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The credit insurer has warned that with the ongoing malaise in the European economy, companies heavily exposed to Europe continue to be a relatively risky investment. To that end, Coface has downgraded its risk assessment of corporates in Italy, Spain, Czech Republic, Poland and Slovenia.

Political tension has led to a downgrade of corporates in Ivory Coast, while the slow pace of reform has seen similar measures be taken against Indian companies. South Africa’s A3 assessment has been placed under negative watch, also due to political and social unrest.

Coface’s deputy chief economist Julien Marcilly tells GTR that the relative stagnation in the trade finance markets has had little impact on its assessments. He says: “The lack of support of trade finance has played a negligible role in our recent country risk assessment changes. To a large extent these changes have been driven by concerns on domestic demand and its impact on local companies in advanced economies such as Spain, Italy and Japan, not on lower export outlook.”

Marcilly explains that despite its downgrades, in some instances countries have seen their trade balance redressed in a positive fashion because of the crisis – “especially in Spain, where export growth has accelerated significantly on the back of lower labour costs”.

Japan, on the other hand, has been given a negative assessment, largely because of the poor export prospects. “Lower export prospects to China partly explain this negative watch,” explains Marcilly, “but other factors, such as SMEs’ fragility, play a role too.”

Key to a company’s ability to ride out the seemingly perpetual struggle gripping Europe is to diversify its trade routes. Marcilly uses Germany as a case in point: “Germany has benefited from more dynamic exports to emerging markets than other eurozone countries.

On the emerging market side, the bulk of countries have also suffered from sluggish activity in developed markets over the past year. But once again it turns out that countries benefiting from a more diversified export base such as Indonesia and Malaysia did better than emerging markets mostly exposed to the advanced economies’ economic cycle, such as the bulk of emerging European economies and Taiwan.”