as a result of the expansionary policy. The anti-ballistic missile defence system, completed Exiting from the excessive deficit procedure provision in the Spanish constitution was followed government’s payroll is expected to swell with in September 2017, illustrates the importance predicted in 2018 by the calling of early regional elections, in which the hiring of 9,500 additional civil servants. The of this support and the worsening of the North The public deficit will continue its slow contraction the central protagonists for independence, and increase in the minimum wage, various subsidies Korean threat. Highly criticised by China, the since 2016. The improvement in the public accounts despite being the subject of legal action, stood to reduce inequalities and financial support to installation of this system has been at the origin can be attributed to an increase in revenues and and obtained the majority again. This victory is SMEs will also weigh on spending. The growth of a deterioration of diplomatic relations with a slight reduction in public spending (lowered likely to prolong the Catalan crisis, which in view of this spending in the social field will be partially the Middle Kingdom. However, even though social contribution, limited investments and lower of the results of the PP could occur at the national offset by a decline in infrastructure spending. China’s position on THAAD has not changed, interest costs). Unless there is a political consensus level. The agreement between the PP, PSOE and In order to respond to the North Korean threat, they have been in the process of normalising following the Catalan crisis making it possible to Ciudadanos on the Catalan question is not going the defence budget is also rising. The maximum since the meeting between the Chinese and approve the 2018 budget, the 2017 budget agreed to eradicate the dissensions within the Cortes corporate tax rate, up from 22% to 25% will Korean Foreign Ministers at the end of October in May 2017 with the support of the Basque minority (the Spanish parliament). With the government contribute to higher tax revenues. Public debt, 2017. A few weeks later, South Korea’s refusal to party, should be duplicated in 2018. There will be struggling to obtain a majority to approve the 2017 which is lower than that of its OECD peers, is conduct a military exercise alongside the United a slowdown in budget revenues but spending will budget, it seems that the inflexibility of its position expected to remain stable and low risk. On the States and Japan appeared to be a sign of South continue to be held in check. The reduction in social concerning the Catalan question will in future cost it other hand, household debt, which continued to Korea’s desire to improve relations with China. transfers and the freeze on government employee the votes of Deputies in the small regional nationalist rise in 2017, is a source of concern. wages in 2018 will allow for a small increase in public parties. Mariano Rajoy is no longer safe from a investments. The favourable debt ratio will help censure motion.

200 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 201 SPAIN SRI LANKA

PAYMENT AND COLLECTION PRACTICES IN SPAIN COFACE ASSESSMENTS Payment When claims are contested, a court hearing is held to Enforcement of a legal decision examine both parties’ arguments and a judgement B Bills of exchange are widely accepted for commercial When all appeal venues have been exhausted, COUNTRY RISK transactions in Spain. In the event of defaults, they should be handed down within ten additional days. domestic court decisions become enforceable. If the offer creditors certain safeguards, including access Although this is time frame that is prescribed under debtor fails to satisfy the judgment within twenty Spanish law, it is rarely adhered to by the courts. B to special collection proceedings with instruments days, the Court Clerk, upon request, can seek out the BUSINESS CLIMATE for negotiation under the civil procedures code Ordinary proceedings debtor’s assets and seize them. (juicio cambiario). Bills of exchange which have been In addition to the juicio cambiario, creditors unable Decisions on foreign awards rendered by EU countries guaranteed by a bank can be somewhat difficult to to reach a payment settlement out of court can benefit from particularly advantageous enforcement obtain, but they do limit the risk of payment default by enforce their rights through a civil procedure (juicio conditions, such as EU Payment orders and the TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) offering creditors recourse to the endorser of the bill declarativo). Civil procedures are divided into ordinary European Enforcement Order. Judgements rendered GDP growth (%) 4.8 4.4 4.7 4.8 21.3 of exchange. proceedings (juicio ordinario) for claims of over Exports of goods, as a % of total by non-EU countries are recognised and enforced, Inflation (yearly average, %) 2.2 4.0 6.0 5.0 POPULATION Cheques are widely used for corporate transactions EUR 6,000 and oral proceedings (juicio verbal) – a provided that the issuing country is party to a bilateral United States (millions of persons - 2016) more simplified system – for smaller claims. Both 28% Budget balance (% GDP) -7.0 -5.4 -5.2 -4.7 in Spain. They offer similar legal safeguards under the or multilateral agreement with Spain. If no such 3,789 proceedings are initiated with a lawsuit served on the Euro Area Current account balance (% GDP) -2.4 -2.4 -2.5 -2.3 juicio cambiario in the event of default. The same is agreement is in place, Spanish exequatur proceedings 19% GDP PER CAPITA true of promissory notes (pagaré), which, like bills of debtor, who is obliged to present their defence in front will be followed. Public debt (% GDP) 77.6 79.3 77.6 74.8 (US dollars - 2016) of the court. United Kingdom exchange and cheques, are instruments enforceable 10% (f): forecast by law. If unpaid, they are recorded in the registry of The claimant is required to explain the facts of his Insolvency proceedings India unpaid acceptances (RAI, Registro de Aceptationes claim and provide all supporting documents – either 5% RISK ASSESSMENT Impagadas). originals, or copies that have been certified by a Out-of-court proceedings A debtor has the possibility of negotiating a formal United Arab Emirates public notary - on filing its initial petition. Prior to the 2% Attached to the Centre for Interbank Cooperation, the refinancing agreement (acuerdo de refinanciacion Growth should remain strong In terms of external accounts, the current RAI is the country’s most important registry. It records investigation of the case, the judge will summon the account balance is expected to remain in deficit in parties during a first hearing audiencia( previa), using formal) with his creditors. This agreement must Growth is expected to remain strong in 2018. A all commercial payment defaults of over EUR 300, thus be signed by the court. Within this agreement, the Imports of goods, as a % of total recovery is likely in the agricultural sector, which 2018, with remittances from expatriate workers allowing banks and other deposit institutions to verify ordinary proceedings, to encourage a conciliation. If this and tourism revenue only partially offsetting is unsuccessful, the lawsuit will be pursued. The court parties are free to write off as much of the debt as China was heavily affected by the droughts and floods a company’s payment record before extending credit. they deem necessary. 22% that hit the country in the first half of 2017. These the deficit in the trade balance. The latter should can then order specific measures to clarify issues or nevertheless be reduced, with an increase in Electronic transfers via the SWIFT network, widely India episodes weighed on household consumption facts that remain unclear, before passing judgment. Restructuring proceedings exports, and a decrease in fossil energy imports used by Spanish banks, are a fast, fairly reliable and 20% in 2017, as the shortage caused a temporary Restructuring proceedings are launched by filing a linked to a lower demand for thermal energy. cheap payment instrument, provided the purchaser Monitory proceedings (Juicio monitorio) Euro Area rise in inflation. This inflation is expected to slow petition for an insolvency order. After examination In addition, despite expected growth, FDI orders payment in good faith. If the buyer fails to order For monetary, liquid and overdue claims, whatever 7% down in 2018 against the backdrop of tighter of the petition, the judge makes an insolvency order. would remain low compared to neighbouring a transfer, the legal recourse is to institute ordinary the outstanding amount (previously limited to up United Arab Emirates monetary policy by the central bank in response Creditors are expected to notify their claims within countries. As a result, the rupee is likely to remain proceedings, or summary proceedings, based on to EUR 250,000), creditors can now benefit from a 6% to the gradual rise in key interest rates of the US one month of publication of the insolvency order. The under pressure. the unpaid invoice. Banks in Spain have also been more flexible summary procedure. This process does Singapore Federal Reserve. Tourism should also benefit court appoints an insolvency manager, who examines 5% implementing SEPA standards for euro-denominated not require the presence of a barrister, or solicitor. from better weather conditions. The filing of a petición inicial, prepared with a pre- the debtor’s financial situation and establishes a payments. report on its debts. If there is no opposition to the The growth of the industrial sector is set to Relative political stability in the face printed form, is directly submitted to the judge of of persisting destabilizing factors first instance (juzgado de primera instancia) where report, the insolvency manager submits the final + STRENGTHS strong, stimulated by the reinstatement of Since the 2015 elections, the political stability Debt collection the debtor is located. After reviewing the supporting version to the judge. The judge subsequently orders the generalized system of preferences with • Diversified agricultural production (tea, rice, the European Union (EU) since May 2017. This of the country has seemed assured. However, Unless there are special clauses included in the documents, the judge can order the debtor to pay the commencement of the arrangement phase with coconut, rubber) there is considerable tension between President commercial contract, the applicable rate of interest within twenty days. its repayment schedule, viability plan and alternative disappearance of tariffs for nearly 1,200 Sri • Strategic location at the centre of trade Maithripala Srisena (Freedom Party) and his is that applied by the European Central Bank in its proposals for repayment. routes between Asia and the Middle East Lankan products (including tea and other If the debtor does not respond, the judicial prime minister, Ranil Wickremesinghe (United most recent refinancing operation (performed prior Liquidation agricultural products, as well as various representative will inform the judge and request • Indian, Chinese and Japanese interests National Party), making their alliance fragile. to the first calendar day of the half year concerned), Liquidation in Spain aims to divide the company’s textile products) should greatly benefit the confirmation of the decision in favour of the initial • Tourism in strong growth Discussions on the constitutional reform project with an additional seven percentage points. The rate is assets once all of its obligations have been satisfied. manufacturing sector, for which the EU is the request. The judicial representative then hands that was launched in March 2016 are therefore published by the Finance Minister every six months, in During this phase, the company retains its legal largest export market. Uncertainties about down a ruling confirming the conclusion of monitory difficult, and the oncoming local elections in the Boletín Oficial del Estado. persona. Liquidators are appointed to execute the Brexit conditions and its implications for UK proceedings, which is transmitted to the creditor. This - WEAKNESSES growth, however, are expected to affect the January 2018 - initially planned for mid-2017 – The statute of limitations for ordinary claims is five allows the creditor to contact the Enforcement Office process and they can also take over the function of • Vulnerability of agricultural production sector, with the United Kingdom accounting presents a factor of instability. years, following the introduction of Ley 42/2015 on for the next phase. If the debtor disputes the ruling administrative body and company representative. to climate disasters for 30% of Sri Lanka’s exports to the European Furthermore, tension remains between the the 5th October 2015. and provides motivated arguments for this within a The liquidator cannot redistribute the company’s • Low levels of capital public spending Union. The construction sector, meanwhile, Buddhist majority and the Muslim minority written statement signed by a barrister and a solicitor, assets among its associates until all of its creditors Amicable phase because of burden of debt servicing will be boosted by government support for (9% of the population) . In addition, Sri Lanka a full trial on the case will be instigated. have been paid and payment demands against the There are no formalities or conditions for the dispatch • Vulnerability related to reliance on infrastructure projects and the positive impact faces international pressure under the auspices company have been settled. Aggrieved creditors of a reminder to the debtor, but it is advisable to send short‑term external financing of the takeover of the Hambantoa port by the of the United Nations Council, pending the can contest transactions that they believe may have a claim to the debtor first (aburofax , which is an official • Lack of infrastructure Chinese company CMPort in July 2017. This government’s recognition of human rights taken place illegally during the allocation of the assets. fax which has legal value). The creditor can obtain major investment project, combined with the violations, and the adoption of recommendations These proceedings can last up to seven years. guarantees for the payment of the debt. Unless both government-led fiscal consolidation reforms to sustain reconciliation between the Tamils and parties reach an agreement, no interest or penalties under the auspices of the IMF and the relatively Sinhalese. can be charged for late payments at this stage. stable political climate, should reassure foreign Improving the business environment is one of Legal proceedings investors and stimulate investment. NUMBER OF CORPORATE FAILURES the government’s priorities, but accusations If no settlement agreement is reached with of favouritism and corruption are sometimes the customer, the creditor can initiate a legal Total Estimate (e) / Forecast (f) Yearly growth Public finances still fragile despite gradual directed against leaders. collection process, using civil procedure law (ley de improvement 10,000 50% Enjuiciamento civil). 9,143 Engaged in a process of fiscal consolidation with 37.0% Exchange proceedings 9,000 40% support from the IMF, the Sri Lankan government 8,095 Exchange proceedings are used for claims based on is continuing its efforts to reduce the deficit and 8,000 30% bills of exchange, promissory notes and cheques. debt. The priority of the reforms is to improve tax 7,000 A judge of the first instance (juzgado de primera 18.4% 6,564 20% collection in particular. Foreign investments, such instancia) verifies that the ‘exchange title’ has been 6,000 5,910 as those related to the Hambatoa port, make 5,097 10% it possible to generate revenues that are then correctly implemented and then orders the debtor to 4,990 12.9% make payment of both the principal amount and the 5,000 used to reduce the debt. Nevertheless, the large 4,078 3,833 3,641 0% late interests and costs, within ten days. The judge will 4,000 share of some hard-to-reduce positions, such also order a seizure for security (embargo preventivo) -3.6% -10% as the salaries of civil servants (representing 3,000 -6.0% -5.0% on the debtor’s assets, equivalent to the outstanding -22.3% 25% of government expenditures), will prevent amount. The debtor has ten days to dispute the ruling. 2,000 -20% the government from reversing this trend in the -20.0% immediate future. If there is no payment received or opposition within 1,000 -30% the prescribed time, the judge will order enforcement -28.2% measures. If necessary, the judicial representative will 0 -40% carry out attachment. 2010 2011 2012 2013 2014 2015 2016 2017(e) 2018(f) Source: National Statistics Institute Spain (INE), Coface

202 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 203 SUDAN SURINAME

COFACE ASSESSMENTS COFACE ASSESSMENTS E D COUNTRY RISK COUNTRY RISK E D BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 4.9 3.0 3.6 3.8 GDP growth (%) -2.7 -10.5 -1.2 1.1 Exports of goods, as a % of total 39.6 Exports of goods, as a % of total 0.6 Inflation (yearly average, %) 16.9 17.8 30.5 16.0 POPULATION Inflation (yearly average, %) 6.9 55.5 22.3 9.3 POPULATION United Arab Emirates (millions of persons - 2016) United Arab Emirates (millions of persons - 2016) 43% Budget balance (% GDP) -1.9 -1.8 -2.5 -2.8 33% Budget balance (% GDP) -9.9 -7.1 -6.3 -4.9 2,304 6,430 Saudi Arabia Current account balance (% GDP) - 7.8 - 5.8 - 4.7 -4.2 Switzerland Current account balance (% GDP) -16.3 -2.8 9.4 6.1 19% GDP PER CAPITA 30% GDP PER CAPITA Public debt (% GDP) 72.9 64.2 55.2 50.1 (US dollars - 2016) Public debt (% GDP) 42.6 68.8 63.1 66.1 (US dollars - 2016) Egypt Euro Area 16% (f): forecast 14% (f): forecast Macao Guyana 6% RISK ASSESSMENT 5% RISK ASSESSMENT Euro Area Trinidad & Tobago 4% Modest growth, dependent on agriculture exchange rate, which will help reduce imports 5% En route to recovery in 2018 which would put pressure on the substantial and extractive industries while boosting the growth of non-oil exports In 2018, Suriname is expected to exit from three level of public debt, mostly denominated in Imports of goods, as a % of total Since the shock triggered by the secession of (livestock and sesame). International prices have Imports of goods, as a % of total years of recession, which started with falling foreign exchange. Moreover, the parliament has boosted gold exports (which doubled in value in approved the creation, from 2018, of a sovereign Macao South Sudan in 2011, efforts have been made United States commodity prices and was then fuelled by the 50% to re-establish macro-economic stability and 2017) and oil exports. The easing of US sanctions 26% devaluation of the currency, hyperinflation, fiscal wealth fund managed by the central bank for should result in more trade partners in 2018, savings of mining revenues, in order to mitigate United Arab Emirates restore growth. Significant imbalances, linked to Euro Area austerity, and high interest rates. Economic 15% the loss of three quarters of oil exports following and also stimulate exports in general. However, 20% recovery will likely be supported by buoyant the future disappearance of this income source India the secession (and the corresponding income), foreign investment will not be enough to cover Trinidad & Tobago mining output and exports, in part due to the and the volatility of prices. 11% continue to limit growth prospects, as do the the deficit: substantial foreign aid is needed to 16% completion of significant investments in 2017. The current account surplus is expected to fall Egypt difficult business climate, the lack of exchange avoid a fall in the foreign exchange reserves, China Output is set to be boosted by the opening of the in 2018, but should still remain relatively high. 10% rate flexibility, over-indebtedness, armed which are already at very low levels (about six 6% Merian gold mine, the expansion of the Staatsolie It will mainly be supported by rising exports of Euro Area ethnic conflicts, and the lack of integration in weeks of imports). Greater flexibility regarding St. Lucia oil refinery, as well as by the resumption of gold and oil associated with increased production 10% international trade. the Sudanese pound, which is still considerably 4% bauxite production. The moderate rise in capacity. In addition, exports of non-oil products overvalued, will attract these investments. 2018 harvests are expected to remain at their commodity prices (gold, aluminium, oil) will also (rice, wood) will be more competitive due to + STRENGTHS usual level after recovering from torrential rains + STRENGTHS boost state revenues and FDIs in the energy the earlier depreciation of the local currency. in 2016. These should contribute to a modest A very difficult political context and mining sectors. The construction sector will Nevertheless, the trade surplus will likely fall as • Strategic position between the Middle East • Mineral resources and agricultural potential benefit from these new investments, especially a result of more expensive imports. Monetary and West Africa pick-up in growth, which is largely reliant on Because of progress in the fight against agriculture and the extractive industries, as terrorism and the management of internal • Financial support from international donors after the discovery of new gold reserves close policy is expected to remain cautious, while the • Easing of sanctions imposed by the United and foreign investors to the Gross Rosebel mine. In addition, exports central bank’s room for manoeuvre will continue States in 1997 well as on public spending. The slight upturn conflicts, the United States has lifted almost all in the barrel price should enable modest oil- of the sanctions imposed in 1997. At the same (excluding commodities) will continue to benefit to be limited by the weakness of the foreign • Relative stabilisation of diplomatic relations related GDP growth, triggered by a cut in energy time, the country has kept Sudan on its terrorism from the depreciation of the local currency, which exchange reserves (less than two months with South Sudan thanks to the oil - WEAKNESSES increases their competitiveness. of imports). However, these are expected to agreement subsidies. blacklist, and maintained sanctions relating to increase thanks to the current account surplus human rights violations in Darfur. • Dependence on oil, gold and aluminium Public investment is likely to remain modest, due • Adjustment efforts under the IMF Slower monetary expansion should reduce and the removal in May 2016 of the United States monitoring programme inflation in 2018, even though it will remain very Coming to power after the coup d’état in 1989, • Poorly diversified economy to financing constraints and a fiscal consolidation policy. Austerity measures (higher taxes on currency peg. high due to rising oil (of which the country is a net President Omar al-Bashir is well placed to win • Size of the informal economy (30% of importer despite surplus crude oil production) GDP) with casinos, gold mining and fuel, gradual removal of subsidies on water and the 2020 elections; the opposition remains A government which is losing popularity - WEAKNESSES and food prices. fragmented and is too disorganised to present a smuggling electricity) will contribute to the weakness • Difficulties with the management of of private consumption. In addition, inflation, President Désiré Bouterse, leader of the National • Unsustainable external debt The easing of US sanctions is likely to have credible alternative. In early 2017, the President reinstated the post of Prime Minister – a role public-sector companies although markedly declining, will remain high and Democratische Partij (NDP), is expected to • Lack of investment in infrastructure a limited impact in the short term, but over put pressure on household purchasing power. that had been absent since the coup d’état • Inadequate transport infrastructure pursue his reform programme so as to maintain the longer term could encourage economic A tighter monetary policy will help lower inflation • Significant business climate and – and formed a new government following a (roads, ports) the support of international donors, despite the governance shortcomings diversification and growth through the as will the fading impact of the devaluation of the National Dialogue for «consensus». However, • Difficult business climate; ineffective large-scale protests in 2017 against austerity resumption of international financial Suriname dollar on the price of imported goods. • Continuing high levels of human and food these demonstrations of a rebalancing in the justice system (especially the hike in electricity and water insecurity transactions, helping to alleviate the pressure on the banks, and to restore FDIs and technology distribution of power were not convincing in prices). Despite his growing unpopularity and his • High rates of unemployment (especially Ongoing fiscal consolidation and current legal problems (resumption of proceedings for among young people) and poverty transfers. 2017, and social tensions persisted, fuelled by the regime’s failure to stem rising prices and to account surplus murder during the coup d’état in 1982), President • Less activity in South Sudan, which is ensure the distribution of basic necessities. Higher mining revenues, together with fiscal Bouterse is expected to remain in post until reducing outlets for Sudanese products Twin deficits proving hard to eliminate his term of office ends in 2020. Internationally, Although the shared economic challenges consolidation, will help to gradually reduce the • Claims for citizenship of South Sudan The fiscal deficit will remain stable thanks to the President Bouterse’s relations with the associated with the production and supply of oil fiscal deficit, mostly financed by international in the oil regions of the South and tensions cut in energy subsidies, which will, however, Netherlands and the United States will remain in the Darfur region has led Sudan and South Sudan to co-operate, donors. Fiscal austerity, in place since 2016, continue in turn to dull internal demand. tense. Over the past fifteen years, the former armed conflict persists in the Sudanese regions comprises a freeze on civil service wages, Despite the efforts made to contain current dictator is alleged to have secretly supported of South Kordofan and Blue Nile: the people the introduction of VAT at 10% in 2018, cuts in spending and boost tax receipts, which would drug trafficking and money laundering. in these regions identify more strongly on an subsidies on water and electricity, and cuts in enable infrastructure investment and greater ethnic level with the people of South Sudan and operating expenditure. This was written into a Restricted access to credit, underdeveloped redistribution, the public deficit remains at a level are demanding to become part of the country. stand-by arrangement with the IMF, which has infrastructure, and a lack of skilled labour will requiring central bank financing – a financing allowed the disbursement of USD 478 million continue to impact the business climate. method which encourages inflation. However, their demands face repression by the Khartoum regime, which wants to maintain over two years. In May 2017, the government The public and external debt ratios are high, and control over the oil resources in said regions. In cancelled this agreement, judging that it no most of the external debt is in arrears. Because 2003, economic and social marginalisation of longer needed IMF aid, while pursuing its reform of the quasi closing of access to international ethnic minorities led to the outbreak of conflict programme. As a result, the deficit will be funded markets, Sudan has to resort to financing in in the Darfur region, where the population through international loans (specifically from the form of grants and concessional loans, and also face repression by President Al-Bashir the Inter-American Development Bank, the continues to work towards debt relief under the due to the presence of oil resources. Since Caribbean Development Bank, and the World HIPC initiative. This should be made easier by the 2016, unilateral ceasefire declarations by the Bank), as well as by issuing debt on international lifting of sanctions. Sudanese government have helped reduce markets. However, the country’s fiscal position In 2018, the current account deficit will continue national insecurity and the scale of population remains worrying – especially in the event to improve because of the depreciation in the displacement linked to these conflicts. of another depreciation of the local currency,

