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Weekly Export Risk Outlook: Argentina, China, Eurozone and Ghana



​China: GDP supported by stimulus

Economic growth remained within the authorities’ target, helped by supportive macro-policies. Real GDP increased by +6.7% y/y in Q3 supported by the tertiary sector (+7.6% y/y). Demand wise, government and households expenditures were the main drivers. Retail sales continued to increase above +10% y/y in September. State investment remained strong (+21.1% YTD y/y in Jan-Sep) keeping overall investment growth (+8.2% YTD y/y) in a decent range. On the opposite, exports continue to disappoint with a significant contraction in USD denominated exports in September (-10% y/y). On prices, inflation edged up in September (+1.9% y/y from +1.3% in August) driven by a rise in food prices. More importantly, the producer price index increased by +0.1% y/y in September, after 54 months of y/y decline. Looking ahead, GDP growth is set to decelerate gradually to around +6.4% in 2017. On the upside, domestic demand will prove resilient thanks to active fiscal support and resilient private consumption. On the other hand, (i) weak overseas demand and (ii) a more cautious approach on credit expansion (to avert financial risks) would translate into weak private investment growth.

Ghana: Market friendly stabilization

Ghana’s GDP growth is losing pace but other news are currently quite good. GDP grew by +2.5% y/y during the 2nd quarter, among the weakest growth rates in a decade. But, Ghana benefited from welcomed evolutions. As foreign exchange reserves were very low (import cover structurally under 3 months of imports) and the current account deficit quite strong (weaker than -10% of GDP), the currency was hardly hit (depreciated by -50% between end-13 and mid-15) by a sudden stop in capital flows, and the inflation rate skyrocketed to about +20%. Since the country turned to the IMF and the Central Bank was tough (+1300 basis points to 26%), the situation is somewhat stabilizing. The IMF program and recovering private capital flows (USD 750 M Eurobond issuance in September) helped to cope with financing needs. Moreover, the recent decision implemented to allow more dollars from cocoa-exporters to be exchanged on the interbank dollar markets is welcomed. It will make dollar liquidity less scarce and stabilize the economy.

Eurozone: Investment drives credit demand from corporates

Credit demand in the Euro area continues to expand. According to the recent ECB October 2016 Bank Lending Survey, demand has increased across all loan categories in Q3 2016, largely driven by low interest rates. A net percentage of Euro area banks reported an increase in demand for corporate loans (+11%, measured as the difference between the share of banks reporting an increase in loan demand and the share of banks reporting a decline), pushed also by M&A activities. Both Germany and France have recorded a net increase (+6% and +54% respectively), while net declines have been registered in Italy (-13%) and Spain (-20%). As for demand for loans to households, the net increase across the Eurozone (+23%) remains above historical average, helped by stronger consumer confidence and by eased credit supply conditions. On the supply side, a substantial net percentage of Euro area banks continue to report narrowing margins on loans, in a context where ECB’s asset purchase program is also weighing negatively. Indeed, a larger net percentage of Euro area banks has reported a negative effect on net interest margins (-46%) than the net percentage of banks boasting capital gains (+19%).

Argentina: Inflation moderates amid anchored expectations

Inflation hiked to +1.1% m/m in September compared to a +0.2 % m/m increase in August. Recent figures have been driven by changes in regulated energy prices and a substantial reduction in seasonal item prices. Despite these components, inflation showed a downward trend. Excluding volatile items, inflation scored +1.5% m/m in September. This is another consecutive month of deceleration since the new series was launched in May. Bringing down inflation to its target rate remains challenging and our overall forecast for 2016 is +40.2% y/y. The Central Bank will reduce its reference rate in line with predicted changes in prices. Corporates and SMEs will benefit from lower interest rates on loans from the banking sector as inflation is expected to continue its descending path in the near-term. Ease of business' access to finance, together with the government's roadmap to get the economy back on its feet, could spur investment. These elements would come to strengthen our view that GDP will rebound in 2017 compared to our projection for 2016 of -1.1% y/y.