Euro wobbles heighten export risk

Finance-iconEconomic turmoil in Europe means some of the continent's biggest nations now offer greater risk of non-payment to exporters, while emerging European economies now appear less attractive trade destinations.

Europe’s economic wobbles have made several of Australia’s important export markets a riskier trading propositions, according to the latest export risk assessment by trade services company Coface.

Coface rates nations’ suitability as trading partners on a seven-step scale and assesses nations based on their payment performance, political risks and other factors.

The company says it “has noted a clean break in companies’ payment behaviour in the second half of 2011, with a sharp rise in non payments. For 2011 as a whole, Coface recorded a 19% rise in payment incidents worldwide, with a particularly marked increase (28%) for companies in the Euro zone.”

“In 2012, the combination of significantly weaker growth in Europe with the drying up of credit facilities could significantly affect the companies’ credit risk”, said François David, Coface’s President.

With the Euro Zone expected to contract and Spain and Italy now in profound recessions, Coface has downgraded both to A4 status – the lowest of its four A-level ratings – as it has observed a 50% increase in “payment incidents in the two countries since the start of 2011.”

Thankfully, neither nation is among Australia’s top ten trading partners. But Coface also points out that Europe’s emerging economies, which have been tipped by many to represent new markets, are now a greater risk. The company has therefore downgraded the Czech Republic, Slovenia, Slovakia, Hungary and Croatia, all of which it says now represent greater risk of non-payment for exporters.

North African nations are now also less safe for exporters. Egypt has earned the second-lowest rating – a C – while Syria and Nigeria have bottomed out with ratings of D.


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