204 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 205 SWEDEN SWEDEN

COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN SWEDEN Payment Court proceedings For awards rendered in a European Union A1 If the debtor contests the debt, the creditor has member-state, special enforcement conditions COUNTRY RISK Bills of exchange and promissory notes are neither widely used nor recommended as they the decision of either turning to the District Court are provided. When the claim is undisputed, the A1 must meet a number of formal requirements in (the first instance, Tingsrätten) or to terminate creditor may apply to the European Enforcement order to be considered as legally valid. the process. Order, or when the claim does not exceed EUR BUSINESS CLIMATE 2,000 EUR, the creditor may start a European Just as the rules for issuing cheques have Proceedings involve a preliminary hearing in which the judge attempts to help the parties Small Claim Procedure. For awards issued in non become more flexible, the sanctions for issuers EU countries, the Svea Hovrät Court of Appeal of uncovered cheques have been relaxed over reach a settlement after examining their case TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) documents, evidence and arguments. It is up to must recognize an award in order to enforce it, the years. The use of cheques has subsequently provided that a recognition and enforcement GDP growth (%) 4.1 3.2 3.1 2.4 10.0 become almost non-existent. the parties themselves to decide what evidence Exports of goods, as a % of total they wish to submit. agreement has been signed between the non-EU Inflation (yearly average, %) 0.7 1.1 1.8 1.6 POPULATION Conversely, use of the SWIFT electronic network country and Sweden. Germany (millions of persons - 2016) If the dispute remains unresolved, the 11% Budget balance (% GDP) 0.2 1.1 0.9 0.7 by Swedish banks provides a secure, efficient, 51,125 and fairly cheap domestic and international proceedings continue with written submissions Norway Current account balance (% GDP) 4.7 4.5 3.9 3.7 and oral arguments until the main hearing, where Insolvency proceedings 10% GDP PER CAPITA fund-transfer service. Payments are dependent Public debt (% GDP) 44.2 42.2 38.8 36.5 (US dollars - 2016) the emphasis is on counsels’ pleadings (defence Out-of court United States on the buyer’s good faith. Sellers are advised to 7% (f): forecast take great care to ensure that their bank account and prosecution) and examination of witnesses’ Swedish law does not formally regulate out-of testimonies. court arrangements. Nevertheless, creditors and Denmark details are correct if they wish to receive timely 7% RISK ASSESSMENT payment. In accordance with the principle of debtors can enter into voluntary negotiations in order to negotiate the debt and reach an Finland Direct debits represent about ten percent of immediateness, the court bases its decision 7% agreement. Growth will be weaker in 2018, 2012, will probably approach the 30% threshold. non-cash payments in Sweden and are quickly exclusively on the evidence presented at the but still dynamic The sustaining of the current account surplus growing in popularity. There are two types of trial. Barring exceptional circumstances, the Restructuring Imports of goods, as a % of total The Swedish economy is expected to continue its is one clear indicator of the favourable direct debit in Sweden: Autogiro Foretag (AGF) judgement is customarily issued within two The aim of restructuring is to find a financial weeks thereafter. solution for an insolvent company that is Germany dynamic growth path in 2018, albeit at a slower competitiveness of the economy. To some for B2B transactions and Autogiro Privat (AGP) 19% rate. Headline growth is set to be more in line with extent, Swedish specialised exports are less for B2C payments. They can both be used for As a general rule, the code of civil procedure deemed to have sustainable long-term business Netherlands the economy’s potential rate, which is estimated dependent on fluctuations in the exchange single or recurring payments. requires the losing party to bear all legal costs prospects. It can apply for a restructuring with 8% at around 2%, according to the OECD. As in 2017, rates: high quality goods such as machinery considered reasonable, as well as the attorney the local court. If approved, the court will appoint a rekonstruktör to manage the restructuring. The Norway the largest growth contributions will be delivered (roughly 14% of exports), cars and parts (13%) Debt collection fees incurred by the winning party beyond a 8% by private consumption and investment. and electronics (7%) dominate the export basket. given threshold claim amount (about SEK 22,250, latter will investigate the financial situation of the Denmark Consumers’ propensity to buy is boosted by Risks from the upcoming Brexit are contained, Amicable phase approximately EUR 2,585). company, before establishing and implementing 8% Amicable settlement aims to recover the a restructuring plan under which up to 75% of the growing employment, increased social transfers, since UK’s share amounts to just 6% . The primary It takes up to twelve months (in exceptional China debt without transferring the case into a trial debt may be written off. low interest rates, and marginal tax cuts. Real income, mostly thanks to investment income, cases more) to obtain a writ of execution in 6% disposable incomes will likely expand at a contributes positively to the current account procedure. The debtor is informed (either orally Bankruptcy or via writing, with written correspondence being first instance, bearing in mind that there is a moderate pace, albeit slightly higher than in the balance. The latter’s surplus is expected to widespread tendency in Sweden to appeal Proceedings are initiated as a consequence of previous years. Driven by a build-up in domestic decrease slightly because of a somewhat weaker preferred) about the debt, the payment deadline a company becoming permanently insolvent. + STRENGTHS and the consequences of not paying the debt. If against judgements. However, the Government’s demand, inflation is expected to stabilise close to trade surplus. target for 2013 is for 75% of the civil cases at They aim to wind down an insolvent company by • Open, diversified and competitive economy the 2% target of the central bank (Riksbank). debtor agrees to pay the debt, both parties may selling its assets and distributing any income to One key risk for the Swedish economy is the high settle on instalment payments through an official district court level to be determined within • Specialisation in high-tech products and creditors. Either the debtor or the creditor can file Buoyant investment growth in 2017, driven by level in debt of private households. According document that sets out the contractual terms of seven months. the green economy the upswing in residential investment since to Riksbank’s data, private debt-to-disposable a petition before the local court. After the court the agreement. has declared a company bankrupt, it appoints an • Sound public finances 2013, is expected to cool down, because of income-ratio has risen fast: in mid-2017, it stood Enforcement of a legal decision • Increasingly dynamic demographics labour shortage and a lack of constructible at almost 183%, with indebtedness growing Where there is no specific interest clause in administrator that independently takes control land. Nevertheless, the construction sector faster than disposable incomes. A severe setback the contract, the rate of interest applicable As soon as a domestic judgment becomes final, over the company’s assets with the main task will continue to fuel growth, while the risks of in property markets could therefore hamper the since 2002 is the six-monthly benchmark rate it is enforceable. If the debtor does not comply, of realising such assets and repaying the debts - WEAKNESSES overheating in real estate activity are reducing. In highly indebted private household sector, as well (referensräntan) of the Central Bank of Sweden comply, the creditor can request the court’s of the bankruptcy estate in accordance with the 2018, government consumption will likely receive as the banking system. The Swedish banking (Sveriges Riksbank), plus eight percentage enforcement authority to seize and sell the creditors’ statutory ranking. • Tensions on the real estate market a slight boost from a more expansionary fiscal sector is well capitalised but highly concentrated: points. debtor’s assets. • Substantial household debt policy. In addition to higher transfers and some the country’s four major banks hold about 85% Under the Swedish Interest Act (räntelag, 1975, • Highly concentrated banking sector tax relief, there will likely be higher expenditures of deposits and loans. Approximately 85% of last amended in 2013), interest on damages is for public employees and for supporting lending to households consists of mortgages, awarded from the 30th day following the day on improvements in the social and health sectors. and almost half of lending to corporates goes to which the creditor addressed a written claim Net exports should marginally support growth. real estate-related operations. for damages to the defendant, if the plaintiff so As a very competitive small and open economy, requests. In any event, interest may be awarded Sweden will be favoured by a better global General elections in September 2018 from the date of service of the summons application. macroeconomic environment. Given that global Sweden will probably be ruled by a left-green demand for investment goods picked up strongly minority government until the next general Legal proceedings in 2017, it should remain high in 2018 as well. elections (September 2018). Although the Fast-track proceedings Hence, Swedish exports are expected to grow Where claims meet some basic requirements populist Swedish Democrats party is expected to NUMBER OF CORPORATE FAILURES by more than 4% again, although this will likely perform better than in the last elections in 2014, (e.g. payment is overdue, mediation was be offset by dynamic import growth. Growth they lost some support, as the refugee crisis has attempted), creditors can obtain an injunction Total Estimate (e) / Forecast (f) Yearly growth contribution of net exports will therefore be to pay (Betalningsföreläggande) via summary not been as acute as in 2015 and 2016. Therefore, 9,000 10% positive, but low. In spite of robust growth, filed the two biggest parties could win voters’ support proceedings through the Enforcement Service. 7.5% bankruptcies are expected to keep increasing, The application has to be made in writing and 7,873 back, according to polls conducted in autumn 8,000 7,494 especially in the construction and retail sectors. clearly express the grounds of the claim. No 7,287 7,408 2017. Furthermore, the Swedish Democrats 6,971 6,695 5% further proof needs to be submitted. 7,000 6,560 6,481 4.0% are quite isolated in the Swedish parliament, 5.1% 6,232 Sound public finances, large current account meaning that the upcoming Swedish government This Enforcement Authority (Kronofogdemyndigheten) 6,000 3.3% surplus, but high private debt will likely proceed with an EU-friendly and orders the debtor to respond within a period ten 0% Despite a more expansionary fiscal stance consensus-based policy stance. days to two weeks. If the debtor fails to reply in 5,000 time or acknowledge the debt, a verdict will be -4.2% in 2018, with an expected fiscal package of Sweden has one of the most friendly business 4,000 about SEK 40 billion (Swedish krona), the environments in the world. It notably ranks tenth rendered on the merits of the original application. -5% -4.3% budget balance will remain in positive territory. in the 2018 Doing business ranking. 3,000 -5.0% While formal, this system offers a relatively -5.9% Nevertheless, the surplus in structural budget straightforward and quick remedy in respect of 2,000 will shrink slightly due to these discretionary undisputed claims, which has greatly freed up -10% measures. With the economy growing rapidly, the courts. Creditors are not required to hire a 1,000 and the general government sectors being a net lawyer but, in some circumstances, would be well -11.4% lender for years, public gross debt is expected to advised to do so. On average, the process takes 0 -15% continue shrinking. In 2017, the debt-to-GDP- two months from application to decision. The 2010 2011 2012 2013 2014 2015 2016 2017(e) 2018(f) ratio, which fell below 40% for the first time since decision is immediately enforceable. Source: Statistics Sweden (SCB), Coface

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COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN SWITZERLAND Payments Legal proceedings entail initiating a formal (and Switzerland’s domestic courts rapidly enforce A1 now unified) procedure, comprising written and court decisions falling under the scope of COUNTRY RISK Bills of exchange and cheques are not commonly used in Switzerland, due to prohibitive banking oral phases, with the possibility of examining bilateral or multilateral reciprocal recognition and and tax charges. The stamp duty on bills of witnesses during a court hearing. These enforcement treaties - such as those issued in EU A1 procedures can last from one to three years, countries or under the Lugano Convention (which BUSINESS CLIMATE exchange is 0.75% of the principal amount for domestic bills and 1.5% for international bills. depending on the canton. concerns Norway, Denmark & Iceland). Decisions Conversely, where a creditor holds unconditional rendered outside Europe are obliged to follow Commercial operators are particularly Swiss exequatur proceedings. demanding regarding the formal validity of proof of debt signed by the debtor (any original TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) document in which the buyer recognises his cheques and bills of exchange as payment Insolvency proceedings GDP growth (%) 1.2 1.4 0.9 2.0 8.3 instruments. debt – such as a bill of exchange or a cheque), Exports of goods, as a % of total he may request the temporary lifting of the Restructuring proceedings (Nachlassverfahren) Inflation (yearly average, %) -1.1 -0.4 0.3 0.5 POPULATION Domestic and international payments are Euro Area (millions of persons - 2016) debtor’s opposition (main levée de l’opposition), Restructuring proceedings can be initiated either commonly made by bank transfer - particularly 35% Budget balance (% GDP) 0.1 0.3 0.3 0.3 without having to appear before the court. This by the debtor or the creditor. The administrator 80,346 via the SWIFT electronic network to which United States Current account balance (% GDP) 11.4 9.5 9.8 10.0 is a simplified procedure, which is quick and takes the necessary measures to prepare for the 12% GDP PER CAPITA the major Swiss banks are connected. SWIFT relatively easy to obtain, and in which the court’s creditor and court approval of the composition Public debt (% GDP) 46.6 45.7 44.9 43.2 (US dollars - 2016) provides rapid and efficient means of processing United Kingdom decision is based upon the documents submitted agreement. An inventory is then taken, where 11% (f): forecast of payments, at low cost. by the seller. all assets are valued. Approval of the agreement China 9% RISK ASSESSMENT Once this lifting order has been granted, the requires the affirmative vote of a quorum of Debt collection creditor has twenty days in which to refer the either a majority of creditors representing two- Hong Kong 6% Economy benefiting from European upturn which have increase significantly as the numbers of The Swiss legal system presents technical case before the judge to obtain the debt’s release thirds of the total debtors, or a quarter of the and weakening franc foreign workers have grown (in excess of 300,000). specificities, notably: (libération de dette) and subsequently obtain an creditors representing three-quarters of the executory order. total debt. Once approved, the agreement must Imports of goods, as a % of total In 2017, the economy succeeded in adapting to Even after removing the trade in commodities (3.9%), • The existence of an administrative authority the surplus is still 4%. In addition, the recurrence “Enforcement and Bankruptcy Office” Once the court hands down a final ruling, the be confirmed by the Court. It then becomes valid Euro Area the strong franc and achieved moderate growth. and binding on all creditors of claims subject to 46% Thanks to productivity improvements and cost of surpluses has enabled the creation of sizeable (e.g. Office des poursuites et des faillites / Enforcement and Bankruptcy Office delivers assets abroad to the extent that the net external Betreibungs und Konkursamt / Ufficio di an execution order or a winding-up petition the agreement. United States reductions, companies have largely restored their 9% margins that had contracted as a result of the price credit position is equal to 130% of GDP. esecuzione e fallimenti) in each canton, with (commination de faillite). Bankruptcy proceedings United Kingdom cuts made to try and offset the appreciation of the In order to prevent any further appreciation in several offices at local government level which This winding-up petition enables the creditor to A company may be declared bankrupt by the 7% Swiss franc following the lifting of the exchange the franc, the SNB will have to continue its very are responsible for executing court orders. send the court a request for bankruptcy. Upon court and placed into bankruptcy proceedings United Arab Emirates ceiling by the Swiss National Bank (SNB) in January flexible policies. Its key lending rate will continue Their functions are regulated by federal law. receipt of this request, the court will fix a hearing if a creditor has successfully requested this, 6% 2015. 2018 should see a sharp upturn. The business to be negative (-0.75% in November 2017), as Interested parties can consult or obtain extracts and send a written notice to attend to both following a debtor’s declaration that it is China and consumer confidence indexes at the end of will the three-month LIBOR (range of -0.25 to from the Office’s records. parties. insolvent. The court will determine whether 5% summary or ordinary proceedings should be 2017 point towards this. Both domestic demand and -1.25%). However, the weakening on the franc • A new, unified civil procedure code, created If no payment is effected by the debtor and the foreign trade will contribute towards this. Despite should remove the need for the SNB to buy assets by a commission of experts and approved by applied, or whether bankruptcy proceedings creditor does not withdraw his request, the court will go ahead (if the assets are insufficient to + STRENGTHS the slow rate of growth in wages, the gradual in foreign currencies, the balances of which are in the Federal Council, became effective in 2011. will declare the debtor company bankrupt. improvement in the jobs market will help sustain excess of the GDP. The exposure of the banking This code entailed the repeal of the 26 cantonal cover the expected costs of proceedings). The • Stability and political, economic and social household consumption. Investment is expected system to property will continue at a high level as procedure laws which were hampering the Either a court of first instance or a district court Receiver then draws up an inventory. Summary consensus, linked with direct democracy to rise, that by companies and households helping 80% of domestic lending is in this sector. The fact efficiency of the judicial system. Nevertheless, hears legal procedures. Commercial courts, proceedings are ordered if the proceeds of the • Close relations with the European Union, boost that by the Federation, the Cantons and that only 45% of households are home-owners lawsuits require the assistance of a lawyer who presided over by a panel of professional and assets are unlikely to cover the costs of ordinary except for agriculture Communes which is flagging. Thanks to the strong reveals how high the debt levels of borrowers must is familiar with the court organisation in the non-professional judges, exist in four Germanic proceedings. In this case, there are no creditors’ • Balanced public accounts despite relatively market outlook and with the production capacity be. Households do however have assets that are jurisdiction where the case is has been initiated, cantons: Aargau, Berne, Saint-Gall, and Zürich. meetings and the bankruptcy office will proceed low taxation utilisation rate in October 2017 reaching its highest equal to three times their debts and non-performing as well as with the language to be used in the Once an appeal has been lodged with the cantonal to the liquidation and realisation of the assets, • Limited sensitivity of exports to exchange court, as a last resort for claims exceeding without the participation of the creditors. rates; high technology, quality level since 2012, there should be a strong upturn loans account for less than 3% of the total. In litigation process (French, German or Italian). for equipment. Research and development, which addition, the applicable prudential regulations have 30,000 Swiss francs (CHF), cases are heard If ordinary bankruptcy proceedings apply, • Strength of external surpluses Amicable phase also suffered following the appreciation of the Swiss been and will be strengthened. Two establishments by the main federal judicial institution - the the receiver publishes a notice of bankruptcy • Low unemployment and diversified labour The debt collection process commences with the franc, should also feel the benefits. To a lesser extent, hold half of domestic assets within the sector, Swiss Federal Court (Tribunal fédéral Suisse / instructing all creditors and debtors to file their • European crossroads with excellent issuing of a final notice, preferably by recorded communication network cheap credit will also help boost construction, in alongside Cantonal, cooperative and small private delivery (making it possible to accrue overdue Schweizerisches Bundesgericht / Tribunale claims and debts within 30 days. This notice particular residential. Exports are also likely to benefit establishments. Whilst maintaining close external interest). The notice requests the debtor to pay, federale svizzero), which is located in Lausanne. invites creditors to a first meeting (where from the positive movement in European, US and links, they have significantly reduced their balance they may appoint a private receiver instead of - WEAKNESSES within two weeks, the principal amount due, Asian economies, as well as from the drop in the real sheets since the crisis with a focus on managing along with overdue interest calculated at the Enforcement of a legal decision the state bankruptcy office) and a creditors’ effective exchange rate since the second half of 2017. assets for third parties. committee. A second meeting will be convened • Small, open and landlocked economy legal rate of 5% (unless otherwise agreed by the Domestic judgments are enforceable once Pharmaceuticals (30% of exports) and engineering, for the commencement or continuation of claims • Overvalued Swiss franc seen as a safe- parties). final. The court typically awards compensatory not overly sensitive to prices, and thus to the franc, against third parties and to agree the method haven, sensitivity to global economy Solid public accounts damages and orders to seize and sell assets. will remain strong. Machines, and industry in general Legal proceedings for realisation of the assets belonging to the • Level of dependence on commodity trade, In compliance with the budget rule approved in 2003 If payment is not forthcoming, the creditor can Punitive damages are not granted. financial services and the presence of (precision instruments, in particular medical, agri- bankruptcy estate. multinational companies food, electrical equipment, chemicals), financial by the Federation and replicated by most Cantons, submit a signed and completed petition form a structural equilibrium has been enforced for the • House prices and high level of household debt services, commodity trading, tourism and transport (réquisition de poursuite) to the Enforcement public accounts. In the event of significant worsening and Bankruptcy Office. This Office then serves (almost 200% of disposable incomes) are expected to perform better. The recovery will NUMBER OF CORPORATE FAILURES • Presence of systemic banking be less visible for watch making (11% of exports) in local economic conditions, the Federal and the debtor with a final order to pay within twenty establishments which will again suffer with the slowdown in the Cantonal authorities, by a vote of the representative days, effective from the date of notification of Total Estimate (e) / Forecast (f) Yearly growth • Ageing demographic offset by immigration assemblies, would have significant expansionary the petition. Chinese economy. The outlook will remain difficult 7,200 25% (foreign labour makes up 30% of the for retail trade, facing competition from foreign budgetary discretion. The public debt is split equally While very easy to use by creditors, this workforce) 19.7% 6,948 supermarkets in the border regions, and hotel and between the Federation, on one hand, and the procedure nonetheless permits debtors to 7,000 20% Cantons and Communes, on the other. The cost catering sectors, despite the gradual return of foreign oppose the order within ten days of being served, 6,800 SECTOR RISK ASSESSMENT of this is very low with a zero or negative yield on 15% customers, as well as for metallurgy, wood, paper, without having to specify grounds. In such cases, 6,562 6,564 printing and clothing. Given these conditions, the bonds of 10 year or less (October 2017). Budgetary without unconditional proof of debt to cancel 6,600 number of company insolvencies, on the rise since policy will remain uncontentious. The three parties the debtor’s opposition, the only recourse for 6,411 10% 6,400 5.9% 6,285 6,282 2014, should, at the least, stabilise, despite a rate of on the right and centre-right (Democratic Union of creditors is to seek redress through a formal the Centre, le Christian-Democratic People’s Party 6,156 5% insolvency that will remain high in the construction, legal action. 6,200 6.6% 2.5% and the FDP-Liberal Party) will dominate the Federal 5,986 5.0% hotel, catering and retail sectors. Before commencing formal legal action, it 6,000 Assembly and the National Council (executive of 5,838 2.0% 0% 7 members with a rotating annual presidency) until is mandatory to proceed to mediation or 5,800 External accounts in surplus and the next elections scheduled for 2019. The Socialist conciliation before a Justice of Peace. This -2.0% -5% accommodative monetary policy excludes disputes falling within the jurisdiction 5,600 Party has two seats on the Council. The major -5.5% There is a sizeable current account surplus. This areas of debate will remain immigration, relations of the Commercial Court of Zurich, or cases 5,400 -10% consists of a surplus for goods (7.9% of GDP in with the EU, as well as reforms to pensions and where both parties have agreed to ignore 5,200 -11.1% 2016), as well as a surplus for services (2.9%) corporate taxation. these proceedings and the claim is higher than -15% 2010 2011 2012 2013 2014 2015 2016 2017(e) 2018(f) mainly generated by finance, licences and patents, CHF 100,000. exceeding the remittances of foreign workers (3.8%) Source: Swiss Economic Institute (KOF), Coface

