Worse Coface ratings for China and Russia

For the first time in its history, Coface is advising investors to be cautious all over the world. China and Russia have also been placed on the negative monitoring list. In Hungary, the number of insolvent companies has doubled in the last four years. 22 countries have received worse ratings than in the past. The value of the Coface insolvency index has risen by 50 percent in 2007-2008. In Hungary, 2008 was a record year for bankruptcies. The financial crisis reached a new dimension in the fourth quarter of 2008, when recession hit countries like Germany. The present crisis is regarded as similar to those seen in the early 1980’s and the 1990’s. According to a forecast by Coface, the Chinese economy will grow by 7 percent in 2009. Surveys about the payment morale of Chinese companies clearly show the effects of murderous competition in the competitive sector. The slowing down of growth will lead to an increase in the number of bankruptcies. This is why China has been placed on a negative monitoring list with a rating of A3, while the rating for Taiwan and Hong Kong has also been reduced to A2. Coface expects 2.5 percent economic growth in Russia in 2009. Payment morale has also deteriorated here, especially as a result of deficiencies in management, which has also been taken into consideration in determining a rating of B. Foreign debts of Russian companies have grown by 140 percent since 2005. There is not much reason for optimism in Hungary. The number of insolvent companies has doubled in four years, with 4 percent of companies becoming insolvent in 2008. Deterioration is certain to continue in the first half of 2009 and there are doubts regarding the positive change expected by many in the second half.