Every quarter, Euler Hermes publishes its country and sector risk ratings to measure the development of non-payment risk in trade receivables. We monitor and evaluate a total of 242 countries and 18 sectors every quarter through continuous tracking of 40 short-term and long-term economic and financial indicators. The defaults in Argentina and Lebanon these last few months confirm the necessity of the country risk model in order to measure the vulnerabilities that a crisis, such as the Covid-19 outbreak, can expose.
In the first quarter of 2020, Euler Hermes lowered the grade of 18 countries: Ecuador, Thailand, Indonesia, lndia, United Arab Emirates, Kuwait, Morocco, Kenya, Ghana, Mauritius, Czech Republic, Poland, Romania, Ireland, Slovakia, and Latvia. This list includes both developed and developing economies. For instance, Brazil is paying dearly in this global economic and health crisis, despite initial hopes that dynamic reforms would accelerate growth. Similarly, Japan, which was already fragile at the start of 2020 following several shocks last autumn, now sees its weaknesses made worse with the Covid-19 pandemic. India is also on the list: The country was already facing numerous structural and cyclical challenges, and these are now being amplified by the current situation.
“The visible and potential consequences of the Covid-19 pandemic are integrated into our country risk analysis. We are still paying attention to the situation of other developed countries, notably France, Germany, Spain, and the United States. These countries have the necessary means to protect their businesses but their situation could rapidly become more complicated should their measures of isolation and the freezing of their economies last longer”, warns Ludovic Subran, Chief Economist of Euler Hermes and Allianz.