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COFACE ASSESSMENTS COFACE ASSESSMENTS E A2 COUNTRY RISK COUNTRY RISK E A2 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 0.7 1.5 2.7 2.5 Exports of goods, as a % of total 18.6 Exports of goods, as a % of total 23.5 POPULATION Inflation (yearly average, %) -0.3 1.4 1.3 1.9 POPULATION Lebanon (millions of persons - 2016) China (millions of persons - 2016) 34% 26% Budget balance (% GDP) -1.8 -1.6 -0.7 -1.0 RISK ASSESSMENT 22,497 Jordan Hong Kong Current account balance (% GDP) 14.6 13.7 13.1 11.7 11% 14% GDP PER CAPITA Relative calming of fighting and annihilation a state. Nevertheless, the reluctance of the Syrian, Public debt (% GDP) 36.8 36.5 36.0 36.0 (US dollars - 2016) Iraq United States 11% of the Islamic State (IS) Iraqi, Turkish and Iranian states would make the 12% (f): forecast China The Syrian conflict that crystallizes local, regional process very long. Japan 9% and international interests appears unlikely to end 7% RISK ASSESSMENT Euro Area in the near future, with additional players entering A chaotic economic situation Singapore 9% 6% external position, because with a net external the confrontation between the regime of President According to a World Bank estimate, the Syrian GDP Growth restricted by the Chinese slowdown position representing 180% of its GDP, it is one Bashar El Assad and Sunni opponents that has has shrunk by nearly 63 percent in the 2010-2016 Economic activity will remain restricted by the of the world’s leading creditors. In addition, it has Imports of goods, as a % of total been ongoing since 2011. On the one hand, Saudi period. The decrease in the GDP is mainly due to Imports of goods, as a % of total weakening of demand in the main Taiwanese substantial foreign exchange reserves (which Arabia, Turkey, and the other Gulf Cooperation the decline in oil production. Oil GDP fell drastically export markets (mainland China and Hong Russia China are expected to represent more than 21 months 22% Council (GCC) member states – Sunnis – were the by 93%, while non-oil GDP fell by 53% due, in 19% Kong). Nevertheless, exports will continue to of imports in 2018). The current account surplus Turkey first supporters of the opposition. On the other particular, to the destruction of infrastructure. Japan contribute to growth in 2018, thanks to positive is expected to decline due to the deterioration of 20% hand, both Iran and Lebanese Hezbollah – Shiites – Industries have been hit hard, physical damage is 17% growth in advanced economies. Profits will be the trade terms and weak Chinese demand, but it China see the Alawite regime in Damascus as a regional high, and economic sanctions make it impossible to United States concentrated in electronics (accounting for will remain at a high level. This is mainly thanks to 11% ally to be preserved (Syria remains an important export and access financing. The country remains 12% 40% of exports), machinery and the chemical a strong trade surplus but also a positive balance Euro Area crossing point for weapons equipment sent from fragmented between different areas of influence, Euro Area industry. Moreover, although the break in official of services. 8% Tehran to Hezbollah). Russia, Hezbollah soldiers and and the continued fighting and bombing of the 8% relations since June 2016 has not prevented the Taiwan the Pasdaran (Guardians of the Iranian Revolution) coalition and Russia continue to cause infrastructure South Korea People’s Republic of China from maintaining 4% 6% offer military and logistical support to the Syrian destruction. Following the destruction of numerous its rank as Taiwan’s main trading partner, it has The challenge of broken dialogue with army, which is crucial to maintaining the regime. houses, rent prices in safe areas rose by 500 to been detrimental to the service industries in mainland China An international coalition, composed mainly of + STRENGTHS 1000%. Most electrical installations are no longer + STRENGTHS view of the ban on touristic travels organised for The 2016 parliamentary and presidential Western and Arab countries, was formed in 2014 functional, and the first sources of electricity those hailing from mainland China. In addition, elections brought the opposition party, the • Strategic geographical position with the main objective of curbing the expansion in conflict zones are car batteries. The majority • Resilient external financial position while public investment will increase slightly, Progressive Democratic Party (DPP), and • Energy transit country of Islamic State terrorist organisations and the Al- of schools in the country have been destroyed, • Support for R&D by public expenditure the deterioration of the Chinese economic President Tsai Ing-wen to power. While the • Oil potential Nusra Front, close to al-Qaida. The United Nations which will have a structural impact on human • Consensus on democratic gains situation and the breakdown of relations will Kuomintang and the previous president favoured estimates that half of the Syrian population has capital. Private investment, which accounted • 4th largest electronics producer in the world weigh on private investment, both domestic and a policy focused on rapprochement with been displaced since April 2011, including 4.9 million for 12% of the GDP in 2010, represents only 4%. foreign, because of the lower performance of mainland China, the DPP has a harder position - WEAKNESSES refugees abroad and 6.3 million internally displaced Household consumption is strongly penalized by exporting companies and decreased confidence. and refuses to adhere to the “1992 consensus” people in Syria. The Syrian humanitarian crisis has the downward trend of the Syrian pound, high - WEAKNESSES On the other hand, although stimulated by the that drove relations between the two sides of • Civil war since 2011, 320,000 dead, spread to neighbouring countries (Lebanon, Jordan, inflation, and the low number of jobs. If the situation depreciation of the New Taiwan dollar against destruction of many infrastructures the Taiwan Strait in addition to recognising the Turkey), who now host the largest number of calms down in 2018, oil exploitation could resume, • Foreign trade very vulnerable to the the US dollar, inflation will be limited by modest “one China” principle. This policy will remain • Fragmentation of the territory between conflict-related refugees which would improve the country’s catastrophic economic situation in mainland China and growth in household consumption in 2018. In different groups of influence the United States unchanged, and official relations broken. In fact, After proclaiming the “caliphate” four years ago, economic situation. The reconstruction effort, fact, despite the low levels of unemployment, most Taiwanese remain against any plans for • Oil production is reduced to nothing •  Massive relocations undermining the virtual stagnation of wages could undermine the Islamic State group is currently in ruins in Syria. estimated at USD 200 billion, will be at the heart of industrial employment reunification with the Beijing regime and are The last outbreak of fighting ended in late 2017 the negotiations. The countries of the international consumer confidence and lead to reduced increasingly suspicious of the existence of a • Lack of competitiveness of the service spending. Although the probable raising of the on the last two main fronts of the IS. In Raqqa, the coalition will condition their participation to take into sector relationship of economic dependence. In this self-proclaimed capital of the IS, the “caliphate” account their concerns. minimum wage and the construction of social context, and despite the pressure exerted • Behind in terms of infrastructure housing may help upgrade the purchasing soldiers were defeated mainly by the Syrian compared to other advanced Asian by Beijing to isolate Taipei diplomatically, the Democratic Forces (SDF) – composed of mostly Deepening twin deficits economies power of the lower economic classes, given the president seeks to boost diplomatic relations Kurdish soldiers – who were, supported by the aerial concentration of disposable income growth in with countries that still recognize Taiwan as a Public finances have steadily deteriorated with • Increasing isolation on the international bombardments of the international coalition. In Deir- the affluent classes, demand will be particularly sovereign country. It also intends to integrate the intensification of the conflict. The public diplomatic scene Ezzor, regime soldiers and their Iranian counterparts, strong for the luxury sectors (fashion, cosmetics the island into regional and global trade beyond deficit would have reached 20% in 2015, and supported by Russian bombing, won a strategic and electronics). the free trade agreements concluded in 2013 could continue to widen. Falling oil revenues and victory in September 2017 in an oil-rich region. with Singapore and New Zealand, including tax cuts resulted in a contraction in government discussions to integrate the Trans-Pacific In 2018, there should be a decrease in the intensity revenues that would have accounted for less than Its financial situation will remain strong Partnership. Moreover, the president, whose of hostilities and an accentuation of territorial 7% of the GDP in 2015. In addition, public spending The implementation of the national infrastructure popularity has waned due to disappointing fragmentation. The Astana talks, which bring has increased significantly under the weight of development plan (centred on the modernisation economic performances, is nevertheless together the emissaries of the regime and those the increase in military spending. Public debt has of the railway network, water distribution, the preparing for the 2020 electoral campaign: she of the opponents at the initiative of Russia, Turkey, become unsustainable, accounting for more than development of renewable energies, urban pushed for the resignation of her prime minister and Iran, should lead to the creation of so-called 150% of the GDP in 2015. areas and innovation), started in 2017 and “de-escalation” zones. However, the IS would no with expected completion in 2025, will slightly at the end of 2017, hoping that a new government The current account balance also has a significant longer be a major player in the conflict. In order to inflate public spending. On the other hand, the could revive popular consent. deficit. The rate of openness of the Syrian economy maintain their military bases in the country, the government will increase business and dividend has been drastically reduced and exports have Russians will support the regime of President El taxes, and lower the income threshold from decreased by almost 93% between the beginning Assad, who is likely to remain in power in 2018. The which the maximum tax rate applies. Despite of the conflict and 2015. Oil revenues plummeted Turks, militarily involved in the conflict, will have the these measures, the public deficit, albeit small, is from USD 4.7 billion in 2011 to USD 0.14 billion main objective of slowing down the progressive expected to widen slightly. However, the public in 2015. Exports of the mining sector are now autonomy of Syrian Kurdistan along their border debt will remain at a moderate level, especially non-existent, whereas they were worth USD while preventing the Iranian stranglehold on since it is almost entirely denominated in New 4.7 billion in 2010. Foreign exchange reserves have the country and the Idlib zone. Israel bombed Taiwan dollar and held by domestic investors. been depleted, from USD 20 billion in 2010 to less Hezbollah’s strategic positions in Syria in 2017, Moreover, the high level of private foreign than USD 1 billion at the end of 2015, to fund the seeing it as a threat and a vector of Iran’s advance debt (around 30% of GDP), which contracted external deficit. towards the Israeli-Syrian border. The Kurds will notably in the context of financing trade, does want to take advantage of the fall of the IS to build not compromise the stability of the island’s

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COFACE ASSESSMENTS COFACE ASSESSMENTS D C COUNTRY RISK COUNTRY RISK D C BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 6.0 6.9 5.0 4.0 GDP growth (%) 7.0 6.9 6.0 6.4 Exports of goods, as a % of total 8.7 Exports of goods, as a % of total 48.6 Inflation (yearly average, %) 5.8 5.9 9.0 8.0 POPULATION Inflation (yearly average, %) 5.6 5.2 5.4 5.0 POPULATION Turkey (millions of persons - 2016) Switzerland (millions of persons - 2016) 27% Budget balance (% GDP) -1.9 -10.6 -6.5 -6.5 15% Budget balance (% GDP) * -3.3 -3.1 -3.4 -4.3 800 980 Russia Current account balance (% GDP) -6.0 -3.8 -3.5 -4.5 India Current account balance (% GDP) * -8.5 -5.6 -5.6 -6.5 18% GDP PER CAPITA 14% GDP PER CAPITA Public debt (% GDP) 34.1 35.3 48.5 56.0 (US dollars - 2016) Public debt (% GDP) 36.7 37.2 37.4 38.3 (US dollars - 2016) China South Africa 14% (f): forecast 12% *2018 fiscal year: July 2017 to June 2018 (f): forecast Switzerland Euro Area 9% RISK ASSESSMENT 11% RISK ASSESSMENT Euro Area China 7% Growth is below potential and depends on The considerable reliance on imports and weak 7% Sustained growth exposed to a business through external loans, divided equally between public investment export diversification will foster a substantial climate under pressure concessional and non-concessional, as well as by Imports of goods, as a % of total After a marked slowdown in 2017 (although current account deficit, despite an increase Imports of goods, as a % of total Growth is expected to remain firm in 2018, borrowing from domestic banks. However, the in remittances from expatriate workers, the lack of a credit rating from the main credit rating Russia probably earlier, this was not reflected in the China stimulated by public infrastructure investment. 35% official figures), the Tajik economy is expected very moderate rebound in the prices of some 21% Among the construction sites launched by the agencies (to November 2017) limits access to the commodities – particularly aluminium and financial markets. Despite public debt mostly Kazakhstan to decelerate further in 2018 as a result of fiscal India government under its industrialisation policy 18% consolidation and a decline in credit. Pace of growth cotton, which respectively account for 23% 18% is the Tanzania-Uganda oil pipeline project, as being external (78% in 2016/2017), risk remains China will therefore remain relatively weak compared to and 15% of exports – as well as the economic Euro Area well as the modernisation of the corridor railway low as it is made up primarily of multilateral loans 10% past performance (growth often above 7% after recovery in Russia (20% of exports), which both 8% project connecting the port of Dar-es-Salaam at low rates. Euro Area 2011) and the objectives that have been set (8.8% add a volume effect to the price effect. Exchange United Arab Emirates to neighbouring countries (Burundi, Zambia and From the perspective of the current account, 7% in the National Development Plan for 2030). rate pressures remain, despite the somoni’s 7% DRC). However, progress on the work remains the deficit is structurally high, with the country Uzbekistan sharp depreciation against the dollar in 2016 South Africa While the recovery in Russia provides support subject to obtaining adequate financing, so some importing twice as much as it exports. Higher 5% and early 2017, making the country vulnerable 6% delays are to be expected. Accordingly, work imports associated with infrastructure projects for household consumption through remittances to external shocks. Capital control measures, from expatriate workers, which represent at Bagamoyo port has been temporarily halted and the fall in mining exports are likely to increase including notably the obligation to deposit a after the Tanzanian government withdrew from the trade deficit. The balance of services is, in + STRENGTHS about one third of GDP, non-membership of the + STRENGTHS proportion of remittances in roubles, is evidence the project, having failed to secure the finance contrast, expected to show a surplus thanks Eurasian Economic Union will continue to limit • Significant hydroelectric potential of the special attention given by the central • Rich in mineral resources (gold, copper) needed to compensate landowners. The project to the growth in tourism revenues. The current the movement of Tajik workers into Russia. Since bank (NBT) to exchange rates in view of the high is expected to continue with finance from China. account deficit is financed by FDIs (4.2% of GDP), • Wealth of raw materials (minerals, the growth of the services sector is hampered by • Gas potential thanks to offshore reserves aluminium, cotton) dollarisation of the economy (70% of loans are discovered in 2010 Meanwhile, growth is likely to be constrained by loans and grants. Significant flows of FDIs are the measured pace of household consumption, denominated in foreign currency). Low levels of sluggish activity in the mining sector, hit by new expected to mitigate the downward pressures • Financial support from international donors, growth, which is dependent on public investment, • Tourism potential (national parks, coastline) including China foreign exchange reserves, which are struggling legal provisions curtailing profits. Specifically, on the shilling, whose depreciation should remain will tend to be driven by the construction sector, • Regional co-operation strategy to stabilise at around three months of imports, in March 2017, the government introduced a fairly moderate. and projects such as the construction of the leave the NBT little leeway to support its own • International support in form of concessional loans ban on exporting raw copper and gold so as to - WEAKNESSES Rogun hydroelectric plant. currency. • Development of monetary policy favour the still-underdeveloped local processing Political stability at the cost of suppressing However, bank weaknesses will curb both industry. This measure comes on top of a new law • Fragility of the banking system instruments all opposition private investment and the financing capacity Domestic and imported political and social on the mining sector, allowing the government • Low level of foreign exchange reserves of the government, which had to support the fragility to renegotiate contracts with mining and The traditional party of independence, Chama • Dependence on remittances from recapitalisation of four banks in 2016 at an Cha Mapinduzi (CCM), victorious in the 2015 Elected to the presidency for a fourth consecutive - WEAKNESSES energy companies at any time, giving it a share expatriate workers estimated cost of 7% of GDP. Restructuring the of 16% in any project and making it impossible presidential and parliamentary elections, is • Islamist terrorist risk against a backdrop term in November 2013, Emomali Rahmon won • Heavy reliance on gold price strengthening its grip on the country. Under banking sector will be a key factor in Tajikistan’s popular support in a referendum in May 2016 to stay to access international arbitration. This new of poverty and scarcity of jobs • Dependent on the agricultural sector President John Magufuli, new laws have been return to its potential growth rate, with credit supply on as Head of State indefinitely. While his country legal framework, as well as the still unresolved • Neighbour of Afghanistan being hit by the high ratio of non-performing loans (21% of GDP and 65% of jobs) and on dispute with Acacia Mining (which was slapped adopted to silence opposition, including that is a significant supplier of jihadists, the president weather conditions expressed on social media. Those critical of the – which has doubled since 2014 to reach almost is stepping up measures aimed at combatting the with a USD 300-million fine for breaching the 50% in late 2016 – and with demand for credit • Inadequate infrastructure, especially in ban on exporting unrefined ores) is likely to put government’s actions from civil society and radicalisation of the Muslim population, such as the the electricity and transport sectors the main opposition party, Chadema, have been adversely affected by the numerous moves to restrictions on clothing. However, together with considerable pressure on mining production tighten monetary policy in order to control inflation. • Inconsistent industrial policy and business and investments in the sector. Nonetheless, arrested (over 400 Chadema members arrested weak performance in the fight against corruption climate shortcomings since the 2015 elections), with the courts While labour market tensions have eased slightly, and drug trafficking, the high poverty rate (30% of foreign direct investments are expected to inflation is nonetheless likely to be fuelled by • Religious tensions between Zanzibar and remain significant, focused on infrastructure interpreting the concept of “threat to national the population live below the poverty threshold) the mainland more expensive imports following the somoni’s projects and gas resources. Moreover, tourism security” very broadly. A degree of uncertainty continues to fuel social frustration and foster the is however coming from factional struggles devaluation against the dollar. development of jihadist groups. is expected to continue to expand. Agriculture (21% of GDP) should benefit from credit growth, within the CCM, between supporters of John With regard to external relations, tensions with Magufuli and those contesting his hegemony. Budget fragility and external weakness a consequence of monetary easing. Household Uzbekistan are easing, with the first direct flight consumption and retail trade are also likely to On the semi-autonomous Island of Zanzibar, The government is expected to continue the between the two countries since 1992 taking benefit. Consumption will also benefit from the opposition party Chadema has much more fiscal consolidation begun in 2017, the goal of place in February 2017, as part of the continuing lower inflation thanks to lower food prices due weight, which it is using to keep up the pressure which was to improve the sustainability of public easing of Uzbek opposition to the construction of to better harvests. Finally, net exports will make on local CCM representatives. The latter is, debt, which was damaged by both the substantial the Roghun dam because of its supposed impact a negative contribution to growth because of however, very likely to stay in power after the effort made to recapitalise the banking system, on its cotton fields’ irrigation system. In contrast, demand for goods and capital imported to fuel the 2020 elections, with voters generally attracted and by the inaugural USD 500 million international problems with Kyrgyzstan regularly surface growth in private consumption and investments. by his anti-corruption policy targeting the large bond issue (7% of GDP) at a rate just over 7% so as over borders, the sharing of water resources, corporations. A continuity of policies detrimental to finance the Roghun complex. In 2018, despite and transport between the two countries. to investors is therefore to be anticipated, the inefficient tax system, the slight rebound in Likewise, the presence of the Taliban in northern Growing fiscal and current account deficits constraining the business climate (country down activity should encourage higher tax revenues in Afghanistan is threatening the security of the Finance for infrastructure projects plus the loss from 132nd place to 137th place in the 2018 Doing addition to the controls on investment spending. border populations, even though the presence in income owing to lower mining output is putting Business rankings). Finally the anti-corruption However, public debt will remain exposed to the of the Russian army and US aid should prevent pressure on the State budget, so increasing the policy is expected to be pursued more vigorously state’s contingent liabilities, to exchange rate risk the conflict spilling into Tajikistan. Relations with deficit. Reforms are underway to improve tax after significant progress already made in 2016 (as evidenced by the effect of devaluation on its China are deepening thanks to the completion collection (especially corporate tax) and boost and 2017. weight in the past two years), and additional bank of public infrastructure projects and to China’s receipts, which represent only 13% of GDP. sector recapitalisation costs. financial investment. Infrastructure-related spending is financed

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COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN THAILAND Payment - If the debt exceeds THB 300,000, the complaint Once the official receiver is in possession of the A4 must be filed at the Civil or Provincial Court. reorganisation plan, he will convene a meeting COUNTRY RISK Credit transfer is the main form of payment used by large companies in Thailand. The majority of Court policy is to screen unnecessary cases with the creditors to consider the proposal. credit transfers are made electronically and the from court trial. Most Civil Courts have mediation If it is accepted, the court needs to approve A3 it and confirm the appointment of the plan’s BUSINESS CLIMATE popularity of this payment method is growing as centres for parties to negotiate and compromise clearing systems have become more developed. on an arrangement. Once a case has been administrator. The latter is then responsible for decided amicably, a compromise agreement the debtor company’s reorganisation, as set out Cheques are still a popular form of cashless within the plan. payment in terms of value. They are used by is prepared and the court passes judgment in TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) companies and consumers to make a wide range accordance. Each of the parties is responsible for 2. SMEs registered with the Office of SME GDP growth (%) 2.9 3.2 3.5 3.5 69.0 of payments. Post-dated cheques are a common documenting evidence and the burden of proof Promotions or other government agencies for Exports of goods, as a % of total associated with their case. A judgement is made conducting business Inflation (yearly average, %) -0.9 0.2 0.6 1.2 POPULATION mean of short-term credit. United States (millions of persons - 2016) once the court has considered and weighed the Petition can be filed against: 11% Budget balance (% GDP)* 0.1 0.6 -1.4 -1.7 Nevertheless, cash remains the dominant evidence presented by both parties. 5,902 payment method in Thailand. - insolvent individuals who owe one or more China Current account balance (% GDP) 8.1 11.5 9.5 7.5 The time frame for proceedings with the Court of creditors a known sum of THB million Baht or 11% GDP PER CAPITA Public debt (% GDP) 42.7 42.5 42.0 42.0 (US dollars - 2016) First Instance can take between one to three years. more; Japan Debt collection 10% * 2018 fiscal year: st1 October 2017 to 30 September 2018 (f): forecast - insolvent limited partnerships, registered Amicable phase Euro Area Enforcement of a legal decision partnerships, non-registered partnerships, 7% RISK ASSESSMENT According to the 2015 debt collection Act B.E. groups of persons or other juristic entities who 2558 (A.D. 2015), the debtor is an individual If the debtor fails to comply with a domestic Hong Kong judgment, the creditor is entitled to apply for the owe one or more creditors a known sum of THB 5% person or personal guarantor. The Act was Steady and moderate growth in 2018 investments into the country. However the surplus execution of the judgment before the court. This 3 million or more on the balance of payments will probably be large created to regulate collection activities carried The National Strategic Plan (2017-2036) places out by creditors, or by collection agencies in can involve the issuance of an execution decree, - insolvent private limited companies owing one Imports of goods, as a % of total the emphasis on competitiveness through the enough to supplement the currency reserves, which delivery of an execution decree to the debtor, or more creditors a known sum of between THB amount to approximately ten months of imports, cases of consumer debt. Commercial debt China development of rail, road, airport, and electricity collection houses are also expected to follow issuance of a writ of execution and the seizure 3 million and 10 million. 22% infrastructures. Although the government hopes to and are greater than the external debt (31% of GDP), and sale of property belonging to the debtor. which is mainly supported by the private sector. the practices set out within the Act. For In cases such as these, the petitioner should file a Japan attract foreign investors – for the Eastern Economic example, during the amicable phase, creditors Thailand has no reciprocal recognition and petition, along with a proposed plan of not more 16% Corridor in particular –the big public investments The Thai baht is expected to hold steady against the dollar. can only communicate with the debtor or other enforcement agreements with other countries. than three years in length in execution. Euro Area in 2018 will likely rely solely on the state. Private persons as authorised by debtor. Creditors or Enforcing foreign judgments requires new 7% Bankruptcy proceedings investment, whether national or foreign, is likely to collection agencies are also limited to identifying legal proceedings, where the evidence will be United States remain cautious. Exports of goods and services (71% Elections delayed by the military A creditor can file a bankruptcy petition against 6% themselves with the details of debt to the debtor. considered and legal defence made available to a debtor if the latter is insolvent and owes one of GDP) are set to perform well, with the slowdown in Since the May 2014 coup d’état, the nineteenth Legal proceedings both parties. or more creditors a definitive sum of over THB Malaysia China being offset by the economic upturn in other since democracy was adopted in 1932, General 6% Thailand’s Judicial Court System comprises three One exception is that Thailand is a signatory to 1 million (if the debtor is an individual), or owes markets.. The automobile sector is set to continue as Prayuth Chan-o-cha, Commander-in-Chief of levels: the New York Convention on the Recognition and more than two million Baht (if the debtor is a legal the second biggest exporting sector, behind tourism. the armed forces, heads the National Council for • The Supreme Court. This is the highest court Enforcement of Foreign Arbitral Awards (1985). entity). + STRENGTHS The contribution of trade to growth is expected Peace and Order (the junta) and, as Prime Minister, authority in the country. All of its decisions are International arbitration awards by member Once a petition for bankruptcy has been filed, to remain slightly positive, despite the increase in an interim government consisting of a 35 member final and must be executed. It hears appeals and countries of the Convention can be enforced if • Diversified and efficient production in imports of capital goods, intermediate products, cabinet, a legislative assembly of 200 members, and the proceedings normally include hearing the fisheries, agriculture (40% of world contests against decisions made by the Courts they are already final. witnesses, temporary receivership of the production of natural rubber), industry and raw materials associated with the dynamism of a Reform Council of 250 members, dominated by of Appeal, Regional Courts of Appeals and debtor’s property, the appointment of an official (automobile, electronics, agri-foods) and public investment and industrial exports. Household the military. The adoption of a new Constitution in a Courts of First Instance. services consumption (half of GDP) should remain strong, referendum (61% of votes in favour) in August 2016 Insolvency proceedings receiver, filing of claims for debt payments by • Courts of Appeal. These are divided into Courts creditors within two months from the publication • Regional crossroads open to its dynamic reflecting the levels of real disposable income, and and its ratification in July 2017 by the new King Maha of Appeal and Regional Courts of Appeal. Both Thailand has legislation on bankruptcy and neighbours date of the permanent receivership order, a despite high indebtedness. Slightly higher inflation Vajiralongkorn could lead to parliamentary elections handle appeals against the decisions or orders reorganisation proceedings (Bankruptcy Act • Strong external accounts will likely be counterbalanced by the favourable at the end of 2018 or in 2019, but not before the B.E 2483). bankruptcy order against the debtor (if no made by the lower courts. agreement can be reached with the creditors, • Diverse exports: tourism, agri-food impact on pay of strong employment and activity passing of ten organic laws. The new Constitution Reorganisation Proceedings • Courts of First Instance. These lower courts issuance of a permanent receivership order, products (rubber, seafood, rice, cane sugar, in most sectors. In addition, households are also (twentieth since 1932) reduces the role of universal 1. Limited Companies, Public Limited Companies comprise the courts in Bangkok, courts in seizure of property, sale of property by public fruits), electronic components, computers set to continue benefitting from a relaxed budget suffrage in the appointment of the Prime Minister. and Financial Institutions (Large Enterprises) and organic chemistry provinces, specialised courts and juvenile and auction and pro rata distribution of the sale policy with, specifically, the maintenance of VAT at The Prime Minister will be appointed by an Assembly family courts. A petition can be filed against an insolvent • High savings rate 7% instead of 10%, at least until the 30th September consisting of 500 elected members and a Senate of proceeds to creditors. A preliminary stage of legal action can be corporate debtor who owes one or more 2018. Finally, the central bank is expected to hold its 250 members appointed by the military. He is then creditors a known sum of THB 10 million key lending rate at 1.5%. In terms of supply, services required to apply the National Strategic Plan which, conducted if there is failure to reach an amicable settlement with the debtor. This phase includes (USD 333,000) or more. Once the court has - WEAKNESSES (55% of GDP), such as hotels, catering, transports, in addition to improving infrastructures, includes accepted the petition for further proceedings, and telecommunications, will benefit from growing strengthened security, the promotion of social communications, negotiations, meetings with • Uncertain political situation and debtors, letters of demand and notifying the it appoints a planner to prepare and submit a antagonism between rural and urban areas numbers of foreign visitors, and agriculture (10% equality, the development of human resources reorganisation plan to the official receiver within and those of the public sector. Royal powers have police in cases where there is a criminal penalty. • Inadequate infrastructures of GDP and 30% of jobs) from growth in external three months. The court may extend this period markets. The construction sector will likely gain from been increased – an illustration of the cooperation Ordinary proceedings up to a maximum of two times, for one month • Ageing population and shortages of skilled there is between the military and the king, who labour the launch of large-scale transport infrastructure If the debtor fails to comply with demand notices, from the publication date of the court order projects, although the situation will be more mixed succeeded his father, Bhumibol Adulyadej, following the creditor can file a claim with the Court, • Mid-range positioning and lack appointing the planner. Secured and unsecured of innovation for industry. a reign of over 70 years. Today, the king is a symbol depending on the value of the debt: creditors must then apply for payment of debts of continuity and stability in a country that has lived - If the debt does not exceed THB 300,000 (Thai • Enduring links between private sector and within one month from the date of publication political milieus (corruption), underground Resilient financial situation through a large number of coups d’état. With the baht), the complaint must be lodged at the of the order for appointment of the planner. possible approach of elections, conflict – often used District or Provincial Court economy Vigorous public investment, and, more generally, the • High level of household debt (79% of GDP) as a pretext by the army to intervene – between, on accommodating budget policy in the run-up to an one side, (the “red shirts” (the rural population of the eventual election, is likely to lead to a slight increase north, students and workers) and the “yellow shirts” in the public deficit. There is, however, room for (the royalists, nationalists and urban bourgeoisie of manoeuvre, as tax revenues only amount to 18% of the south) could once again be ignited. The former GDP. Public debt, more than 95% held by residents, are represented by the populist Pheu Thai Party, will remain well below the 60% ceiling defined in the winner of all elections since 2001 and led in turn by Constitution. the former Prime Ministers, Thaksin and Yingluck In external terms, the decline in the goods and Shinawatra, brother and sister, removed in 2006 and services surplus (10% of GDP in 2017), caused by 2014 and exiled to escape punishment. The latter are increasing imports, will impact on the current account represented by the Democrat Party, conservative surplus – although this will still remain substantial, as and liberal, generally unable to constitute a majority the former will continue to largely exceed the income to form a government, but quick to foster street deficit arising from the repatriation of dividends. Thai demonstrations in the capital. investments in other countries (ASEAN, USA and Europe) – both portfolio and direct – in hotels, retail, agri-foods, chemicals, and finance, exceed foreign

