This global improvement will not be risk-free. Coface warns of three major risks:
1. Greater supply constraints in advanced economies
From the second half, the issue of overheating will be particularly relevant for companies in advanced countries. Historically low levels of unemployment in Germany, the United States and Central Europe indicate that companies are close to their maximum production capacity. This supply issue is shared with French companies, paradoxically facing a labour shortage despite high levels of unemployment, which could limit their growth.
2. Banking risk still present in China
Temporarily hidden in 2016 and 2017 as a result of public investment, the structural weaknesses in the Chinese economy are resurfacing: overcapacity in steel and soaring corporate debt in the form of bank credit and shadow banking. In this context, banking risk increases significantly, especially for small and medium-sized banks.
3. Political risk under watch in the context of a busy electoral calendar
A resurgence of political risk cannot be ruled out in 2018. Social frustrations are still high in emerging countries at the beginning of a busy election year and are accompanied by high Coface social turmoil risk index levels in Iran (71%), Lebanon (65%), Russia (64%), Algeria, Brazil and Mexico (61% each). In the Middle East, this risk is exacerbated by the volatility of oil prices.Saudi Arabia is also marked by a high level of risk in this respect (score of 65%) and Coface has lowered its assessment of the country to C.
Full report on the 2018 Country Risk Conference -> COUNTRY RISK CONFERENCE. 2018: THE UPTURN CONTINUES, BUT CORPORATES RISK OVERHEATING