Coface has downgraded its 2013 growth forecasts for the eurozone and all of the BRIC economies after poor Q1 showings.

Overall, global growth remains weak, but the US and Japan have both been upgraded. Economic recovery in the US is slow but steady and experts are confident that the country is in a position to weather the sequester. Japan has been boosted by the much-heralded inflationary measures taken by Shinzo Abe, the country’s prime minister.

Coface’s chief economist Yves Zlotowski told delegates and GTR at the French insurer’s Country Risk conference that Brazil, Russia, India and China have all experienced disappointing growth so far this year, as “long term issues have become short-term problems”.

In Brazil, concerns over corruption, poor infrastructure and competitiveness persist. The country’s industrial output has stagnated. Wages have risen, but Brazil has failed to increase the amount of value-added products it is manufacturing, meaning unit costs are higher than they should be.

In China, there are concerns over the transparency of companies’ balance sheets, as well as the rise of shadow banking. It’s forecast that by the end of the year, Chinese companies will have combined debt amounting to 140% of GDP.

The levels of leverage could prove dangerous, but economists are not immediately worried. The Chinese government, with its huge cash reserves, often steps in to bail failing companies out. It’s unlikely that this model will change in the medium-term, with the government not keen to shake things up too much until the global economic picture looks a bit better.

JP Morgan estimates that China’s shadow banking system is worth US$6tn – 69% of its GDP. The figure has doubled over the course of two years. Rain Newton-Smith, head of emerging markets at Oxford Economics warned that the lack of regulation and transparency over the industry could create issues for those hoping to do business in China.

Russia, which has had a “terrible” Q1, continues to suffer from a lack of investment, with potential investors spooked by the high levels of capital flight and lack of both transparency and governance.

The eurozone crisis continues to groan on, with the region expected to contract in 2013. In most cases, austerity isn’t working, according to Zlotowski. Germany is the exception, since the case for austerity is stronger when a country’s growth comes from exports. Germany continues to issue more patents and keep unit costs low, since it manufactures value-add goods. For those reliant on internal consumption, as most of the eurozone is, cuts in spending deflate demand, leading to sluggish growth.

The result is that even the Germans aren’t immune to the recessional vortex that surrounds them. Coface has downgraded its German growth prediction, with the lack of demand from austerity Europe slowing its exports to the region.