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COFACE ASSESSMENTS COFACE ASSESSMENTS E C COUNTRY RISK COUNTRY RISK C C BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth* (%) 4,1 5,0 4,0 6,0 GDP growth (%) 5.4 5.0 5.2 5.3 Exports of goods, as a % of total 1.2 Exports of goods, as a % of total 7.5 Inflation (yearly average, %) 0,6 -1,4 1,0 2,7 POPULATION Inflation (yearly average, %) 1.8 0.9 -0.6 1.6 POPULATION Indonesia (millions of persons - 2016) Benin (millions of persons - 2016) 29% Budget balance (% GDP) 3,6 -21,9 1,6 -22,9 17% Budget balance (% GDP) -8.9 -9.6 -5.1 -2.6 2,230 590 United States Current account balance (%GDP) 7,7 -19,3 -5,6 -15,6 Burkina Faso Current account balance (%GDP) -11.3 -9.8 -9.1 -8.4 27% GDP PER CAPITA 16% GDP PER CAPITA Public debt (% GDP) 0 0 0 0 (US dollars - 2016) Public debt (% GDP) 75.6 79.1 78.0 74.1 (US dollars - 2016) Euro Area India 17% *Excluding oil (f): forecast 8% (f): forecast Australia Mali 7% RISK ASSESSMENT 7% RISK ASSESSMENT Sudan Niger 6% Public investments support growth and The current account balance is expected to show 7% Consolidation of growth USD 241.5 million, and by the EU with the payment economic diversification a large deficit linked to the deepening deficit in As in 2017, growth in 2018 is expected to continue to of budgetary support worth EUR 10 million, could Imports of goods, as a % of total In 2018, non-oil economic activity is expected to goods and services. Exports of goods, mainly Imports of goods, as a % of total reap the benefits of the massive public investment catalyse donations from international financial coffee, and remittances from expatriates are donors. In 2018, the public debt is expected to China accelerate after slowing slightly in 2017. Growth will China programme during 2012-2016. The reforms 26% be driven by domestic demand and in particular by expected to edge upwards in 2018, while imports 29% negotiated with the IMF on the basis of an ECF confirm the downward trend begun in 2017 and it are expected to grow strongly because of needs is hoped that it will fall rapidly below the WAEMU Vietnam public investment. This is because the country is Euro Area programme will, in particular, help to consolidate 20% switching to a more diversified economy against relating to infrastructure spending. In order to 26% growth. Activity will continue to be buoyed by the minimum community rate fixed at 70%. Malaysia a background of lower hydrocarbon production finance the current account deficit, the country is Japan agriculture sector, which represents about 30% of The current account deficit is expected to decline 11% and reserves. This diversification takes place in expected to continue drawing on its oil fund and 4% GDP. The dynamism of this sector is attributable thanks to a fall in the trade deficit. In particular, Singapore the context of the Strategic Development Plan benefitting from FDI flows. Ghana to the relatively successful implementation of the exports of cement, clinker and phosphates are 7% (2011-2030) built around four main pillars, namely 3% National Agriculture and Food Security Investment expected to rise. The sub-regional context, more Euro Area health, infrastructure (telecommunications, A fragile government coalition facing a Ivory Coast Programme (PNIASA). Launched in 2011, the favourable overall and recent investments in 5% energy, water supply and treatment), the high maritime dispute with Australia 3% PNIASA has, in particular, enabled farmers to adopt transport infrastructure will sustain re-exports. growth potential sectors (agriculture, tourism and The July 2017 parliamentary elections put the technology to improve yields. The ambitions for The drop in investment spending looks set to + STRENGTHS petrochemicals) and the institutional framework Revolutionary Front for an Independent East + STRENGTHS agricultural development are expected to continue bring down the import invoice, thus offsetting the so as to improve governance. The tourism sector Timor (Fretilin) ahead with 29.7% of the votes, to bear fruit in 2018 thanks to the setting up of the expected rise in oil prices. The transfer balance, • Oil and gas reserves in the Timor Sea has great potential in this country, endowed as followed closely by the National Congress for • Mineral (phosphate, clinker) and agricultural Agricultural pilot project in Kara. In the secondary chiefly transfers from expatriate workers, is likely (coffee, cocoa, cotton) resources • Supported by the Community of it is with protected natural sites. Nonetheless, Timorese reconstruction (CNRT) with 29.5%. sector, the start of phosphate mining operations to continue to make a positive contribution to the Portuguese-speaking countries infrastructure shortcomings are still adversely This narrow victory resulted in the CNRT refusing • With the only deep-water port in West by the Elenilto and Wengfu companies, which current account balance. • Attractive tourist destination (protected impacting tourist visits. In this regard, the country Africa, has the potential to become a could in future generate 5 million tons output to join a government led by the Fretilin, although regional hub natural sites, rich cultural heritage) can rely on its large oil fund (USD 16.9 billion in a government coalition had been in place since per annum, will help the sector to recover. The The streets are increasing pressure on 2017). Moreover, these public funds are expected • Public and private investment opening of the cement plant at Awandjelo in July 2015. An agreement with the Democratic Party in infrastructure Faure Gnassingbé’s regime to stimulate a quasi-non-existent private sector, helped to form a minority government led by 2017 will take annual cement production to over - WEAKNESSES which is struggling to develop in a country where • Structural reforms under way (public two million tons from 2018. The transport of goods In power since 2005 and after the death of his Mari Alkatiri, already Prime Minister from 2002 finances, banking system, phosphate and public spending represents almost 60% of GDP. will continue to contribute positively to growth, father Eyadéma Gnassingbé (president from • Vulnerable to natural disasters (landslides, to 2006. Nevertheless, the new government cotton sectors) The government is also seeking to attract foreign despite the expected drop in public investment 1967 to 2005), President Faure Gnassingbé, re- typhoons, floods) is facing stiff opposition to its investment elected for a third term in 2015, still holds all the • Underdeveloped infrastructure capital, as with the country’s first public/private programme (2017-2022) and could be toppled intended to slow the rise in debt. This sector will, partnership in June 2016 (construction of the effectively, benefit from efficiency gains resulting levers of power and can rest his legitimacy on solid • Human capital deficit if its programme is rejected a second time, thus - WEAKNESSES economic performances and improved relations new Tibar Bay port). Private consumption will be triggering early elections or the formation of from investment in improving the road network • Very heavily dependent on oil income sustained by infrastructure development, which • Heightened socio-political tensions and the expansion of the port and airport of Lomé. with international financial backers. Enjoying (98% of exports) a government by the CNRT. Meanwhile, the support from the army and the police, Faure should help create jobs in construction, with 65% of effectiveness of the government’s actions • Difficult business climate Better infrastructure, together with the only deep- • Almost half the population lives below the the workforce depending on the agricultural sector water port in West Africa at Lomé, will make Togo a Gnassingbé has been able to supress the growing poverty threshold is regularly challenged by the population, • High levels of poverty and unemployment calls for greater democracy against a background (27% of GDP). Meanwhile, inflation is historically and poverty continues to be very significant. • Underinvestment in education and public preferred destination for private investment in the • High unemployment among young people volatile in Timor-Leste, because of the country’s sub-Region in 2018. The port of Lomé is, however, of social tensions which flare up sporadically and (40%) While the vast majority of Timorese still live health are heightened by widespread unemployment exposure to changes in food and oil prices. It is in rural areas and depend on agriculture, the likely to face emerging competition from the deep- • Weak bank intermediation expected to rise in 2018, because of momentum water port of Kribi (Cameroon). Support from the and poverty. In summer 2017, protests against the government has not succeeded in stimulating Faure Gnassingbé regime, sometimes violently put in domestic demand and the modest rise in the the private sector. Afreximbank should also help finance infrastructure oil price. projects, thus enabling support for the transport down, intensified. Constitutional reform, foreseeing Externally, the country’s relations with Australia and construction sectors to be maintained. Private a limit to the number of presidential terms and the are tense, because of the dispute over the introduction of two-round presidential elections, Large twin deficits investment could, however, be hit by the worsening maritime border in the Timor Sea. The previous political climate. has failed to calm the protestors. Effectively, this The 2017 fiscal balance was in positive territory agreement, which dates back to 2006 (valid for non-retrospective text could potentially allow Faure due to a correction to the 2016 budget, to which 50 years) was terminated in January 2017 by In 2018, inflation is expected to rise but will remain Gnassingbé to stand for two extra terms. a certain number of infrastructure investments Timor-Leste, on grounds that the agreement on moderate, in line with trends in other WAEMU countries. With regard to foreign relations, Togo is benefiting were allocated. However, the fiscal deficit is sharing the offshore oil fields was unfair. A more from its WAEMU and ECOWAS membership status expected to be very significant in 2018 as a result advantageous agreement could help delay the to establish itself as a regional hub. Involved in of the fall in oil revenues, as well as new massive shortages the country will be facing and increase Efforts to reduce the twin deficits supported various AU/UN peace missions, Togo is also keen public investments, especially in roads and other the country’s oil fund revenues. While the two by the international community to play a role in improving security on the continent. transport infrastructure (40% of total budget). parties have come to an agreement in principle in In 2018, the government is expected to continue Despite the reforms undertaken and notable As a result, withdrawals of capital from the oil September 2017, the outlines of this arrangement with the fiscal adjustment begun in 2017 aimed fund are expected to increase, taking the fund could take longer to negotiate. progress made, the business climate remains at halting spiralling debt. The tax administration inadequate, especially compared with its WAEMU from USD 17 billion in 2017 (four times GDP) down reforms, among which the creation of the Togolese to 4 billion in 2021. The main risk is the wasteful neighbours and competitors, for Togo to establish Revenue Authority in 2015, should, in particular, itself as a regional hub for business. funding of “white elephants” as with the new help boost revenues. Above all, capital spending, port now under construction. Meanwhile, the which sustained growth during the 2012-2016 spending allocated to health and education (15% five-year cycle, should continue to fall back to a of the budget) and to welfare (14% of the budget) more sustainable level. The reforms undertaken is not expected to increase substantially. and IMF support provided under the ECF worth

216 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 217 TRINIDAD AND TOBAGO TUNISIA

COFACE ASSESSMENTS COFACE ASSESSMENTS C B COUNTRY RISK COUNTRY RISK B B BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) -0.6 -6.0 -3.2 1.9 GDP growth (%) 1.1 1.0 2.0 2.5 Exports of goods, as a % of total 1.4 Exports of goods, as a % of total 11.2 Inflation (yearly average, %) 4.7 3.1 3.2 3.2 POPULATION Inflation (yearly average, %) 4.9 3.7 5.1 5.0 POPULATION United States (millions of persons - 2016) Euro Area (millions of persons - 2016) 38% Budget balance (% GDP)* -8.6 -12.7 -11.9 -10.8 72% Budget balance (% GDP) -5.6 -6.1 -6.2 -5.9 15,459 3,749 Argentina Current account balance (% GDP) 3.9 -10.7 -8.5 -7.9 Algeria Current account balance (% GDP) -8.9 -8.9 -10.1 -8.3 13% GDP PER CAPITA 5% GDP PER CAPITA Public debt (% GDP) 27.9 39.4 47.2 54.7 (US dollars - 2016) Public debt (% GDP) 57.2 62.9 69.2 72.1 (US dollars - 2016) Euro Area Libya 8% *Fiscal year from October 2017 to September 2018 (f): forecast 3% (f): forecast Chile United States 3% RISK ASSESSMENT 2% RISK ASSESSMENT Peru United Kingdom 3% Towards an upturn in activity in 2018 (in particular the Inter-American Development 2% Weak growth in 2018 especially since foreign debt is growing. Debt Growth is set to return to a positive state in 2018, Bank), and with loans from domestic banks. The recovery in 2017 driven mainly by the good service is the second budgetary spending item Imports of goods, as a % of total following a slowdown of activity in the country However, the overloading of the domestic banking Imports of goods, as a % of total performance of the agricultural sector and services and the repayment of maturities with international sector will force the government to borrow on the donors weighs on the foreign exchange reserves, United States since 2014, due to low oil and gas prices, together Euro Area should be consolidated in 2018. Activity was, 32% with the depletion of a number of gas and oil fields, international markets at very high interest rates, 49% however, negatively impacted by weak growth in which corresponds to 101 days of imports in resulting in a further deterioration in the level of September 2017 (USD 5.385 billion), against 111 Russia and chronic operational underinvestment. Growth China the manufacturing sector and a decline in mining 15% is expected to come mainly from the energy sector foreign debt. 10% production. In 2018, the rise in foreign demand, days in the previous year. The management of Gabon (oil, gas and petrochemicals), which accounts for Turkey supported by the expected growth of the European the exchange rate, through the interventions of 12% almost 35% of GDP and over 90% of export sales. Slight improvement in the current account 5% economies and the increase in competitiveness the Central Bank of Tunisia, has only become Euro Area The increase in gas production, thanks to the deficit Algeria related to the depreciation of the dinar, is expected more difficult. In 2017, the dinar exchange rate 7% 4% depreciated by 16.7% against the euro and by 4.1% drilling of new wells, should also help boost activity The current account will, once again, be in significant to favour the rise in manufacturing exports. China and exports. United States against the US dollar. 6% deficit in 2018. The slow recovery in oil and gas 4% However, the rise in production prices could limit Nevertheless, continuing weakness in prices is prices and the expected increase in production will, the growth of businesses heavily dependent on The current account deficit widened in 2017. The likely to restrain investment in the sector, given however, help reduce the trade deficit. The income imports. Social tensions and the multiplication of strengthening of exports in 2017 did not lead to + STRENGTHS that the most easily-accessible reserves are balance deficit should also contribute to improving + STRENGTHS strikes and social movements could, as in 2017, limit a contraction of the trade deficit, given the sharp already in operation, and that extraction from the the current account, as the level of profits shifted the expansion of the mining sector. The tourism acceleration of imports, energy imports in particular. • World’s fifth largest producer of liquefied remaining available reserves will be increasingly out of the country by foreign-owned companies • Progressive political transition and transport sectors will continue their recovery The balance of services and revenues has, however, natural gas (LNG) costly. In addition, private investment in the non- operating in the energy sector will be lower. • IMF extended credit facility thanks to the efforts made by the authorities improved. Although the positive momentum for • Petrochemical industry (world’s leading Nevertheless, the services deficit is likely to deepen • Economy in the process of diversification exports and tourism revenue will continue in 2018, exporter of methanol and ammonia) energy sectors will be dependent on the ability of to improve security and the fight against the the government to introduce a legal context that as a result of a fall in tourist revenues. The country’ and a fairly skilled workforce terrorism, in addition to the promotional effort the current account will remain largely in deficit. • Large sovereign funds and currency currency reserves (nine-and-a-half months of • Proximity of the European market and reserves is more favourable for companies. These sectors, generating a renewed interest in Tunisia as a tourist together with households, will likely experience imports in 2017) are expected to continue shrinking, association agreement with the EU destination. On the domestic demand side, the A democratic transition that is running • Lead country in Caricom, the Caribbean in so far as foreign direct investments will not be • Tourist potential community difficulties in accessing credit due to the scale increase in the general level of prices generated out of steam of the government’s financing requirements, enough to offset the scale of the current account • Mining production (phosphates and oil) by the rise in VAT is likely to continue to constrain • Well-trained and English-speaking After more than a year in power, the coalition led workforce which will be a burden on the domestic banking deficit. In addition, the short-term measures (sales household consumption. Subsidy reform as well as by Prime Minister Youssef Chahed appointed in system. In addition, household consumption is of public sector assets abroad, withdrawals from wage increases combined with dinar pressures are August 2016 continues to face multiple challenges. expected to remain restrained as a result of higher the sovereign fund), aimed at rebuilding reserves, - WEAKNESSES prone to fuelling inflation, which is not expected to Despite efforts to improve the security situation, - WEAKNESSES unemployment and the government’s continued will no longer be effective. This situation is likely weaken in 2018. the government is struggling to meet its economic to make the peg of the Trinidadian dollar to the • High social and geographical inequalities budget consolidation policy. Inflation is likely to and informal economy (50%) and social commitments and is still faced with • Small economy and reliant on oil and gas remain steady, reflecting continued sluggish US dollar difficult to maintain, leading to a probable Twin deficits and significant debt a growing number of strikes and protests. This devaluation in 2018. • High unemployment rate, mainly among • Undeveloped non-energy sector domestic demand, but will nevertheless be subject young people deadlock situation resulted in the dismissal of the (including agriculture; tourism) to supply factors, and notably the volatility of The Tunisian fiscal situation has deteriorated • Significant economic weight of agriculture sharply since 2011, recording substantial fiscal financial and education ministers, and led to Youssef • Projected decline in energy resources foodstuff prices. The search for new growth opportunities • Tourism sector facing political and security deficits and a significant increase in debt. Despite Chaed reshuffling his cabinet in September 2017. • Ineffective public initiatives In power since September 2015, Prime Minister problems and increased competition the support of the International Monetary Fund, He consulted with major political parties and trade • Inadequate supervision of financial sector High public deficit, despite budget Keith Rowley of the People’s National Movement • Social tensions leading to the proliferation authorities are finding it increasingly difficult to unions beforehand, but it ultimately led to increased • Inequitable distribution of wealth, drug consolidation measures (PNM) party is expected to continue with the of demonstrations and social unrest, implement the reforms required to consolidate representation of the Nidaa Tounes (NT) party with traffic related criminality The budget deficit will likely remain huge in 2018. process of consolidating the public finances despite particularly in the mining sector public finances. The public deficit has largely the return of some figures from the old regime. The specific measures (sales of assets abroad, his waning popularity. With a majority in Parliament • Imbalance of structural public accounts exceeded the target set in the 2017 finance law Although Nidaa Tounes remains in the majority partial disposal of public sector companies), (23 out of 41 seats), and aware of the very limited and significant increase in foreign driven by a notable increase in current expenditure and the coalition with El Nahda is not challenged, implemented by the government with the aim of scale of economic diversification, the government indebtedness and interest on the public debt. The financing of the voices of the opposition and civil society fear making up for the decline in energy revenues, will has set itself the objective of enhancing the local the budget deficit was largely provided by external a gradual return to a presidential regime. In fact, a not provide enough revenue to prevent budget productive fabric by attracting more investment resources, including 2.423 billion Tunisian dinars constitutional revision was brought about by the overspending. The fixed portion of spending (wages in both energy (petrochemicals, in particular) from Qatar and 768 million Tunisian dinars from the head of state, President Beji Caid Essebsi, now and payments to government workers, transfers and non-energy (tourism, agri-food, finance, European Union. The government plans to reduce 91 years old. The municipal elections that were and subsidies required by law), which amounts to etc.) sectors. However, institutional weaknesses, the public deficit below the 5% mark in 2018, but intended to anchor the democratic process at the more than 60% of total spending, places a limit on the high level of corruption, and the lack of this goal is ambitious. While payroll is one of the local level and initially planned for December 2017 adaptations to the state budget. The government infrastructure will continue to limit diversification largest budget spending items, civil servants’ have been postponed until 2018. has said that it will introduce a number of fiscal in the economy. The country’s geographic location salaries are expected to fall slightly in 2018. reforms aimed at increasing state revenues (raising makes it a transit point for drug trafficking, which The government intends, in fact, to honour the corporation tax from 25% to 30%, higher taxes brings with it a high level of criminality. The country agreement signed with the Tunisian General Labour on alcohol and tobacco, reduced diesel subsidies, will likely continue to play an active role within the Union (UGTT), the main central trade union of the ending of discounted prices for public services used Caribbean Community (Caricom) and in cooperative country, by increasing wages, and to offset this by public sector companies), but does not appear to initiatives in the fight against crime and drug increase by suspending public service recruitment, have a medium-term strategic budget framework. trafficking in partnership, notably with the United and the non-replacement of retired employees. The huge public deficit will be partly financed Kingdom and the United States. Direct and indirect taxes are expected, however, by drawing on the country’s sovereign funds, as to increase, including a 1% VAT increase. Still on well as through loans from international donors the rise, the debt trajectory remains worrying,

218 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 219 TURKEY TURKEY

COFACE ASSESSMENTS PAYMENT AND COLLECTION PRACTICES IN TURKEY Payment The parties involved design their own solutions The plaintiff is also obliged to put up one quarter B in an environment conducive to mutual of the court fees, which are proportional to the COUNTRY RISK Traditional credit payment instruments are still in common use in Turkey’s domestic market, as understanding. Mediation relies on a process of amount of the claim, at the commencement A4 they not only constitute a means of payment, but communications, via meetings and negotiations. of the proceedings. In addition, notarised also often serve as negotiable instruments. While the parties create their own solution documents must be presented to the court, BUSINESS CLIMATE framework, an impartial and independent third including the contract signed between the This is the case for promissory notes, a solution party (a mediator) enables them to establish parties (if available) and the invoices due regularly used by smaller and medium-sized communications, hold meetings and generally (translated into Turkish by a certified translator, if companies for commercial transactions. TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) develop better understanding of each other. the documents are drafted in a foreign language). Similarly, post-dated cheques are another The parties are free to apply to a mediator GDP growth (%) 6,1 2,9 5,5 4,9 79.8 commonplace practice, as they serve as both a Claims need be filed with details including the Exports of goods, as a % of total at any time, in order to continue, finalise or name of the court, the names and addresses of Inflation (yearly average, %) 7,7 7,8 10,9 9,3 POPULATION title of payment and a credit instrument. Cheques abandon the process. The parties can also apply Euro Area (millions of persons - 2016) circulate in the domestic market as negotiable the creditor and the debtor (along with the details 31% Budget balance (% GDP) -1,0 -1,1 -2,0 -1,9 to a mediator before filing a lawsuit, or while a of their attorneys or legal representatives), the 10,817 instruments until their maturity date. United Kingdom Current account balance (% GDP) -3,7 -3,8 -4,6 -4,3 lawsuit is pending. The court may also advise and amount due, the circumstances of the claim, the 8% GDP PER CAPITA The most recent law concerning cheques, which encourage the parties to apply to a mediator. Public debt (% GDP)* 27,5 28,1 28,5 28,5 (US dollars - 2016) content of the demand, public taxes and costs, Iraq came into force in December 2009, focuses Depending on the debtor’s solvency, the terms of the power of attorney (if necessary) and the *EU-defined general government’s debt stock (f): forecast 5% on the protection of the rights of cheque the transaction can range from payment in full, to signature of the person making the claim. United States holders (beneficiaries). The law covers three repayment by instalments, to a partial payment 5% RISK ASSESSMENT categories of cheques – cheques for business Ordinary proceedings are organised into three as final settlement. In the absence of a voluntary phases. The first involves position statements United Arab Emirates users, cheques for consumers, and pre-printed settlement, the threat of a bankruptcy petition 4% Solid growth buoyed by fiscal measures, The higher fiscal deficit also raises the treasury’s from each party (a statement of claim and bearer cheques – with the aim being to optimise (iflâs) is a frequently employed tactic to elicit a domestic demand and exports borrowing requirements. Between January and tracking of cheques as a payment instrument a statement of defence). In the second and response from the debtor and prompt them to lengthier phase, the court investigates the case Turkey is expected to record strong growth rates September 2017, the treasury’s total eurobond and combat the underground economy. Imports of goods, as a % of total pay the arrears. and examines the relevance of the evidence in 2018 after experiencing several shocks – such issuance reached USD 9.1 billion, although the Euro Area Although banks are now required to exercise 2. Debt Execution Procedure, via an Administrative submitted, to see whether it is conclusive or 29% as a failed coup attempt, sharp depreciation of planned annual amount was only USD 6 billion. greater vigilance with regard to the profiles Body discretionary evidence. Finally, in the main the lira, and security issues – in 2016 and 2017. Domestic debt roll-over ratio of the treasury China of their clients, the law also provides for large There are particular advantages for creditors hearing that constitutes the third phase, the 13% Growth is set to be stimulated by government rose to 154.6% in September 2017 from 90.6% financial sanctions, which are payable by the who use negotiable instruments such as bills court hears both parties and their lawyers before support, private consumption, investments, and annually in 2016. Off-balance sheet stimulus Russia drawer of the cheque in cases of non-payment. of exchange, promissory notes and cheques issuing a ruling. 8% exports. However, rising inflationary pressures, measures may represent upside risks to debt An amendment, which came into effect on 15 July – provided they have been duly established and st United States a weaker lira, and tax hikes are likely to weigh levels if they are realized, as the government The new civil procedure code, effective since 1 2016, imposes a punitive fine on the person that any legal action is taken within the legal 5% on domestic demand, which in turn may impact may need to assume liabilities mostly due to October 2011, was designed to accelerate and responsible for a “dishonoured transaction”. limitation period. These instruments enable South Korea domestic-driven sectors’ performances. In early the public guarantees given under the Public simplify proceedings, in order to combat lengthy If the fine is not paid, the punitive measure can creditors (without obtaining a prior ruling) to 3% 2017, the government decided to increase Private Partnership (PPP) projects. Although lawsuits and reduce the workload for courts. The be transformed into a prison sentence of up to directly approach the enforcement office (Icra the size of the credit guarantee fund (CGF) to expansionary fiscal policy is likely to be gradually parties need to submit their defence arguments, 1,500 days. In such cases, neither settlement Dairesi) for serving the debtor with an injunction ease small and medium companies’ access to scaled back in 2018, the average fiscal deficits counter claims and available evidence at the + STRENGTHS nor prepayment are executed. In addition, the to pay. They can then, if necessary, proceed with financing. The size of the fund has been raised may continue to remain high ahead of the commencement of the trial. These documents drawer of a dishonoured cheque is subsequently the seizure of the debtor’s assets. • Demographic vitality to TRY 250 billion (USD 63 billion, nearly 7% of elections in 2019, compared to previous periods. banned from drawing cheques or opening cheque are reviewed by the court during a preliminary • Large population with rising middle income GDP). Rising capacity utilisation and improving Further deterioration of fiscal dynamics may accounts for ten years, by order of the court (an Seizure is a process that begins with filling an hearing, during which the parties will be class business sentiment are expected to sustain weigh on investors’ sentiment and interest rates. administrative, rather than a penal sanction). order for payment, which is then served to the encouraged to reach a compromise. debtor. If there are no objections to the order, the • Strategic geographic location private investment, yet the pace of growth may The structural lack of savings will likely continue For rapid and secure processing of bank The examination and cross examination of • Well-developed industrial base lose some momentum as the impacts of the CGF to be the economy’s Achilles heel in 2018. The assets of the debtor are liquidated to cover the the litigants is now conducted by lawyers, in transfers, the SWIFT electronic network is claims. If the order is not accepted by the debtor, • High capacity of creating employment fade away. current account deficit is expected to decrease order to discharge judges who previously had well-established in Turkish banking circles and he has the possibility to request that the creditor Exports are set to remain strong in 2018 on the somewhat on the back of slower GDP growth, constitutes the most commonly used instrument a strong tendency to resort to expert opinions but the recent recovery in energy prices will proves the claim in court. to assist them with their judgments. The new - WEAKNESSES back of the steady growth in Western Europe, for international payments. Turkey’s main trading partner. A continued increase the import bill further. Against this The debtor has ten days to settle the arrears code also limits the list of technical and scientific backdrop of significant current account deficit, in question, or five days to approach the experts that can be registered with the Ministry • Domestic and geopolitical instability depreciation of the lira will admittedly help boost Debt Collection • High dependence on external borrowing exports, but remains the main risk for Turkey’s the economy remains dependent on volatile and enforcement court and oppose payment on of Justice. short-term external financing, and continues to There are three separate procedures in Turkey grounds that, for example, the signature on the • High import reliance of the industry import-dependent economy in the upcoming be vulnerable to exchange rates’ volatility and for pursuing debt payments: document is not his own, or that the debt no • Security risks period. Non-financial private sector’s short- term foreign currency denominated debt stood exit strategies of major central banks. Indeed, 1. Amicable Procedures longer exists. If the opposition is deemed to be FDI – still deterred by regional geopolitical abusive, the debtor is liable to large penalties. at USD 44 billion as of the second quarter of 2017. 2. Debt Execution Procedures (provided by an SECTOR RISK ASSESSMENT tensions – are not significant enough to offset Any additional weakness of the lira will increase Administrative Body) 3. Litigation Procedure, examined by the Court. the debt burden and the costs of imported inputs the current account deficit. If the pre-legal procedures for the collection 3. Litigation Procedures (examined by the Court) for the manufacturing sector. A likely rate hike of the debt from the partner/supplier fail, a process from the central bank to counter the Lower political noise, rising geopolitical 1. Amicable Procedure lawsuit can be brought against the debtor currency weakness and inflationary pressures tensions Out of court settlements are always preferable before commercial courts. The commercial would, on the other hand, add to borrowing Following the April 2017 referendum regarding a to taking legal action. Amicable procedures, court (asliye ticaret mahkemeleri), which is a costs. This scenario would deteriorate cash flow vote on constitutional amendments that would which involve the sending of a formal notice to specialised chamber of the court of first instance, management of Turkish companies, who suffer transform the country from a parliamentary pay, followed by repeated telephone calls, remain is competent to hear commercial disputes and from a structural undercapitalisation. democracy into a presidential system, political a relatively effective method. On-site visits can insolvency proceedings. Commercial courts noise has eased in Turkey. Additionally, also pave the way for restoring communications exist in the main Turkish cities. between suppliers and customers, thereby Twin deficits: a cause for concern improving relations with Russia, Iran, and Iraq’s In cases where the validity of the claim is enhancing the chances of completing successful central government have allowed the country disputed, the only recourse is to initiate ordinary While promoting banks’ lending, the negotiations. Points of negotiation include the government’s CGF programme pushed the to strengthen its regional cooperation and proceedings, via a summons, to appear in court. commercial flows. However, the uncertain number of instalments, guarantees, collaterals, banking sector’s loan to deposit ratio as high If Turkey has not signed a bilateral treaty or a relationship between Turkey and the European grace periods and interest. The civil procedure as 125% in the second quarter of 2017. This reciprocity treaty with the plaintiff’s country, Union, as well as recent tensions with the United code specifically states that the judge may at any situation increases currency risks and dulls the the plaintiff is required to put up a surety bond, States, should be monitored closely, as they may time during legal action encourage the amicable rebalancing of the current account deficit. The judicatum solvi, with the competent local court. have economic impacts if tensions rise. Turkey settlement of the dispute, provided that it results widening of the budget deficit was related to This amount represents approximately 15% of has planned three elections for the near future, from a real desire by the parties to seek an out- higher interest expenditures, capital transfers, the claim. The same pertains to Turkish applicants with the first – local elections – set to take place of-court settlement via a negotiated transaction. and current transfers. In total, non-interest with no permanent residence in Turkey. At the in March 2019. If domestic political tensions The “Law on Mediation in Civil Disputes” stipulates expenditures rose by 17.8% year-on-year in end of the litigation procedure, the security increase ahead of this, then the economy may that mediation shall be applied only in the resolution the first seven months of 2017, while interest deposit is refunded to the creditor by the court. be negatively impacted, as it would increase risk of private law conflicts (including those with expenditures increased by 11.8%. Further The reason for the surety bond is to protect the aversion against Turkish assets. an international element) arising from acts or widening of the deficit was prevented by a debtor against potential damages by foreign transactions of interested parties who have the recovery in revenues. entities during the procedure. capacity to settle such conflicts.

220 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 221 TURKMENISTAN UGANDA

COFACE ASSESSMENTS COFACE ASSESSMENTS D C COUNTRY RISK COUNTRY RISK D C BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 6.5 6.2 5.0 5.5 GDP growth (%) 5.6 2.5 4.4 5.3 Exports of goods, as a % of total 5.5 Exports of goods, as a % of total 36.6 Inflation (yearly average, %) 7.4 3.6 8.0 5.5 POPULATION Inflation (yearly average, %) 5.4 5.5 5.9 5.3 POPULATION China (millions of persons - 2016) Kenya (millions of persons - 2016) 70% Budget balance (% GDP) -0.7 -1.3 -0.7 0.2 19% Budget balance (% GDP) * -4.4 -4.9 -3.8 -5.0 6,622 692 Euro Area Current account balance (% GDP) -14.0 -21.0 -13.0 -12.0 Euro Area Current account balance (% GDP) -6.7 -3.4 -4.4 -4.7 7% GDP PER CAPITA 17% GDP PER CAPITA Public debt (% GDP) 19.4 23.9 24.0 27.0 (US dollars - 2016) Public debt (% GDP) 33.2 36.9 38.6 40.1 (US dollars - 2016) Turkey United Arab Emirates 5% (f): forecast 13% * Last fiscal year from 1 July 2017 to 30 June 2018 (f): forecast Afghanistan Rwanda 4% RISK APPRECIATION 8% RISK ASSESSMENT Russia Congo DR 4% Growth based on gas exports to China Despite the trade surplus, a current account 8% Easing of monetary policy to boost growth behind some of the delays, and even cancellations, Gas exports (53% of GDP) are expected to benefit deficit is difficult to finance Slowed by the burden of the high cost of credit and of the concessionary external financing on which Imports of goods, as a % of total from China’s increased demand for this fuel. Volume Thanks to hydrocarbon sales (80% of total exports, Imports of goods, as a % of total the drought, growth should continue to improve a large proportion of the investment spending is dependent. In addition, the increasing use of Turkey growth is expected to outweigh any further price ahead of cotton/textile and oil, each at 10%), the China in 2018. The return of more normal weather 25% decline. Investment (half of GDP), both public and country has a trade surplus equivalent to 17.8% of 18% conditions should enable agricultural production, domestic borrowing to finance the deficit has resulted in an increase in interest rates, which is in Euro Area foreign, and concentrated in hydrocarbons, should the GDP (2016). 80% of gas sales are destined for India and of coffee in particular, to continue improving. 21% maintain its momentum, and is set to benefit from China, meaning that there is an extreme sensitivity 17% The improved performance of the agriculture sector danger of generating a crowding-out effect on the Russia the construction of a gas pipeline to Pakistan and to the price of gas and Chinese demand. Imports, Kenya should also help boost the household consumption private sector. With this large scale utilisation of 12% India through Afghanistan (TAPI), and eventually which are concentrated in capital goods destined 10% of those dependent on the health of that sector. borrowing, the debt has increased rapidly and could, Japan that of a third conduit to China. Public consumption for the hydrocarbon sector, are traditionally inferior, United Arab Emirates With the Central Bank’s (BoU) key lending rate cut at the current rate, undermine its sustainability. 8% (9% of the GDP) stagnated in 2017 due to the need and are further affected by the postponement of 9% from 17% in January 2016 to 9.5% in December The current account balance will likely worsen in South Korea to reduce public spending following the exorbitant certain investment projects, lower consumption, Euro Area 2017, this should boost the use of credit in the 2018, dragged down by the balance of goods. The 8% cost (USD 8 billion) of investments made to host and the reintroduction of customs duties. 8% private sector, while also helping to boost growth increase in exports, and of coffee in particular, the Asian Indoor Sports and Martial Arts Games. It However, imports of services for the exploitation in household consumption. Services (almost 50% is expected to be slower than that of capital + STRENGTHS should resume timidly in 2018. of hydrocarbon fields, as well as the outflow of + STRENGTHS of GDP), starting with retail trade, are expected to goods. The import bill could also be swollen by the Household consumption (11% of the GDP) was dividends from foreign investors, are leading to feel the benefits of this vitality. The increasingly increasing firmness of oil prices in 2018. Transport • Fourth largest natural gas reserves, heavily affected in 2017 by several factors: the a current account deficit, financed in part by FDI • Significant natural resources: fertile land, oil favourable credit conditions will help boost private services will continue to be a burden on the balance but tenth largest producer and gas reserves, hydroelectric potential elimination of the free supply of gas, electricity, centred on hydrocarbons. A withdrawal from the investment, attracted in particular by prospects for of services, while the repatriation of profits will be • Significant currency reserves reserves will likely be made to finance the balance. • Work on diversification in particular in the the exploitation of oil and gas reserves (production a further drag on the income balance. Remittances and water in force since 1993, the increase in the agri-food sector • Low debt ratio price of basic food products (fruits and vegetables, In order to reduce the drain, authorities are trying expected as of 2020). The secondary sector from expatriate workers will once again be the to restrict non-essential imports by increasing • International support for infrastructure should see rapid growth thanks to the uplift as a leading positive contribution to the current account rice and sugar), a decline in public salaries, and lay- projects offs in the public sector. Despite this, household taxation, controlling access to foreign exchanges, result of public investment as part of the second balance. The size of investment inflows, mainly from • Debt mostly subject to concessionary - WEAKNESSES consumption should also resume in 2018. However, and reducing liquidity and the place of cash in the National Development Plan. There will likely be China and India, should help to finance the deficit. economy. However, there comes a time when the conditions projects for the construction of the oil and gas • Small landlocked economy a further devaluation of the manat (the local currency), possible given its strong overvaluation (in only way out, if the government wants to avoid the industry infrastructures, as part of public-private Deterioration in the internal political climate, • Porosity of border with Afghanistan, while use of external debt (22% of the GDP), is to devalue. partnerships, in addition to those of recent years military resources are weak October 2017, its exchange rate with the dollar on - WEAKNESSES unstable external environment the black market was twice the official rate), would covering transport and energy (hydroelectricity). • High dependence of the economy on the Under the pressure of capital goods import Yoweri Museveni (72), in office since 1986, was re- hydrocarbon sector (mainly gas) and on cause a new surge of imported inflation, especially Precarious security situation at the Afghan • Poverty, inequality elected in the general elections in 2016, after his China, a quasi-exclusive export market for food products, unfavourable to consumption. border • Lack of infrastructures demand, the contribution of exports to growth will however remain negative, despite improved coffee party (National Resistance Movement, NRM) won a • State interventionism and gaps in The security situation is fragile at the border with • Insecurity in the border regions (DRC and majority. In October 2017, a draft amendment to the governance (corruption, authoritarianism) South Sudan) exports. The growth outlook, positive overall, could Maintaining a balanced budget at the cost Afghanistan because of the presence of the Taliban. suffer in the event of any worsening in the country’s constitution to remove the age limit for presidential • High unemployment (60%) and rural • Slow progress in terms of governance of savings President Gurbanguly Berdymukhamedov was re- political and/or security context. candidates (75 years old), and which would self‑sufficiency th (particularly control of corruption) The decline in the price of gas, which generates elected for a third term on the 12 February 2017, therefore allow Mr. Museveni to stand in the 2021 with 98% of the vote. The multi-party system The inflation forecasts are for stabilisation around elections, triggered violent demonstrations. These 80% of budget revenues (12% of the total GDP), the BoU target rate (5%), after the price pressure and the successive defections of buyers from introduced in January 2012 did not change the grip mounting tensions have also brought attention of his party (Democratic Party) in the legislative under the impact of the drought on food prices to the issue of his succession, which remains Russia and Iran, even largely offset by the increase eased. in Chinese demand, forced the Turkmenistan elections at the end of 2013. In September 2016, unresolved. They are also feeding into the rising tide government to reduce the state’s expenses in President Berdymukhamedov (60 years old) of discontent surrounding the level of corruption order to safeguard the balance of its accounts. The endorsed a constitutional amendment that allows Budget execution undermining public and the lack of progress in improving standards adjustment was all the more severe, as spending him to remain at the head of the country without accounts of living. Alongside these sources of political on hosting the Asian Games took a heavy toll. an age limit (previously set at 70 years of age), and The budget deficit in 2016/17, under the impact instability, there is also ongoing fragile security The cuts made concerned subsidies, wages, and to extend the term of office of the President from of lower domestic receipts and the slow rate of situation in Uganda’s border regions. The instability public sector employment, and also investments five to seven years. Lower subsidies may increase execution of the infrastructures projects, was in South Sudan and the Democratic Republic to promote the diversification and substitution of public discontent, but a very strict security policy reduced. Similarly to the problems encountered of the Congo is a particular source of concern. domestic production for petrochemical, mining and limits the risk of large-scale movements. during the preceding fiscal year, the extension of As the leading supplier of troops to the AU mission agri-food imports. The sale of public companies, According to the World Bank’s governance the tax base is unlikely to make much progress in Somalia (AMISOM), the country remains a which are inefficiently managed, could encompass indicators, Turkmenistan is one of the worst-ranked in 2017/18. The deficit is thus expected to potential target for Islamist terrorism – specifically, petrochemical complexes, shopping centres, countries in the CIS. The country ranks 192nd (out of increase, reflecting the increase in spending on El Shebab, which continues to plague Kenya. textiles, livestock and the dairy industry. The assets 205) in the fight against corruption, and ranks 205th capital investment in the context of developing These areas of instability have a negative impact of the Stabilization Fund, the amount of which is not in terms of the quality of regulations. The business infrastructures and the oil and gas sector. Progress on assessments of the operational environment, communicated by the authorities, give the State a climate remains very difficult due to the dominance in the delivery of these projects is however subject despite a business climate that is relatively certain level of flexibility, at least in the short term, of the public sector and its monopolies over the to constant delays, leading to budget overspends. favourable compared to those of its Sub-Saharan especially as the public debt remains low. formal economy, control over trade and prices, and The recurrence of this scenario cannot be ruled African peers. Without any significant progress the difficulty associated with obtaining reliable data. out, at the same time as the increase in current in 2017, the country has nevertheless dropped expenditure might not be enough for the allocation seven places in the Doing Business 2018 rankings of the resources necessary for the planned (122nd out of 190). investments. These issues have tended to be

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COFACE ASSESSMENTS COFACE ASSESSMENTS C A4 COUNTRY RISK COUNTRY RISK C A2 BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) -9.8 2.3 1.8 3.0 GDP growth (%) 3.8 2.7 2.0 3.8 Exports of goods, as a % of total 42.4 Exports of goods, as a % of total 9.9 Inflation (yearly average, %) 48.7 13.9 14.0 11.0 POPULATION Inflation (yearly average, %) 4.1 1.8 2.8 3.7 POPULATION Euro Area (millions of persons - 2016) India (millions of persons - 2016) 22% Budget balance (% GDP) -1.2 -2.2 -2.2 -2.5 10% Budget balance (% GDP) -3.4 -4.1 -3.7 -2.2 2,199 35,384 Russia Current account balance (% GDP) -0.3 -4.1 -4.0 -4.0 Iran Current account balance (% GDP) 4.7 2.4 2.1 2.1 10% GDP PER CAPITA 9% GDP PER CAPITA Public debt (% GDP) 79.3 81.2 85.0 83.0 (US dollars - 2016) Public debt (% GDP)* 18.7 20.7 20.7 20.8 (US dollars - 2016) Egypt Japan 6% (f): forecast 9% *General government gross debt (f): forecast Poland Switzerland 6% RISK ASSESSMENT 8% RISK ASSESSMENT Turkey Oman 6% Recovery in economic activity in 2018 half of 2018 (if a compromise can be reached with 6% Improved growth perspectives for 2018 the government has tried to maintain fiscal After being hit in 2017 by the suspension of trading the IMF on the calculation formula), or until after the The UAE economy remains one of the most sustainability, despite persistently low oil Imports of goods, as a % of total relations with its eastern regions (Donetsk and elections in 2019. The pension reforms to deal with Imports of goods, as a % of total diversified economies in the Gulf Cooperation prices. Indeed, the government has been an annual deficit equal to 5% of GDP were approved seeking to remain committed to its 2021 Vision, Euro Area Lougansk), controlled by Russian-supported Euro Area Council (GCC) region. This diversity has made it an 28% separatists, the Ukrainian economy should grow at in October 2017. This includes an immediate 12% outperformer in the region, and has prevented its which includes a set of national indicators in increase in the number of years of contributions education, healthcare, economy, government Russia a faster rate in 2018, driven by both domestic and China economy from falling into recession in the current 13% export demand. Household spending is once again required from 15 to 25 (then gradually up to 35), an 8% era of lower energy prices (since 2014). The UAE services, security, etc. With solid financial China set to be the biggest contributor. With elections increase in these contributions, and the minimum United States will also benefit from big international events, buffers, authorities are able to use withdrawals 12% scheduled for 2019, wages are likely to rise strongly, pension. This may not be enough to enable the 8% such as the Dubai Expo 2020 and the Qatar 2022 from these funds to finance the budget deficit. Belarus echoing the doubling of the minimum wage in release of further tranches of the IMF loan. The India World Cup, as they will increase tourism in the As of August 2017, the UAE’s central bank had 7% 2017. The basic pension was also raised by 10% in elimination of the pension deficit will increase the 7% region. Further increases of oil prices, coupled AED 335.4 billion dirhams (Emirati dirham; Poland October 2017. Finally, real income levels will likely primary surplus, hasten the reduction in the debt, Japan with easier fiscal consolidation, are set to help the USD 90.6 billion) as net international reserves. 7% also benefit from a slowing in inflationary pressures, and free up resources for investment, while in 4% economy register higher growth rates in 2018. The Abu Dhabi Investment Authority (ADIA) is linked with a slower depreciation of the hryvnia (the parallel military expenditure could reach up to 6% of believed to have USD 828 billion as of June 2017. GDP in 2018. There might also be a need, once again, In Dubai, investments related to Expo 2020 + STRENGTHS local currency), although higher charges for certain + STRENGTHS – which is expected to attract more than With the slow recovery in oil prices since early public services (heating, electricity), as well as the to rescue the banking system, with a rate of non- 2017, the budget deficit will start to narrow. performing loans at around 40%. 25 million visitors from 180 countries – play • Strategic location between Russia and prices of imported goods, will continue to add to • Political stability an important role in the development of the This is set to result in higher spending on the European Union rising prices. The trade deficit is expected to fall to around 4% of • Diversified and business-friendly economy tourism, hospitality, real estate, construction, infrastructure, construction, and investment, as • Significant agricultural potential The vitality of consumption should boost the GDP in 2018. The growth in agri-food exports and • Liberal trade regime transportation, and infrastructure sectors. the government should ease fiscal consolidation • Huge iron ore and manganese reserves retail, logistics and construction sectors. Agri-food the recovery in mineral, metals, and machinery, • Financial hub position for the region Business confidence figures indicate that to sustain economic activity. The budget is both to the EU and the CIS, will also have an impact. expected to be balanced in 2021 and start • Skilled and low-cost workforce exports (45% of the total), including cereals (wheat, • Strong financial buffers operating conditions in the non-hydrocarbon • International financial support maize) in particular, will be boosted thanks to a Revenues from road transport and remittances sector continue to improve as well. Government- to produce small surpluses afterwards. The favourable 2017 harvest and the upwards trend in from expatriate workers in Russia and Poland supported construction activities are also set to government also uses external borrowing will offset Ukrainian tourist spending and the through bond issuance in international financial prices. Sales of iron and steel (25%), hit hard by the - WEAKNESSES contribute to investments, which will likely inch - WEAKNESSES blocking of trade with the eastern regions (in which repatriation of dividends. The current account up over the coming quarters. markets. Higher non-oil exports, thanks to rising deficit will be financed through FDI (reduced • Limited flexibility of the monetary policy global trade volume and tourism revenues, will more than half of the production capacities are Private consumption will likely remain among • Conflict with Russia and Russian-speaking located), will feel the benefits of higher prices and because of political uncertainties), multilateral loans, due to the currency peg regime help to sustain the current account surplus as populations in the east with threats and possibly IMF loan payments and the markets. • Lack of transparency of the quasi-public the main growth drivers in 2018, sustained by well. The appreciation of the US dollar on the to territorial integrity growing European demand. This upturn is, however, household consumption and higher international at the price of increased imports of coking coal, Currency reserves covered around four months of entities US Federal Reserve rate hikes would also help • Political and social instability due imports in October 2017. Foreign debt amounts to • High import reliance of the industry tourism. The introduction of a VAT in 2018 is not the dirham to appreciate, as it is pegged to the to widespread poverty, corruption, previously available from the east of the country. expected to represent a significant drag on and an oligarchy These new imports, in addition to those of capital approximately 110% of GDP, with half owed by the • Still dependent on hydrocarbon revenues US dollar. This may affect the competitiveness of public sector and 71% denominated in dollars. The in terms of fiscal performance growth. However, subdued oil prices will likely non-oil exports. • Limited economic diversification: and consumer goods generated by the vitality of prevent the economy from recording growth metallurgy, cereals consumption, are likely to limit the contribution depreciation of the hryvnia is likely to continue, with the extent depending on the speed of reforms and rates as high as pre-2014 levels. The UAE is • High levels of public and foreign debt of trade to growth. Private investment will likely affected by production cuts as agreed with Political stability continue to be curbed by political and economic the situation in the eastern provinces. Restrictions SECTOR RISK ASSESSMENT • Banking system weakened by non- on capital movements will likely remain in force. OPEC and non-OPEC countries. In particular, The UAE stands apart from the region’s performing loans uncertainties, while public investment will be Abu Dhabi’s economy – which relies on the instability and is considered as a “safe haven” targeted on modernising and extending the (poor hydrocarbon sector for around half of its GDP for investments. The country participated in the quality) road network. Any upturn on activity in Uncertainty surrounding reforms and – has been affected by the output cap. As of Qatar boycott, which began in June 2017. The 2018 will continue to be contingent on the stability fighting in the east September 2017, the UAE’s oil production has longer the crisis continues, the more investment of the situation in the country’s eastern provinces Petro Poroschenko was elected President in May declined by 2.5%, compared with its level in appetite and bilateral trade flows will be affected and relations with Russia. 2014, following the removal of Viktor Ianoukovitch, 2016. A slower hydrocarbon sector impacts the negatively in the region. On the other hand, in the triggered by the protest movements (Maïdan), at whole economy – not only through production, short term, the country will benefit from arrivals High level of public and foreign debt the end of 2013. The two pro-western parties (Petro but also through government expenditure of GCC tourists who would normally visit Qatar, With public debt amounting to more than 80% Poroschenko Bloc-BPP and the People’s Front-PF) and investors’ sentiment. Meanwhile, non-oil but will now visit the UAE instead. The country of GDP (49% of which is foreign), and the cost dominate parliament. However, the government sectors look more positive: recent recovery in oil should remain attractive for investors thanks to of servicing this rising with the depreciation – facing the oligarchy, with upcoming elections prices has led to some recovery in consumer and its political stability. of the hryvnia (75% denominated in foreign and a population anxious about the economic and business sentiment, driving non-hydrocarbon currency), public finances are in a fragile state. The geopolitical crises – does not have a coherent and investments. agreement signed in 2015 with the IMF included a stable majority to be able to fight corruption, speed USD 17.5 billion package in return for reforms. By up the rate of reform, or make progress in resolving Fiscal improvement in the horizon October 2017, only half of this had been released. the separatist problem. The Minsk II Agreement, signed at the beginning of 2015, reduced the level Lower oil revenues have weakened the UAE’s The arrival of elections, and the fifteen year 7.4% of clashes between the Ukrainian army and the fiscal and external positions. The government USD 3 billion Eurobond issue in September 2017 pro-Russian separatist movements, but without has therefore introduced certain fiscal to cover the budget and refinance debt, have ending the conflict. The situation remains resolutely tightening measures, such as removing fuel encouraged the authorities to postpone or dilute unstable, overshadowed by the constant fear of a subsidies, raising electricity and water tariffs, the reforms. The increase in domestic gas prices sudden escalation. and postponing transfers to government- appears to have been pushed back to the second related entities (GREs). Via these measures,

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PAYMENT AND COLLECTION PRACTICES IN UAE COFACE ASSESSMENTS Payment Fast-track proceedings Insolvency proceedings A3 An order of payment is a procedure where a party th The most common methods of payment in the On the 4 September 2016, the final draft of the COUNTRY RISK United Arab Emirates (UAE) are cash, credit applies to the courts for summary judgment Federal Law on Bankruptcy was approved. The new and debit cards, Open Accounts, Letters of against a defendant for commercial debts, insolvency law proposes three new insolvency substantiated by a valid but unpaid commercial A1 Credit, Documentary Collections, and cheques. procedures: BUSINESS CLIMATE Cheques are the most common and preferred instrument such as a bill of exchange, promissory note or cheque. If a defence is filed, the dispute Financial Reorganization Procedure method of payment in the United Arab Emirates An out of court, private conciliation process that (UAE), especially in commercial transactions, as must be solved via an ordinary lawsuit before the court of first instance. is applicable to entities who have not yet formally there are no costs involved with issuing cheques, entered the zone of insolvency, which has the aim of TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) unlike transactions that are backed by a Letter Ordinary proceedings achieving a consensual, private settlement between GDP growth (%) 2.3 1.8 1.5 1.2 65.6 of Credit or any other type of a bank guarantee. Proceedings start by filing a plaint (complaint) Exports of goods, as a % of total parties. An independent mediator with bankruptcy Inflation (yearly average, %) 0.0 0.7 2.7 2.5 POPULATION Cheques constitute a reliable debt recognition in the relevant court. It must meet procedural expertise is appointed by the commission for a United States (millions of persons - 2016) title that may be enforced directly before a requirements, and include both the debtor’s 15% Budget balance (% GDP) -4.3 -2.9 -2.4 -2.1 period of up to four months to oversee discussions 40,050 judge. In addition, UAE criminal law states that a information and the details of the debt. The court between the debtor and its creditors. Germany Current account balance (% GDP) -5.2 -5.9 -4.6 -4.7 11% GDP PER CAPITA person who delivers a cheque in bad faith without issues a summons to be served to the defendant, Public debt (% GDP) 89.0 89.3 86.9 87.2 (US dollars - 2016) sufficient consideration may be imprisoned. which includes an endorsed hearing date. Protective Composition Procedure (PCP) France A debtor that is (a) experiencing financial 6% (f): forecast UAE banks are part of the Society for Worldwide Once an answer has been filed by the debtor, the difficulties, but is not yet insolvent; or (b) has Netherlands Interbank Financial Telecommunication (SWIFT), trial process is adjourned to allow the creditor to been in a state of over-indebtedness or cessation 6% RISK ASSESSMENT which is used when transferring money between respond. Further adjournments are given so that of payments for less than 45 days, proposes a Ireland banks, particularly for international wire memoranda can be submitted by both parties. compromise with its creditors outside of formal 6% Decline in activity continues November 2017. Capital spending is expected to transfers. Once the court believes that the case has been bankruptcy proceedings. The PCP includes Growth, still suffering from the uncertainties rise only moderately. Although these measures sufficiently pleaded, it reserves the matter for a moratorium on creditor action (including associated with Brexit, is expected to weaken are unlikely to stop the downward path of the judgment. The entire proceeding is based on Imports of goods, as a % of total Debt collection enforcement of secured claims) and places the in 2018. Household consumption, which deficit in 2018, financing them is expected to written submission supported by documentary Germany debtor under the control of an office holder 14% represents over 60% of GDP, is set to continue push up the debt ratio, which came down due to Amicable phase evidence. The court will issue remedies in the appointed from the Commission’s (the government to slow. Indeed, while inflation, following the an accounting change in 2017. Debt collection begins with the amicable form of specific actions and compensatory United States agency that has the authority to oversee the 9% depreciation of the British pound sterling after The current account balance will continue to approach, during which the debtor receives a damages. Injunctive relief is not generally insolvency proceedings) roll of experts, for an initial the referendum, is outstripping nominal wage show a large deficit in 2018. After benefiting notice for payment, followed by a phone call available and attachment orders are difficult China observation period of up to three months. 9% growth, the pressure on household disposable from a buoyant global trade environment and the from the creditor or an agency, with the goal of to obtain. reaching a payment agreement. Other key tools of the PCP process include the ability Netherlands income will persist, leading to an erosion of pound sterling’s depreciation in 2017, the balance 7% Legal proceedings to raise debtor-in-possession (DIP)-style priority consumer confidence. However, the drop in of goods deficit is expected to increase slightly Enforcement of a legal decision funding, which may be secured on unsecured assets France consumption’s contribution to growth will be in 2018. This will not be offset by the services The UAE Courts are comprised of: 5% · The Court of First Instance A court judgment becomes enforceable once or take priority over existing security, and ipso facto gradual if households continue to reduce their surplus. Even if it could recede, the income · The Court of Appeals it is finalised. If the debtor fails to comply with previsions that prevent the invocation of insolvency- savings (4.8% of disposable income in 2017 balance deficit, which has widened since the · The Abu Dhabi Supreme Court the court’s decision, the creditor may request linked contractual termination provisions – provided + STRENGTHS compared with 9.2% in 2015). The slowdown start of the decade in connection with the decline enforcement mechanisms before the judge, the debtor performs its executor obligations. The in domestic demand has already impacted the in investment income, will continue to impact the Located in each Emirate, courts of first instance such as an attachment order, or even the debtor is given time to file a plan, which is then voted • Hydrocarbon production covering three automotive sector, which posted a fall in new current account balance. Transfers, which make have general jurisdiction and include a Civil Court, imprisonment of the debtor. on by creditors. quarters of energy needs registrations in 2017. The contribution of private a low contribution, are not expected to influence a Criminal Court and a Shariah Court. Following • Cutting-edge sectors (aeronautics, investment is expected to fall, with businesses the current account overall balance. Even a judgement from one of these courts, the Any foreign awards must first be recognized as a Bankruptcy pharmaceuticals, automotives) domestic judgment. When bilateral or multilateral The procedure is split into two elements: choosing to delay their investment decisions though the UK has recorded the biggest current concerned parties have the right to appeal to the • Financial services reciprocal recognition and enforcement treaties i. a rescue process within formal bankruptcy due to political uncertainty. The fear of a post- account deficit of the G7, and political uncertainty Court of Appeals on factual and/or legal grounds. • Competitive and attractive fiscal regime Brexit slowdown and the rising cost of credit, presents certain threats, the country is expected Following this, aggrieved parties have the right exist, this requirement is simply a formality. In proceedings, which is procedurally similar to the the absence of such agreements, an exequatur PCP (including an automatic moratorium and the following the hike in the benchmark interest to be in a position to finance its current account to appeal to the Supreme Court on matters of rate, will continue to weigh on the construction deficit thanks to investment flows. law only. Shariah Court handles civil matters procedure is provided by domestic private ability to raise DIP funding) international law. ii. a formal liquidation procedure - WEAKNESSES sector. Despite a more accommodative fiscal between Muslims. policy, the contribution of public consumption • Uncertainty over the implementation and Thorny Brexit negotiations on the agenda consequences of the decision to leave will likely remain weak. Buoyed in 2017 by a of a weakened government devalued pound and by robust demand in EU the EU After triggering Article 50 of the EU treaty • High levels of public and household debt partner economies, exports should continue to contribute positively to growth in 2018. governing the EU withdrawal process in March (140% of disposable income) 2017, Theresa May, Prime Minister since July • Low productivity and lack of training not The effect of sterling’s depreciation on export competitiveness is, however, likely to ease, 2016, called early general elections so that conducive to innovation she could begin Brexit negotiations from a • Regional disparities with London and reducing the contribution of exports to growth. The economic slowdown could be reflected in a position of strength. However, during the the Southeast and the rest of the UK, June 2017 elections, even though Theresa especially regarding transport and energy rise of about 8% in bankruptcies. infrastructure May’s Conservative party won, it lost its The increase in consumer prices is expected to absolute majority in the House of Commons moderate slightly, benefiting from the weakening - a significant setback. Only a fragile alliance effects of the sterling’s devaluation on imported with the Democratic Unionist Party (DUP), a SECTOR RISK ASSESSMENT goods and a less pronounced increase in energy conservative protestant party from Northern prices. After the Bank of England raised its Ireland, enabled Mrs May to remain in position benchmark interest rate – for the first time at the head of government. From its weakened since 2007 – to 0.5% in November 2017, a second negotiating position, on the 5th December intervention to raise rate by 25 basis points in 2017 the government nonetheless managed 2018 to bring inflation down towards the 2% to conclude the first phase of talks with the target cannot be ruled out. European Commission, reaching agreement on the EU divorce terms. This compromise, earned Slower fiscal consolidation after drawn-out negotiations, marks a rare While the economy is facing a less favourable positive moment for the government. The Irish context and is still struggling to overcome issue will return in the next round of negotiations. certain structural weaknesses, such as The second phase, covering future relations with anaemic productivity growth, the pace of fiscal the EU, will be even more complicated, with the th consolidation is expected to ease. In particular, effective exit date of 29 March 2019 looming. cuts to current expenditures are expected to be An amendment adopted thanks to the rebellion smaller than initially foreseen. Rising spending on of some Conservative MPs providing for any the National Health Service (NHS) and measures final deal to be ratified by Westminster exposed to “repair” the property market imbalances Mrs May’s weakness and her reduced room for were announced in the budget statement in manoeuvre to find an agreement that will satisfy her majority.

226 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 227 UNITED KINGDOM UNITED STATES

PAYMENT AND COLLECTION PRACTICES IN THE UNITED KINGDOM COFACE ASSESSMENTS Payment (formerly “the plaintiff”) files a Claim Form with the Insolvency proceedings County Court or the High Court. Full details of the A2 Cheques are frequently used for domestic and Administration COUNTRY RISK international commercial payments, although bills complaint are set out in the Particulars of Claim, Administration is intended as a rescue mechanism of exchange and letters of credit are preferred which is usually a separate document which supports which enables companies (wherever possible) the Claim Form. The Claim Form must be served on A1 for international transactions. Bank transfers – to continue with their business operations. The BUSINESS CLIMATE particularly SWIFT transfers - are also often used and the defendant by the court, or by the claimant. The procedure is initiated either by applying to the court are viewed as a fast and reliable method of payment. defendant can then respond to the claim form within for an administration order, or by filing papers with the Direct Debits and Standing orders are also recognised 14 days of service. A time extension of 28 days is court documenting the out-of-court appointment of agreed for the debtor to file a defence and/or a as practical solutions for making regular or anticipated an administrator. TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) counter-claim. Once these formal documents have payments and are particularly widely used in domestic Company Voluntary Arrangement (CVA) GDP growth (%) 2.9 1.5 2.3 2.3 323.3 transactions. It is acceptable to issue invoices both been exchanged, the court orders both parties to Exports of goods, as a % of total complete an “Allocation Questionnaire”. The CVA is an informal but binding agreement, Inflation (yearly average, %) 0.1 1.3 1.7 1.9 POPULATION before and after the supply of goods or services. between a company and its unsecured creditors, in Canada (millions of persons - 2016) Freezing order (formerly Mareva Injunction) 18% Budget balance (% GDP) * -3.5 -4.4 -4.3 -4.4 which the company’s debts are renegotiated. It can be 57,608 A freezing order (or freezing injunction) is a special Mexico Current account balance (% GDP) -2.4 -2.4 -2.4 -2.6 Debt collection used to avoid or support other insolvency procedures, 16% GDP PER CAPITA interim order which prevents the defendant from such as administration or liquidation. It provides for a Public debt (% GDP) 105.2 107.1 108.1 108.5 (US dollars - 2016) Amicable proceedings disposing of assets or removing them from the Euro Area The debt collection process usually begins with the restructuring plan which imposes the support of 14% (f): forecast country. One of the conditions attached to the dissenting creditors. debtor being sent a demand for payment, followed by granting of such an order is often that the applicant China a series of further written correspondence, telephone will pay full costs to the person against whom it was Creditor’s Scheme of Arrangement 8% RISK ASSESSMENT calls and (if the value of the debt permits), personal made, if it turns out to be inappropriate. A typical The Creditor’s Scheme of Arrangement is a court- Japan 4% visits and debtor meetings. The collection process has commercial dispute can take 18-24 months to reach approved compromise or arrangement, between a Tax reforms to delay the slowdown in (estimated at 0.25% of GDP). The US public debt, been designed as a progression of stages, beginning a judgment, starting from the time legal action is first corporate debtor and all classes of its creditors, for growth among the largest in the world, should therefore with an amicable (pre-legal) collection phase and initiated. the reorganisation or rescheduling of its debts. It is Imports of goods, as a % of total Although President Donald Trump was unable continue to grow. escalating up to litigation, should the debtor fail to not an insolvency procedure and does not include China to make any progress with any major measures meet his obligations. Enforcement of a legal decision a moratorium on creditor action. It can, however, be 21% between January and November 2017, activity A large trading deficit financed by foreign Legal proceedings implemented in conjunction with formal insolvency Euro Area picked up strongly thanks to the resilience of savings A number of enforcement mechanisms are available. proceedings, (administration or liquidation). It can also The County Court only has civil jurisdiction. Judges 15% household consumption and the recovery in The balance of goods is in substantial deficit These include the Warrant of Execution (which allows be implemented on a standalone basis by the debtor handle claims for debt collection, personal injury, Mexico housing investment, in a context of high levels of due to imports of consumer and capital goods. breach of contract concerning goods or property, a County Court Bailiff to request payment from the company itself. 13% confidence among agents. Growth is expected debtor) and the Writ of Fieri Facias for debts exceeding This deficit is partly offset by the surplus in the land recovery and family issues (such as divorce and Receivership Canada to remain robust in 2018, mainly because of GBP 600, under which a High Court Enforcement balance of services and the balance of income, adoption). Cases valued at less than GBP 25,000 (or There are three types of receivers. The first of these 13% acceleration in company investments, bolstered Officer can make a levy on goods to the equivalent the dividends from US investments in other under GBP 50,000 for personal injury cases) must is a receiver appointed with statutory powers. The Japan by the significant cut in corporation tax from value of the judgment debt (for subsequent sale at 6% countries being greater than the transfers have their first hearing in the county court. second type of receiver is one who is appointed 35% to 21% in President Trump’s tax reforms. auction and offsetting against the amount due). of foreign investors and workers. The large The High Court is based in London, but also has under the terms of a fixed charge or a security trust Conversely, growth in household consumption current account deficit is currently financed by provincial districts known as “District Registries” all As a member of the European Union, the UK has deed. The third category is an administrator (who is + STRENGTHS is likely to slow, despite the historically low FDI and portfolio investments. The result is that over England and Wales. It has three divisions: the adopted several enforcement mechanisms for appointed under the terms of a floating charge over rate of unemployment (around 4%), significant the external position is a net structural deficit • Flexibility in the labour market Queen’s Bench Division, the Chancery Division, and decisions rendered in other EU countries. These all, or a substantial share, of the debtor company’s increases in real wages, and the wealth effect (USD7,935 billion in Q2 2017, approximately 45% the Family Division. include EU payment orders which are directly property. • Full employment is also one of the generated by rising housing prices. The impact of GDP). enforceable in domestic courts and the European objectives of the Federal Reserve of the reduction in income tax – which will mainly Liquidation The Court of Appeal has two divisions – the Civil Enforcement Order, for undisputed claims. Judgments benefit the most wealthy (maximum tax rate cut While President Trump has a distinct wish to A company can enter voluntary or compulsory • The predominant role of the dollar in the Division and the Criminal Division issued in non-EU countries are recognised and global economy from 39.7% to 37%) – will be partly offset by a increase protectionism – as can be seen with liquidation. Voluntary liquidations can be either a the abandoning of the Trans-Pacific Partnership The Supreme Court is composed of a president, enforced if the issuing country has an agreement • Nearly 60% of public debt held by residents continued tightening of monetary policy, with “members’ voluntary liquidation” or a “creditors’ (TPP) and the renegotiation of the free-trade a deputy president, and twelve professional with the UK. If no such agreement is in place, an the Fed planning on three further rises in its key voluntary liquidation”. Both of these proceedings • Attractive market: leader in research & agreement with Canada and Mexico (NAFTA) – exequatur procedure is provided by English Private innovation, huge market interest rate in 2018. The consequent increase justices are initiated by the company itself, by passing a International Law. in the cost of credit will mainly be felt by lower the external deficit is expected to worsen in Fast-track proceedings (Summary Judgments) resolution during a meeting of members. The • Reduced corporate tax rates income households, with an impact on their 2018 due to the upwards pressure on the dollar In order to apply for a summary judgment, the company then ceases trading and a liquidator • Increasing energy self-sufficiency consumption. In addition, households’ room for – linked with the tighter monetary policy of the claimant must obtain an Application Notice Form from collects the company’s assets and distributes manoeuvre is very limited due to their levels of Fed – which will reduce the competitiveness the court. This should be supported by a Statement the benefits to the creditors so as to satisfy, as indebtedness – stable but very high (136% of GDI of US exports, and the continued buoyancy of in which the claimant sets out why he believes that far as possible, the company’s liabilities. - WEAKNESSES imports in the wake of domestic demand, notably summary judgment should be given - either because in Q2 2017) – and the reduction in their savings • Low labour force participation rate from investment. the defendant has no real prospect of successfully rate over the last two years (3.2% in October • Low geographic flexibility of households 2017, down -3.1 points in two years). This slowing defending the claim, or because there is no reason Critical mid-term elections following the why the case should be decided by a full trial. • Polarisation of political landscape in demand will mainly hit the retail, clothing, and transport sectors. However, the energy sector first legislative victory for President Trump A copy of this statement is served on the opponent • Lower fertility rate will feel the benefits of raising oil prices. This, The December 2017 vote on tax reforms was the seven days before the summary judgment hearing. • Obsolescence of many infrastructure combined with the growth in wages, is expected first legislative victory for President Trump, who The opponent also has the opportunity of presenting • Increasing inequalities to lead to a slight upwards shift in inflation, which has so far experienced considerable difficulties a statement, but this must be sent no later than three NUMBER OF CORPORATE FAILURES will come closer to the Fed’s target (2%). Whilst in implementing his programme. This victory days before the hearing. The claimant cannot apply it is expected to slow at the end of the year, the was vital for President Trump with the upcoming for summary judgment until the debtor has either SECTOR RISK ASSESSMENT Total Estimate (e) / Forecast (f) Yearly growth economy will continue to grow and company mid-term elections to be held in November returned an acknowledgment of service form, or has 15% insolvencies are expected to be 4% lower in 2018. 2018, during which all the seats, in the House of filed a defence. If the court agrees with the claimant, 25,000 Representatives, as well as one-third of Senate it will return a favourable judgment. The application 9.4% 10.0% 10% With the tax reforms driving up the public seats will be up for election. Despite a Republican will be dismissed if the court does not agree with the 19,796 20,284 20,000 19,351 deficit, debt will continue on its upwards majority in both Houses of Congress, President claimant. 17,681 17,728 2.5% 5% slope Trump is already facing a rebellion within the 16,318 16,116 Ordinary proceedings 14,731 Republican party. A change in the majority during There are now identical procedures and jurisdictions 14,658 According to the Congressional Budget 15,000 0% the mid-term elections would make any further for the County Court and the High Court. A number Office (CBO), despite the removal of local tax 0.5% deductions for federal taxes, the tax reform reforms almost impossible. The victory of the of litigation “tracks” have been created, each with Democrat candidate in the Senatorial election in -5% being instituted by President Trump will amount their own procedural timetables. Claims are allocated 10,000 -7.7% Alabama (a traditionally solid Republican State) in -4.6% to USD1.4 trillion over ten years – around 7% to a track by a procedural judge, according to their December 2017 would seem to indicate that the monetary value. There are transaction processes that -10% of GDP. At the same time, the government will -8.6% also cut social expenditure, notably healthcare Democrats could at least win back the Senate. need to be followed before initiating a court action. 5,000 -10.2% (removal of fines for those not having health These processes have been designed to encourage -17.6% -15% the parties concerned to settle disputes without the insurance, which is likely to lead to a fall in the numbers of insured citizens), in order to make need for court proceedings, thus minimising costs and 0 -20% savings. The scale of the tax reform will, however, court time. 2010 2011 2012 2013 2014 2015 2016 2017(e) 2018(f) result in an increase in the deficit in 2018, Proceedings formally commence when the claimant Source: The Insolvency Service, Coface despite any slight associated increase in growth

228 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 229 UNITED STATES URUGUAY

PAYMENT AND COLLECTION PRACTICES IN THE UNITED STATES COFACE ASSESSMENTS Payment Ordinary proceedings garnishment of their bank account. As a federal The vast majority of proceedings are heard by State, decisions rendered in one of the country’s A4 Exporters should pay close attention to sales COUNTRY RISK contract clauses on the respective obligations State courts, which apply state and federal law to states may be executed in another state’s court, of the parties and determine payment terms disputes falling within their jurisdictions (i.e. legal provided that the enforcing court considers that actions concerning persons domiciled or resident it is competent to enforce any judgement. A3 best suited to the context, particularly where BUSINESS CLIMATE credit payment obligations are involved. In in the State). For foreign awards, each state has its own that regard, cheques and bills of exchange are Federal courts, on the other hand, rule on legislation. Nevertheless, they must be first very basic payment devices that do not allow disputes involving State governments, cases recognized as domestic judgments. If a reciprocal creditors to bring actions for recovery in respect involving interpretations of the constitution or recognition treaty exists, the requirement is TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) of “exchange law” (droit cambiaire) as is possible federal treaties and claims above USD 75,000 US fulfilled. However, in the absent of one, exequatur GDP growth (%) 1.0 1.5 3.4 3.2 3.5 in other signatory countries of the 1930 and 1931 between citizens of different American States proceedings aim at ensuring enforcement in Exports of goods, as a % of total Inflation (yearly average, %) 8.7 9.6 6.1 6.7 POPULATION Geneva Conventions on uniform legal treatment or between an American citizen and a foreign domestic court, after verifying the judgment Brazil (millions of persons - 2016) of bills of exchange and cheques. national or foreign State body or, in some cases, meets certain criteria provided by the state law. 17% Budget balance (% GDP) -3.5 -4.0 -3.4 -3.1 15,062 between plaintiffs and defendants from foreign China Current account balance (% GDP) -2.1 -0.1 -0.4 -0.8 Cheques are widely used but, as they are not 13% GDP PER CAPITA required to be covered at their issue, offer countries. Insolvency proceedings Public debt (% GDP) 64.6 61.9 59.8 61.3 (US dollars - 2016) Euro Area relatively limited guarantees. Account holders A key feature of the American judicial system is Out-of court proceedings 11% (f): forecast may stop payment on a cheque by submitting a the pre-trial “discovery” phase whereby each Different State laws can propose out-of court United States written request to the bank within fourteen days party, before the main hearing, may demand proceedings in order to avoid any formal judicial 6% RISK ASSESSMENT evidence and testimonies relating to the dispute of the cheque’s issue. Moreover, in the event of proceedings, such as the Assignment for the Argentina default, payees must still provide proof of claim. from the adversary before the court hears the benefit of creditors in the state of California, 6% New found strength in the wake of regional or tasa consular. While the public debt burden “Certified checks” offer greater security to case. During the trial itself, judges give plaintiffs where a company turns over all of its assets to circumstances remains considerable, the authorities have suppliers since the bank certifying the cheque and their lawyers a considerable leeway to an independent third party, who liquidates and Imports of goods, as a % of total In 2017, Uruguayan growth rebounded after two gradually increased the share denominated in thereby confirms the presence of sufficient funds produce pertinent documents at any time and distributes them to all creditors in an equitable years in the doldrums. Activity was sustained local currency and held by residents (over 55% at in the account and makes a commitment to pay conduct the trial in general. This is an adversarial China fashion. 19% by exports and household consumption. The the second quarter of 2017, compared with just it. Although more difficult to obtain and therefore procedure, where the judge has more the role Restructuring proceedings: Chapter 11 economy benefited from the resumption of 30% in 2007) and extended the average maturity less commonplace, “cashier’s checks”, cheques of an arbitrator, ensuring compliance with the Brazil Chapter 11 of the American Bankruptcy Code 18% growth in Brazil and Argentina, as well as the (fourteen years), thus lessening its vulnerability. drawn directly on a bank’s own account, provide procedural rules, although more and more provides a distressed entity with the opportunity Argentina rebound in agricultural export prices (soya, meat, Meanwhile, in 2017, the current account complete security as they constitute a direct practice enhances the part of the judge in the to preserve its business as a going concern 13% dairy products). Internally, consumption regained deficit widened slightly, due to rising imports undertaking to pay from the bank. running of the case. while implementing an operation of financial Euro Area some momentum thanks to lower inflation, which resulting from the recovery in internal demand. Bills of exchange and promissory notes are less The “discovery phase” can last several months, restructuring. The debtor can seek to adjust its 13% fell back to within the target range (3%-7%) fixed While exports also rebounded, thanks to the commonly used and offer no specific proof of even years, and entail high costs due to each debt by reduction the amount owed or extending United States by the central bank. aforementioned improved economic prospects, debt. The open account system is only justified adversary’s insistence on constantly providing 7% repayment terms. The debtor entity and its Activity is expected to remain buoyant in they only partially offset the rise in imports. after a continuing business relationship has been pertinent evidence (argued by each party), and management continue to operate the business as 2018, with growth being driven by all sectors. In 2018, Uruguayan exports are expected to established. involve various means – like examinations, the debtor-in-possession. The Bankruptcy court + STRENGTHS continue to be driven by stronger growth in its requests to provide supporting documents, Investment is thus expected to rebound after a Transfers are used frequently especially via supervises the proceedings. sluggish year, thanks to the Ferrocarril Central main partner markets. At the same time, imports the SWIFT electronic network, to which most the testimony of witnesses, and reports by • Abundant agricultural and forestry are expected to remain buoyant thanks to the detectives – before submitting them for Liquidation under Chapter 7 resources railway infrastructure project, which aims to American banks are connected, and which The purpose of these proceedings is to implement facilitate the transport of goods (especially resilience of consumption and the recovery in provides speedy and low-cost processing of court approval during the final phase of the • Social homogeneity and political stability investment. After a sharp rise in the number proceedings. an orderly liquidation of the distressed entity. wood) to the port of Montevideo (public/private international payments. SWIFT transfers are The court-supervised process involves a trustee • Active reform policy (business climate, financing estimated at USD 1 billion). This project of tourists (mainly from Argentina) in 2017, the public finances, social security) particularly suitable where real trust exists In civil cases, the jury determines whether the selling assets and distributing the proceeds is specifically the subject of negotiations with services balance looks as if it will take a hit in between the contracting parties, since the seller demand is justified and also determines the to creditors in accordance with the statutory • Substantial foreign direct investments the Finnish UPM group regarding the potential 2018 from the ending of tax benefits at the end of is dependent on the buyer acting in good faith and penalty to impose on the offender. For especially priorities provided in the Bankruptcy Code as well • Member of Mercosur, preferential trading construction of a third pulp mill, which is set March (partial or total VAT exemption depending effectively initiating the transfer order. complex, lengthy or expensive litigation, as in as pursuing available causes of action. The US relations with the EU and the US to be the largest private investment project on the service) reserved for tourists. The current account deficit is, therefore, expected to For large amounts, major American companies also the case of insolvency actions, courts have been Trustee appoints an independent interim trustee ever undertaken in Uruguay (USD 4 billion). grow slightly. use two other highly automated interbank transfer known to allow creditors to hold as liable the to administer the case. The interim trustee holds Consumption is expected to slow because of - WEAKNESSES systems – the Clearing House Interbank Payments professionals (e.g. auditors) who have counselled a meeting of creditors after the petition is filed. the jump in inflation as a result of the peso’s the defaulting party, where such advisors have System (CHIPS), operated by private financial He is responsible for liquidating the estate’s • Economy vulnerable to commodity price devaluation against the dollar after a year of The governing coalition faces divisions and institutions and the Fedwire Funds Service System, demonstrably acted improperly. assets and distributing the proceeds to the movements (soya, meat, dairy products) stability. However, inflation will remain around allegations of corruption operated by the Federal Reserve. creditors. The Court supervises the proceedings. • Dependence on economic cycles the upper limit fixed by the central bank, thanks President Tabaré Vazquez is facing allegations of Enforcement of a legal decision State law can also provide different mechanism in Argentina, Brazil and China to more modest wage rises, which themselves corruption concerning the previous government, Debt collection Domestic judgments, in the United States, for liquidation of a debtor’s assets such as • Inadequate transport infrastructure are largely due to the gradual indexing of wages related to his centre-left coalition Frente Amplio to sectoral activity rather than to inflation. (FA), and in particular his vice president, Raul Amicable phase give the creditors additional rights such as the receivership. • Competitiveness reduced by strong inflation Externally, the strengthening economic recovery Sendic, who stepped down in September 2017. Since the American legal system is complex and, seizure and selling of the debtor’s assets or the in Brazil, the country’s main client for exports of Moreover, President Vazquez is facing a sharp especially as regards lawyers’ fees, costly, it is • Public debt (mitigated by long maturity and increasing share of local currency- goods, and in Argentina, principal source of FDIs drop in his popularity (around 30% approval advisable to negotiate and settle out of court denominated) and tourists, should also sustain growth. ratings in mid-2017). A sign of his fading with customers wherever possible or else hire a NUMBER OF CORPORATE FAILURES popularity is that the right-leaning opposition collection agency. Total Estimate (e) / Forecast (f) Yearly growth Gradual fiscal consolidation and slight party (Partido Nacional) was ahead in the polls in Legal proceedings deterioration of the current account balance mid-2017 for the first time since 1994. Meanwhile, The judicial system comprises two basic types of 60,000 0% 56,289 After public accounts were hit by weak activity the governing coalition is characterised by court: the federal District Courts with at least one -2.5% -3.0% -2% in 2016, the government pursued a more sharp divisions between the Communist wing such court in each State and the Circuit or County 50,000 47,821 restrictive fiscal policy in 2017. The government and President Vazquez’s moderate wing, as Courts under the jurisdiction of each State. -4% has accordingly implemented the fiscal evidenced by the latter’s decision to vote in Fast-track proceedings -7.5% 40,133 -6% favour of the temporary exclusion of Venezuela 40,000 consolidation programme set out in its five- If the debt is certain and undisputed, American year finance act of 2015, aimed at achieving from Mercosur in August 2017. The divisions 33,254 -7.0% -8% law provides for a “summary judgment” -8.2% a 2.5% public deficit by the end of President within the coalition also concern the free-trade procedure, where a motion for “summary 30,000 26,991 -10% Tabaré Vázquez’s presidential term in 2019. agreement on services signed in October 2016 judgment” is based upon a claim by one party that 24,786 24,166 with Chile, to which the left wing of the Party is 22,475 -12% The government’s strategy relies notably on all necessary factual issues are settled or that no 21,800 opposed, and which Parliament still hasn’t ratified 20,000 higher tax revenues, thanks to the economic trial is necessary. It is appropriate when the court -14% momentum gained through VAT, as well as higher one year on. Uruguay remains a particularly determines there are no factual issued remaining stable country politically. -17.1% -16% income taxes in particular (between four and six to be tried, and therefore a cause of action or all 10,000 -15.0% points, depending on the tax band) that came Despite there being significant room for progress -16.1% causes of action in the complaint can be decided -18% into force in 2017. In 2018, in order to finance the on financial transparency, Uruguay is a preferred without a trail. If the judge decides that there are -18.8% 0 -20% increased education budget, set to reach 5% destination for FDIs in the region, thanks to a facts in dispute, the court will deny the motion for 2010 2011 2012 2013 2014 2015 2016 2017(e) 2018(f) of GDP, the government decided to raise one favourable business climate overall. summary judgment and order a trial. Source: Administrative Office of the United States Courts, Coface of the taxes levied on imports: Consular Duty

230 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 231 UZBEKISTAN VENEZUELA

COFACE ASSESSMENTS COFACE ASSESSMENTS C E COUNTRY RISK COUNTRY RISK C E BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 8.0 7.8 5.7 6.0 GDP growth (%) -6.2 -16.5 -12.0 -6.0 Exports of goods, as a % of total 31.3 Exports of goods, as a % of total 31.0 Inflation (yearly average, %) 8.5 8.0 12.0 13.0 POPULATION Inflation (yearly average, %) 111.8 254.4 652.7 2,349.3 POPULATION Switzerland (millions of persons - 2016) United States (millions of persons - 2016) 35% Budget balance* (% GDP) 0.8 0.4 0.5 1.0 35% Budget balance (% GDP) -17.7 -17.8 -18.5 -18.7 2,133 7,620 China Current account balance (% GDP) 0.7 0.7 1.0 0.5 India Current account balance (% GDP) -6.6 -1.6 -0.4 -1.3 20% GDP PER CAPITA 17% GDP PER CAPITA Public debt (% GDP) 10.7 16.3 17.0 17.0 (US dollars - 2016) Public debt (% GDP) 32.1 31.4 22.9 19.7 (US dollars - 2016) Russia China 9% *including disbursements from the Fund for Reconstruction and Development (f): forecast 14% (f): forecast Turkey Netherlands Antilles 9% RISK ASSESSMENT 8% RISK ASSESSMENT Kazakhstan Singapore 7% Growth sustained by investment expatriate workers should help maintain a slight 5% Acute and far-reaching crisis of the contraction in imports (from USD 33.3 to Uzbekistan is set to remain one of the most current account surplus. The recurrence of the The economy, in crisis since 2014, is expected USD 15.5 billion between 2015 and 2017) and a Imports of goods, as a % of total dynamic economies in the CIS in 2018, even surplus accounts for the comfortable level of foreign Imports of goods, as a % of total to remain in recession in 2018, under the impact relatively stable level of oil exports, thanks to the exchange reserves (about 24 months of imports, recovery in oil prices. This surplus will not offset the China if official data tends to overestimate growth. United States of galloping inflation and declining oil and gas 22% Public investment, aimed at improving industrial inclusive of gold) which protects the country from 22% production. Despite the slow rise in oil prices, oil and deficit in services, linked with the collapse in tourism and the cost of oil industry engineering services, Russia performance and infrastructure, especially in financial tensions. China gas production is likely to continue falling (-13.5% 21% the fields of gas, hydroelectricity, and roads, The underdeveloped banking system is tightly 14% between October 2016 and October 2017) due to nor the high cost of debt servicing (USD 120 billion). Euro Area should continue to sustain activity, particularly in controlled by the state, particularly regarding its loan Euro Area the lack of investment. As oil accounts for 90% of The very low level of FDI and any bilateral loans will 16% construction. The state could also be bolstered by policy, which weakens the quality of its portfolios. 9% exports, 50% of budget revenues, and almost all not be enough to bring the balance of payments into equilibrium. Currency reserves will continue to South Korea multilateral donors and foreign private investors, Nevertheless, it could benefit from the removal, Brazil of currency earnings, this decline in production is decline (USD 9.9 billion in November 2017, including 10% whose confidence has been boosted by the of the so’m’s peg to the dollar in September 2017, 7% expected to worsen the existing macroeconomic gold), with any rebuilding being limited by the Kazakhstan measures taken by the new Head of State – notably the key to this being its 50% depreciation and its Colombia imbalances. The non-oil economy is expected to 10% 6% repayment in kind of Chinese and Russian loans, the liberalisation of exchange rates and the creation alignment to the black market rate. If trust builds contract further, suffering from a lack of investment, which leaves very little oil for sale to bring in enough of a special economic zone (Urgut district). Industry in the future management of the currency, the following years of neglect in favour of the oil and foreign currency. This financing deficit is likely to (machines, automotive equipment, agrifood) and economic actors will continue to go to the banks gas sector. The difficulty of obtaining intermediate + STRENGTHS + STRENGTHS continue to pull down the bolivar, further aggravating services (almost 45% of GDP) are also likely to to convert their foreign currency assets, which can products and capital goods is undermining industrial the gap between the official rate (VEB 10 for USD 1), • Abundant and diversified natural resources perform well. no longer be used for domestic payments, thus • Significant oil reserves along the Orinoco output, because the private sector depends on the (gas, gold, cotton, hydroelectric potential) river and potential offshore gas fields used only for public transactions involving staples, facilitating the de-dollarisation of the economy. state for access to foreign currency. This decline The contribution of exports (almost 20% of GDP) and the parallel rate (VEB 103,000 for USD 1 at the • Low level of debt and comfortable foreign Whatever happens, the sector will be supported by • Geographic proximity to the United States, in productive capacities is taking place in a context exchange reserves could be improved by steady increases in export the leading market for Venezuelan oil end of 2017). prices (for gas, cotton, and gold – the top export the government if difficulties arise. of hyperinflation. The monetisation of the public • Ambitious public investment programme • Assets (including in the United States) of deficit because of the decline in oil revenues has product). External demand might increase slightly the State oil company, PDVSA • Population of 32 million inhabitants (especially from China, Russia and Kazakhstan). caused inflation to soar, exacerbated by the fall of Tense political situation An authoritarian regime but anxious to • Growing workforce • Strategic position between China and However, as imports of capital goods and metals for attract foreign investors the Venezuelan bolivar and rocketing import prices. In 2017 was a year of rising political tensions, an Europe (New Silk Road) infrastructure projects and industrial facilities will this context, household purchasing power continues indication of the inability of the government to find The death of Islam Karimov in September 2016, increase substantially, the net contribution of trade to be seriously diminished. The shortage of everyday a way out of the economic mess. The election of a president since the country’s independence in - WEAKNESSES is likely to be nil. essentials is becoming increasingly severe, under the Constituent Assembly in August 2017 was preceded - WEAKNESSES 1991, resulted in Prime Minister Shavkat Mirziyoyev pressure of the government’s policy to drive down by three months of conflict between government Household consumption (over 50% of GDP) is • In default on its sovereign and quasi- becoming the Head of State after a comfortable sovereign debt imports. Investment is likely to continue its decline in a forces and supporters of the opposition, resulting in • Poor economic diversification and expected to be sustained by the moderate rise election victory (89% of the votes) in December business climate that is being undermined (arbitrary over a hundred deaths. This new assembly, which dependence on commodity prices in social spending and wages in the large public • Economy heavily dependent on oil and gas 2016. Like his predecessor, he is expected to sector and loans from China and Russia expropriations, intrusive checks, government favours Nicolas Maduro (Partido Socialista Unido • Low competitiveness sector, as well as by the ongoing recovery in maintain a strong state. However, putting an end to inspections) and in a context of widespread de Venezuela , PSUV) because it was boycotted by • Underdeveloped banking sector; practice remittances from expatriate workers in Russia • Hyperinflation a decade of isolationism, he has moved to establish political insecurity. the opposition, has been trying to take power away of directed credit and Kazakhstan (likely to total about two million), • Shortages of currency and goods (basic closer relations with neighbouring countries, in from the opposition (Mesa Unitaria Democratica, • State interventionism; difficult business offsetting the negative impact of higher prices on foodstuffs, medicines) particular Kirghizstan and Tajikistan, with which MUD) dominated Congress, with an announcement climate real incomes. Inflation is set to remain high, driven • Opaque and informal management of oil Fragile budget and external positions agreements on water management, communication and gas revenues of the dissolution of the latter in August 2017. The • Autocratic regime by the ongoing depreciation of the Uzbekistanti The decline in oil revenues, together with the real- channels, the electricity network, and border wave of international outrage following this and so’m (the local currency), strong credit growth, and • Length of payment time in business term reduction in non-oil revenues, has resulted in a disputes have been concluded or are currently being demonstrations within the country forced the periodic increases in the price of utilities (water, gas, • Serious political insecurity rocketing of public deficit. However, the government negotiated. Likewise, relations with Russia are now government to step back, but without actually electricity) that aim to align them to market prices, as • Criminality (homicides), corruption, has not reduced social spending in the same closer, but are not expected to overshadow relations defusing the situation. Elections of regional well as by higher food costs generated by disrupted trafficking of all types, black market with the West or the healthy relationship with China. proportion. The deficit is largely being financed governors in October 2017, largely won by the food production and distribution mechanisms. through monetisation, as well as via Russian and The key priority is economic development. Indeed, governmental party, strengthened the hand of Chinese loans, subject to “loan against oil” terms. President Maduro by highlighting divisions within the Public and external accounts show a slight the president seems to favour economic reforms With Venezuela in default on its sovereign and quasi- aimed at attracting investors. This is evidenced nd opposition. The decision by four governors, members surplus sovereign (PDVSA) debts as of the 2 November of MUD, to be sworn in by the Constituent Assembly by removing the so’m’s dollar peg and most of 2017, it is facing the need to restructure its debt in In 2018, the government is expected to continue its generated considerable disagreement within the foreign exchange control measures. However, order to maintain its access to finance. Russia has policy of stimulating activity via increased public the coalition, as the vast majority of its members economic openness is still tentative. Removing the granted a restructuring covering USD 3.15 billion spending. However, the public balance will continue claim the Assembly is without any legitimacy. peg does not predict how foreign exchange will be relating to payments due over the next six years. to show a small surplus, and the public debt burden The victory of the PSUV in the municipal elections managed in the future. State-owned enterprises However, achieving a more comprehensive will remain weak thanks to withdrawals (amount in December 2017, boycotted by the opposition, continue to dominate, despite their inefficiency. restructuring appears to be more difficult following unknown) from the Sovereign fund made since Red tape and difficulties due to customs persist, further exacerbated these tensions. Negotiations the drop in hydrocarbon prices and the recession in an unfruitful first round of meetings with its creditors. between the government and the opposition started and performance in terms of corruption, regulation, The existence of US sanctions against certain Russia in 2014. Nevertheless, higher revenues from and government effectiveness remains poor. The in November 2017, with the government agreeing to the export sectors should help gradually reduce Venezuelan officials – including lead negotiator intensify the fight against corruption, and the arrest risks linked to the rise of Islamist groups is likely to Tareck El Aissami, accused of drug trafficking – these withdrawals, as will the reforms aimed at endure. Meanwhile, poverty, unemployment and of senior oil industry executives. With a divided increasing the effectiveness of public spending. will prevent any US creditor from taking part in opposition and an increasingly repressive use of restrictions on freedoms provide fertile territory for these negotiations. The trade balance will remain close to equilibrium. protests by a very young population (almost half of power, the danger of political and social upheavals The increase in exports will more or less offset which is under 25 years old), which the government In terms of the current account, the balance of will continue at a high level until at least the next trade should be slightly in surplus. This is a reflection presidential election at the end of 2018. that of imports, while higher remittances from will do everything to control.

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COFACE ASSESSMENTS COFACE ASSESSMENTS B E COUNTRY RISK COUNTRY RISK B E BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main Economic Indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 6.7 6.2 6.3 6.5 GDP growth (%) -28.0 -9.8 -0.8 8.6 Exports of goods, as a % of total 92.7 Exports of goods, as a % of total 29.1 Inflation (yearly average, %) 0.6 2.7 4.4 4.0 POPULATION Inflation (yearly average, %) 39.4 5.0 21.0 15.0 POPULATION United States (millions of persons - 2016) Oman (millions of persons - 2016) 20% Budget balance (% GDP) -6.2 -6.6 -5.8 -5.8 31% Budget balance (% GDP) -10.6 -13.5 -6.0 -2.1 2,172 938 Euro Area Current account balance (% GDP) -0.1 4.1 1.3 1.4 Egypt Current account balance (% GDP) -5.5 -5.6 -4.2 -3.1 14% GDP PER CAPITA 20% GDP PER CAPITA Public debt (% GDP) 57.3 60.7 61.4 63.6 (US dollars - 2016) Public debt (% GDP) 66.7 85.3 77.3 59.0 (US dollars - 2016) China Saudi Arabia 14% (f): forecast 13% (f): forecast Japan Malaysia 8% RISK ASSESSMENT 7% RISK ASSESSMENT South Korea Thailand 6% Growth will remain solid The current account surplus will probably 5% Critical political and security situation infrastructures, many of which were suffering from Growth is likely to remain robust in 2018, remain steady in 2018. The dynamism of exports Since 2015, Yemen has been in the throes of a obsolescence, thus destroying a large part of the Imports of goods, as a % of total supported by domestic demand and exports of of manufactured goods should contribute Imports of goods, as a % of total war between Houthi rebels – Shiites – and the productive system. Investment, public and private, to improving the trade balance, despite the remains almost non-existent. The UN Disaster China manufactured goods. Export sectors will likely United Arab Emirates government forces of President Abdrabbuh Mansur 25% continue to benefit from FDI, the country’s concomitant rise in imports of intermediate 13% Hadi, supported by Iran and by a coalition of ten Arab Assessment Report puts the cost of destruction goods. The income balance would remain heavily at USD 19 billion, the equivalent of 50% of the South Korea participation in a growing number of free trade China countries led by Saudi Arabia. With the military 17% agreements, and offshoring from China. The in deficit, but offset, in part, by the increase in 12% intervention of the Sunni Arab coalition, the conflict 2013 GDP. Japan country is also moving its exports upmarket, expatriate transfers, mainly from the United Saudi Arabia has taken on a new dimension around the tensions In 2018, the Yemeni economy will likely continue 8% including electronics, with the production of States. In addition, the services surplus would 8% between the Shiite and Sunni communities, to be undermined by the consequences of the United States some parts for smartphones and tablets (16% benefit from the growing influx of tourists. Turkey exacerbated by regional rivalry between Saudi conflict. Combined with the destruction of both 6% of total exports). In addition, the textile sector Despite the growth in foreign exchange reserves, 8% Arabia and Iran. Three years later, the fighting public infrastructure and a part of the electricity Taiwan is set to remain dynamic due to low labour costs, resulting from the current account surplus and Indonesia continues, with missiles entering Saudi territory system, there are also problems associated with 5% despite an expected increase in wages. The good FDI, they remain insufficient (two months of 7% from Yemen. The Houthis control the capital, Sanaa, shortages of drinking water, which make any health of the manufacturing sector will benefit imports). The Vietnamese đông, whose exchange and northwest Yemen (the most populated region) reconstruction more difficult. Inflation, boosted by + STRENGTHS the construction sector, as well as the increasing rate against the US dollar is managed by the + STRENGTHS since 2014, while government forces are grouped the depreciation of the Yemeni rial, will likely weigh urbanization of the population and the rapid central bank, will remain exposed to fluctuations in the southeast. Former president Ali Abdallah on private consumption in 2018. In addition, failures • Quality and inexpensive labour development of tourism. The latter should also in global risk aversion, particularly related to the • International humanitarian and financial Saleh was killed by Houthis in December 2017, two in international aid distribution channels and the • Strong agricultural potential and natural benefit from the implementation of an electronic tightening of US monetary policy. The banking support days after having ended his alliance with them. The rise in unemployment are likely to result in reduced resources visa system in 2017, but will remain limited by system will likely remain fragile because it is not • Geostrategic importance of Yemen at search for solutions to the Yemeni stalemate is disposable household income. However, access to • Development strategy based on infrastructure deficiencies. Private investment capitalized and heavily dollarised. The monetary the entrance of the Red Sea expected to be adversely affected by the rivalries perishable foods is improving with the lifting of the openness, upscaling and diversification of will largely depend on FDI inflows, while public policy should therefore be more restrictive in • Architectural and cultural heritage between several Gulf countries and Qatar, which blockade on the country’s main ports, and the price the economy investment is still constrained by funding 2018, in order to contain inflation and credit risk, • Gas reserves reinforce fractures in Yemeni society, forcing of foodstuffs is beginning to stabilise, which should • Economy not affected by Chinese limitations. The agricultural and oil sectors are which still seems high (especially in construction), • Youthful profile of the population the various local factions to choose sides. The benefit the minority of Yemeni households that still slowdown likely to be less dynamic, due to the reorientation despite the creation of a defeasance structure. antagonistic geopolitical ambitions of Saudi Arabia have a capacity to consume. of the economy and workers towards the In addition, the high exposure of public banks to and Iran will make it difficult to negotiate a solution manufacturing and service sectors. public companies constitutes an additional factor - WEAKNESSES or an end to the crisis in 2018. External and public accounts in dire straits - WEAKNESSES of fragility. Household consumption is expected to • Civil war accompanied by a humanitarian The current account balance is expected to • Shortcomings in the business climate continue to grow, predominantly thanks to and economic crisis, as well as the division A worsening humanitarian crisis and continue to run a deficit in 2018, given the low oil • Lack of infrastructure inflation control, wage growth, and expatriate Growing geopolitical tensions of the country an economy destroyed by war revenues. The deficit should nevertheless contract • Reform of the incomplete public sector remittances. In addition, the development of the The sovereignty dispute between Vietnam and • Poorest country in the Arabian Peninsula Prior to the start of the war in 2015, Yemen was in 2018, due to severe import restrictions and the • Increased inequality middle class and the growth of household credit China over the China Sea will likely continue • Heavy reliance on international aid already the poorest country in the region. The destruction of the port infrastructure. The port, will support domestic demand. • Fragile banking system to weigh on diplomatic relations between the • Poor business environment (bureaucracy, UNO estimated that 13 million Yemenis – half the which is a strategic access point to the Yemeni • Publicly inefficient and heavily indebted two countries. Since 2014, Vietnam have made corruption, destroyed or non-existent population – were living below the poverty line. Since market of Hodeidah, is under Houthi control and has enterprises Public accounts remain poor multiple attempts at oil exploration in the infrastructure) then, the situation has worsened and the country is thus seen a significant reduction in traffic. Current The budget deficit will likely remain high in region, before falling back under the pressure • Explosion of the underground economy suffering a humanitarian crisis of the utmost severity. account deficit financing is through expatriate cash 2018, and the public debt is set to continue – sometimes military – of China. In July 2017, Humanitarian organisations estimate that 80% of transfers (150% increase in the last ten years) and to grow slightly, approaching the ceiling set Vietnam began drilling in disputed waters in the population is in need of emergency humanitarian foreign aid. by Vietnam’s parliament (65% of the GDP). It partnership with a Spanish company. China aid. Imports of food (and medical) products have The public accounts are also in a difficult state. will remain vulnerable to currency risk, as it warned that it was ready to attack the facilities been severely limited, resulting in a scarcity of basic International aid, multilateral and bilateral, is the is largely denominated in foreign currencies if they were not dismantled, leading to the end of goods. More than half of the population will likely main source of funding for the state. Yemen relies (around 40%) – although this share is starting the explorations. While military escalation seems be at risk of starvation. On top of this, because the heavily on Saudi aid, making it vulnerable to the to decrease. Nevertheless, the privatization unlikely, tensions between the two countries sanitation system has not been operational since political agenda of the neighbouring kingdom. Civil programme of public enterprises would gradually seem to have been revived. Vietnam will likely April 2017, the difficulty of accessing drinking water servants have not been paid for more than a year. make it possible to clear margins of budgetary continue to strengthen its bonds with the United and the build-up of waste has resulted in a further The majority of essential public services are no flexibility. The government is also counting States, as well as with the main regional forces deterioration of sanitary conditions, and some longer guaranteed. The central bank, transferred on the influx of FDI to finance part of their (Japan, India and Australia). In addition, despite 700,000 people are likely to be affected by a cholera from Sanaa to Aden, is no longer effective. Within infrastructure projects (notably in transport and the withdrawal of the United States from the TPP epidemic. The intervention of the coalition in 2015 led the conflict zones, humanitarian associations have energy), which are necessary for the country’s (Trans-Pacific Partnership), the country should to an intensification of the fighting and an increase replaced the state. development. In addition, in July 2017, Prime continue to strengthen its trade integration at in human casualties. The death toll is estimated at Minister Nguyễn Xuân Phúc announced his desire both the multilateral and bilateral levels. 10,000. In addition to this, 300,000 have been injured to speed up the liberalization of the services, The Communist Party continues to control the and there are over 3,000,000 refugees. telecommunications, and finance sectors, by entire political, economic and social life of the While oil and gas exports accounted for 80% of easing restrictions on foreign capital. New country. Governance constitutes a risk in terms all exports in 2014, these have since declined tax reforms are also envisaged, including the of attractiveness for foreign investors, given the significantly. Foreign trade represented almost 80% increase of VAT (from 10% to 12%) and tobacco high level of corruption. of the country’s GDP in 2006, but only amounted taxes, as well as the reduction of corporate tax. to 26% in 2015. Bombardments by the coalition have further damaged the already degraded s

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COFACE ASSESSMENTS COFACE ASSESSMENTS D E COUNTRY RISK COUNTRY RISK C E BUSINESS CLIMATE BUSINESS CLIMATE

TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) TRADE EXCHANGES Main economic indicators 2015 2016 2017(f) 2018(f) GDP growth (%) 2.9 3.4 4.0 4.5 GDP growth (%) 1.4 0.6 2.8 0.8 Exports of goods, as a % of total 16.7 Exports of goods, as a % of total 14.5 Inflation (yearly average, %) 10.1 17.9 6.8 7.4 POPULATION Inflation (yearly average, %) -2.4 -1.5 2.5 9.5 POPULATION Switzerland (millions of persons - 2016) South Africa (millions of persons - 2016) 40% Budget balance (% GDP) * -9.3 -5.8 -8.0 -7.8 79% Budget balance (% GDP) * -1.0 -10.0 -11.9 -9.8 1,257 1,112 China Current account balance (% GDP) -3.9 -4.4 -3.6 -2.8 Mozambique Current account balance (% GDP) -10.7 -9.2 -7.6 -7.1 19% GDP PER CAPITA 9% GDP PER CAPITA Public debt (% GDP) 61.4 60.5 55.6 60.0 (US dollars - 2016) Public debt (% GDP) 51.9 69.6 70.6 71.1 (US dollars - 2016) Congo DR United Arab Emirates 7% * including grants (f): forecast 4% (f): forecast South Africa Zambia 6% RISK ASSESSMENT 3% RISK ASSESSMENT Singapore Euro Area 6% A recovery supported by copper prices reduce the risks relating to the sustainability of 2% Growth strangled by shortage of cash the banking system and credit growth. Arrears In 2018, growth will accelerate, spurred the public debt in the short term, although it will Growth, largely dependent on agricultural with international institutions limit the country’s Imports of goods, as a % of total by higher copper prices, in turn leading to still be subject to fluctuations in the kwacha. Imports of goods, as a % of total production, recovered in 2017 due to favourable ability to make use of international aid. Although the country repaid a share of the arrears South Africa greater investment in the mining sector. A Regarding the current account, the balance of South Africa weather conditions, which resulted in an 32% number of mines (Konkola Copper Mines - goods is expected to remain positive in 2018, 47% exceptional harvest after two years of drought. due to the IMF in October 2016, it still owes USD 1.6 billion to the African Development Bank Congo DR Vendata Resources, Chambishi mine - NFCA) thanks to increased exports of copper (volume Zambia Maize production reached 2.1 million tonnes, 13% are expected to expand, thus boosting and price effects) and maize (lifting of the export 24% increasing agricultural GDP growth by 20%. and the World Bank. China production and encouraging new investment. ban on exports following favourable yields in United States However, activity is expected to slow sharply Higher metal prices are expected to encourage 8% The agricultural sector is also expected to 2017) and a drop in imports (lower government 3% in 2018. Rainfalls for the 2017/2018 agricultural export growth in 2018, but the reduction in Kuwait contribute the recovery, with more favourable demand resulting from the fiscal consolidation). China season are expected to be lower than those in the current account deficit will still be mainly 7% weather conditions enabling higher maize In contrast, the balance of services will remain 3% 2017, impacting on activity. Gold exports are attributable to the contraction in imports. As in Euro Area output (second largest non-traditional export negative. The deficit will be offset by grants (0.8% Botswana expected to continue to benefit from the stability 2017, the shortage of dollars is expected to put 5% item, after tobacco). Growth in these two of GDP in 2017), private remittances (1% of GDP) 2% of world prices. Nevertheless, manufacturing will pressure on imports and increase the likelihood sectors should spread to the whole economy, and FDIs (6.3% of GDP). suffer from the shortage of foreign exchange, of depreciation in the bond notes on the black + STRENGTHS thus reducing unemployment. This, combined + STRENGTHS which will hamper imports. Since 2016, the market. The pressure on this substitute currency with inflation within the central bank’s target Worsening political situation economy has been paralysed by a liquidity crisis will continue in 2018, in the absence of action • Mineral wealth (copper: leading producer range of 6-8% and a softer monetary policy, over the long term • Abundant mineral resources (platinum, whose roots lie in the government’s decision in by the central bank and new inflows of foreign in Africa, cobalt, uranium, gold, diamonds, should boost household purchasing power and gold, diamonds, nickel) April 2009 to abandon the Zimbabwean dollar exchange. manganese) provide impetus to internal demand. Demand- Since the contested elections of 2016, won • Agricultural wealth (maize, tobacco, cotton) in favour of a basket of currencies, making the by Edgar Lungu (Patriotic Front), the political • Agricultural wealth (maize, tobacco) elastic sectors, such as retail, are expected to • Tourism development potential US dollar the monetary system’s reference The “Crocodile” succeeds Robert Mugabe • Significant hydroelectric potential benefit. Economic activity is also likely to benefit situation in the country has deteriorated. The currency. The widening current account arrest in April 2017 of the opposition leader • Member of the SADC (Southern African after 37 years in power • International financial support from improved hydropower energy, thanks to Development Community) deficit, weak inflows of capital and the crisis of st better weather conditions. If a loan agreement Hakainde Hichilema (United Party for National confidence have resulted in a limit on the quantity On the 21 November 2017, after 37 years as Head Development) (UPND) on grounds of treason, • Normalisation of relations with the of State, Robert Mugabe (93), was forced to step with the IMF were to be signed in 2018, this international community of dollars in circulation, pushing the banks to limit following his repeated accusations of fraud down. This came a week after the army, denying - WEAKNESSES would reassure investors as to the direction of withdrawals to 50 dollars a day. The rise in dollar- economic policy, which should encourage greater during the 2016 elections, has culminated in indexed bond notes introduced in November a coup d’état had taken place, seized control of • Dependence on copper; poorly diversified tensions between the government and his - WEAKNESSES several institutions in Harare and held Mr Mugabe economy FDI flows. However, the attempt to diversify 2016 by the central bank following the award of the economy by taxing gross output in order to supporters. The unilateral decision by Mr Lungu a USD 500 million loan by the Trade Finance Bank and his wife under house arrest. The bloodless • High degree of dependency on China, to drop these charges in August 2017 has calmed • Economic and financial position damaged intervention was triggered by the dismissal of largest client for copper stimulate the processing industry could dissuade by long period of hyperinflation for Africa (Afreximbank), together with the use of some investors. Finally these growth prospects the situation. However, uncertainties remain electronic payment methods has helped mitigate Vice President Emmerson Mnangagwa a few • Landlocked and dependent on regarding Mr Lungu’s insistence on standing in • Shortage of cash weeks earlier, with the intention of opening a communication routes of neighbouring remain limited by a banking and financial sector the decline in liquidity to some extent. The growth under pressure: the number of non-performing the 2021 elections, with debate raging over the • Underinvestment in infrastructure of money in circulation observed in 2014 took the route to power for Mr Mugabe’s wife, Grace countries legality of his standing again (the Constitution (particularly energy) Mugabe. The democratic transfer of power, • Inadequate electricity generation, reliant loans has doubled (12.1% in late 2016 compared country out of the deflationary spiral in which it with 6.1% in 2014) because of the fall in growth limits the number of terms to two and Mr Lungu • Precarious food and healthcare situation: had been trapped since 2014. However, inflation with the assistance of the army, thus enabled almost exclusively on hydroelectricity; was interim president following the death of majority of the population depends on Mr Mnangagwa, nicknamed the “Crocodile”, to unreliable transport networks in 2015 and rocketing interest rates (interest on international aid (probably underestimated in official figures), bank loans at 29% in late 2016), and local banks former President Sata). The decision is likely to particularly of imported goods, continues to rise succeed Mr Mugabe. The interim president has • High levels of inequality; healthcare, be referred to the Supreme Court in a climate • One of the highest rates of AIDS infection in already been selected to stand for the general education and administrative failings are heavily called on to finance the fiscal deficit. rapidly, rekindling fears of hyperinflation. marked by a concentration of powers in the Africa and in the world elections in 2018 to shore up his position as hands of Mr Lungu. leader of the country. A long-time ally of Robert Laborious fiscal consolidation, Unsustainable twin deficits Mugabe and from the ranks of ZANU-PF, the but an improved current account balance With regard to the business climate, relations with China are becoming increasingly tense due The public deficit deepened in 2017. Higher tax ruling party since independence, the Crocodile With a view to obtaining an IMF loan, the Zambian to popular anti-Chinese sentiment running high. receipts, associated with a more favourable is not expected to make any radical changes government has set about reducing its deficit, These tensions are linked to conflicts between economic context, were not enough to offset the to the way politics operate in the country. specifically by launching the Zambia Plus Chinese employers and local workers, especially spending commitments made by the authorities Nevertheless, while massive unemployment programme (Economic Stabilization and Growth regarding labour conditions, which were recently and allocated mainly to debt interest payments and the shortage of cash are fuelling popular Program, 2017-2019). The 2018 budget appears denounced in a report by Human Rights Watch. and civil service wages. In 2018, the government discontent, the new president is expected to overly ambitious, with an overestimation of Finally, the country’s performance in terms of the aims to reduce the public deficit by half, to 4% of quickly find solutions to the economic crisis. To copper-related income in the context of ever government’s effectiveness and the fight against GDP, but this already unlikely scenario suffers do this, dialogue with international donors and growing expenditure. Effectively, the cuts in corruption is still poor. from the government’s inability to reduce bilateral partners could be resumed to allow the subsidies on energy prices are unlikely to offset spending. With almost 90% of spending allocated country to benefit from aid, which has become the increased civil service wage bill following to the wage bill in 2018, the government’s indispensable. The president also intends to win the recent round of recruitment. Public debt has room for leeway on the budget will remain back the confidence of foreign investors who risen sharply (60% in 2016, compared with 35% limited. Moreover, the slowdown in activity fled the country, mostly because of Mr Mugabe’s of GDP in 2014), driven by the growth in external and the organisation of the 2018 presidential management. The 2018 elections promised by debt (60% of public debt at end 2016) and the elections will adversely affect revenues as Mr Mnangagwa, and the conditions under which sharp depreciation of the Zambian kwacha in well as spending. The public debt will continue they will be run, could therefore be a test for the 2015. Nevertheless, higher copper prices will help to rise in the absence of fiscal reform and firmness of the Crocodile’s commitments. consolidation. Authorities will continue to make use of the domestic market, thus weakening

236 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 237 GLOSSARY GLOSSARY

CIS: Commonwealth of Independent States G20: A group of the heads of state or of A M R V government, finance ministers and central CLS: Continuous Linked Settlement ACA: Affordable Care Act (also known bank governors of 19 countries: Argentina, MDRI: Multilateral Debt Relief Initiative R&D: Research and Development VAT: Value Added Tax System as Obamacare) Australia, Brazil, Canada, China, France, MERCOSUR (or MERCOSUL): South COFFI: Committee on Forests and the Germany, India, Indonesia, Italy, Japan, ADB: Asian Development Bank American Common Market - includes Forestry Industry South Korea, Mexico, Russia, Saudi Arabia, S W Argentina, Brazil, Uruguay, Paraguay AfDB: African Development Bank South Africa, Turkey, the United Kingdom, COLA: Cost of Living Allowance the United States, and the European and Venezuela. SACU: South African Customs Union of five WAEMU: West African Economic Afreximbank: African Import-Export Bank southern African countries (South Africa, and Monetary Union CPEC: China-Pakistan Economic Corridor Union. The G20 was officially created in Lesotho, Botswana, Namibia, Swaziland), AFTA: ASEAN Free Trade Area September 1999 WB: World Bank CSG: Contribution Sociale Généralisée N created in 1969 (Generalised Social Contribution) GAFTA: Greater Arab Free Trade Area AGOA: African Growth and Opportunity Act - NAFTA: North American Free Trade Area SADC: Southern African Development WTO: World Trade Organization allows sub-Saharan African Country that GCC: Cooperation Council for the Arab Community are part of the scheme to export duty-free States of the Gulf, known as the Gulf NAHB HMI: National Association of Home on the American market. E Cooperation Council Builders Housing Market Index SCFI: The Shanghai Shipping Freight Index reflects the export rate of the containers AIIB: Asian Infrastructure Investment Bank - EAC: East African Community GDP: Gross Domestic Product NATO: North Atlantic Treaty Organisation transportation. It includes freight rate multilateral financial institution created in (Shanghai) indices of 15 maritime roads and 2014 to address infrastructure needs in EBRD: European Bank for Reconstruction GNP: Gross National Product (El) Niño/(La) Niña: Large-scale oceanic and Development phenomena in the equatorial Pacific, a composite index (Freight indices reflect Asia, which has since expanded to include GRAINE: Gabonaise des Réalisations the maritime freight and other maritime members on all continents. affecting wind regimes, sea temperature ECB: European Central Bank Agricoles et des Initiatives des Nationaux and precipitation. At the global level, road taxes payable in cash) Engagés (Gabonese Initiative for Achieving AMISOM: African Union Mission in Somalia ECF: Extended Credit Facility - IMF the average temperature tends to be SDR: Special Drawing Right Agricultural Outcomes with Engaged abnormally high in the years concerned APEC: Asia-Pacific Economic Cooperation programme that provides financial assistance to countries with protracted Citizenry) by these episodes. SEPA: Single Euro Payments Area AQIM: Al-Qaeda in the Islamic Maghreb balance of payments problems. The IMF’s GST: Goods and Services Tax SME: Small- and Medium-sized Enterprises main tool for providing support to low- ASEAN: Association of Southeast Asian income countries, created under the PRGT O SOCAR: State Oil Company of Azerbaijan Nations Republic ECOWAS: Economic Community of West H ODA: Official Development Assistance AU: African Union African States SOFAZ: State Oil Fund of Azerbaijan HDI: Human Development Index created OECD: Organisation for Economic EEU (or EAEU): Eurasian Economic Union by the UN Cooperation & Development SWIFT: Society for Worldwide Interbank B HIPC: Heavily Indebted Poor Countries Financial Communication - an organisation EFSD: Eurasian Fund for Stabilization and OPEC: Organisation of Petroleum Exporting with a system for the electronic transfers B2B: Business-to-Business Development (Initiative) - initiated jointly in 1996 by Countries the IMF and the World Bank to provide of funds between member banks in Europe BALTICF: Baltic Exchange Dry Index EFTPOS: Electronic Funds Transfer at Point debt relief and low interest loans to reduce OSCE: Organisation for Security and and North America (BALTICF) - Maritime transport price index of Sale to the external debt burdens of these Co‑Operation in Europe that takes into account 3/4 of ore and 1/4 EIA: US Energy Information Administration countries to a sustainable level. of loose agricultural products flow T EIB: European Investment Bank HOPE (act): Hemispheric Opportunity P BEAC: Banque des Etats de l’Afrique through Partnership Encouragement. TANAP: Trans-Anatolian Natural Gas Centrale (Bank of Central African States) EITO: European IT Observatory Pacific Alliance (Alianza del Pacifico): Trade Pipeline agreement including Chile, Colombia, Peru TAP: Trans Adriatic Pipeline EMU: Economic and Monetary Union I and Mexico C EU: European Union TPP: Trans-Pacific Partnership IATA: International Air Transport Association Paris Club: Official creditor’s informal CAFTA-DR: Dominican Republic-Central grouping TTIP: Transatlantic Trade and Investment ICC: International Criminal Court Partnership America FTA F PDVSA: Petróleos de Venezuela, S.A. CAR: Central African Republic ICJ: International Court of Justice (Petroleum of Venezuela) - Venezuelan FAO: United Nations Food and Agriculture state-owned oil and natural gas company CARICOM: Caribbean Community Organisation ICSID: International Centre for Settlement U of Investment Disputes Petrocaribe: Energy cooperation agreement and Common Market - Organisation UK: United Kingdom of Great Britain and bringing together 15 Caribbean states or FARC: Fuerzas Armadas Revolucionarias de between Caribbean countries and Colombia (Revolutionary Armed Forces of ICT: Information and Communication Northern Ireland dependencies with the aim of economic Technology Venezuela enabling the former to buy oil integration Colombia) on preferential terms UN: United Nations IMF: International Monetary Fund CARIFORUM: Caribbean Forum of African, FDA: US Federal Drug Agency PPP: Public-Private Partnership UNASUR: Union of South American Nations Caribbean and Pacific states (ACP) linked FDI: Foreign Direct Investment PRGT: Poverty Reduction and Growth to the European Union L UNECE: United Nations Economic Fed: Federal Reserve of the United States Trust - IMF’s special low-interest lending Commission for Europe programme for poor countries with CBO: Congressional Budget Office LNG: Liquefied Natural Gas FOMC: Federal Open Market Committee structural balance of payments difficulties UNMIL: United Nations Mission in Liberia CDF: Cancer Drug Fund London Club: Informal group of private bank FTA: Free Trade Agreement PVC: Polyvinyl Chloride US(A): United States (of America) CEMAC: Central Africa Economic and creditors that deals with public sector debt Monetary Community USDA: United States Department of Agriculture CETA: Comprehensive Economic and Trade G Agreement (EU-Canada) G5 Sahel: Institutional framework for CICE: Crédit d’impôt pour la compétitivité et development and security cooperation l’emploi (Competitiveness and Employment regrouping Burkina Faso, Mali, Mauritania, Tax Credit) Niger and Chad

238 COFACE Country & Sector Risks Handbook 2018 COFACE Country & Sector Risks Handbook 2018 239 Design and production: INCREA Printed in France by: Imprimerie de Champagne - Rue de l’Étoile de Langres Z.I les Franchises - 52200 Langres Legal deposit January 2018