GLOBAL ECONOMIC OUTLOOK JULIEN MARCILLY CHIEF ECONOMIST GLOBAL - - PowerPoint PPT Presentation

GLOBAL ECONOMIC OUTLOOK

JULIEN MARCILLY CHIEF ECONOMIST

GLOBAL POLITICAL RISK: « STRONGMANIA » AND ITS CONSEQUENCES

Unemployment, perceived inequalities and corruption « Weak » institutions Abstention, protesting votes, rise of « Strong » leaders Bad economic policies, lack of structural reforms Weak economic growth

2

MORE AND MORE WORRIES ABOUT TRADE PROTECTIONISM

Monthly Use of the word "Protectionism" in Google Search (index, 12-month moving average)

20 25 30 35 40 45 50 2004-01 2005-01 2006-01 2007-01 2008-01 2009-01 2010-01 2011-01 2012-01 2013-01 2014-01 2015-01 2016-01 2017-01 2018-01

3 Sources: Google trends

PROTECTIONISM: PERCEPTION VERSUS REALITY

Net number of existing protectionist measures in the world (source: Global Trade Alert)

5000 10000 15000 20000 25000 30000 35000 40000 45000 2010 2011 2012 2013 2014 2015 2016 2017 2018 (Aug.)

4

PROTECTIONISM IS ON THE RISE, BUT NOT EVERYWHERE

Sources: GTA, Coface estimates

Net % of imports affected by existing protectionist measures in 2017

5 Sources: GTA, Coface estimates

WORLD TRADE: USUAL DRIVERS ARE STILL AT PLAY

GDP per capita (as a % of US)

Sources: World Bank

0% 10% 20% 30% 40% 50% Bangladesh India South Af. Brazil China Mexico Russia 2000 2016

6

TRADE UNCERTAINTIES WEIGH ON BUSINESS CONFIDENCE IN THE EUROZONE

Business confidence (manufacturing sector)

45 47 49 51 53 55 57 59 61 63 65 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Eurozone Germany France Italy Spain Greece Netherlands

Source : Markit

7 Source: Markit

EUROZONE: “ZOMBIE” COMPANIES AT RISK IN CASE OF HIGHER INTEREST RATES

France Germany Italy Spain

3,9 4,2 4,0 4,6 2,9 3,2 3,8 3,7 5,9 6,6 6,4 5,3 10,3 9,3 7,7 6,2 2 4 6 8 10 12 2013 2014 2015 2016 France Allemagne Italie Espagne

Share of “zombie companies” (as a % of the total) Criteria used:

• 1. Unlisted companies

created before 2010

• 2. Non-profitability: negative return rate
• n invested capital or rate between 0%

and 1% over three consecutive years

• 3. Non-solvency: interest coverage ratio

(EBIT/ interest paid) less than 1 over three consecutive years

Source : Coface calculations, Orbis. EBIT: Earnings Before Interest & Tax 8

COFACE SECTOR RISK ASSESSMENTS: WESTERN EUROPE

9

EMERGING MARKETS – KEY CHANGE #1: HIGHER OIL PRICES

Oil exporters: fiscal breakeven price (USD, source: IMF)

72,08 81,20 20 40 60 80 100 120 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 USD

Brent & WTI Oil Prices

WTI Brent

Last data point: 11/09/2018 Source: Thomson Reuters

47 48 54 61 62 72 77 80 88 106 113 133 20 40 60 80 100 120 140 Qatar Kuwait Iraq Kazakhstan Azerbaijan UAE Oman Turkmenistan Saudi Arabia Algeria Bahrain Libya

10

EMERGING MARKETS – KEY CHANGE #2: CAPITAL OUTFLOWS …

• 70
• 60
• 50
• 40
• 30
• 20
• 10

10 20 30 40 50 60 70 01-07 01-08 01-09 01-10 01-11 01-12 01-13 01-14 01-15 01-16 01-17 01-18

Fed's "Taper tantrum" China Lehman crisis

Net purchases of stocks and bonds by non-residents in 25 EM (Bn USD, source: IIF)

11

… PUT CURRENCIES UNDER PRESSURE

90 100 110 120 130 140 150 160 170 180 190 200 210 01-18 02-18 03-18 04-18 05-18 06-18 07-18 08-18

Emerging Market Currencies (100= January 2018)

Turkish Lira Russian Ruble Indian Rupee Argentina's peso South Africa Rand Brazilian Real

Source: Thomson Reuters

Last data point: August 30

Source: Thomson Reuters

12

COFACE COUNTRY ASSESSMENTS

13

• This document is for marketing purposes by Coface.
• Unless otherwise stated, references to the “Group” or the “Coface Group” are references to COFACE SA and its subsidiaries, branches and holdings. The chief operating subsidiary of the

Coface Group is Compagnie française d’assurance pour le commerce extérieur. This subsidiary, which is 100% owned by COFACE SA, is a French société anonyme, with a share capital of €137,052,417.05, and registered with the Nanterre Trade and Companies Registry under company number 552 069 791.

• The information contained in this presentation has not been subject to independent verification. No representation, warranty or undertaking, express or implied, is made as to, and no reliance

should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein. None of the Coface Group, its affiliates or its advisors, nor any representatives of such persons, shall have any liability whatsoever for any loss arising from any use of this document or its contents or otherwise arising in connection with this document or any other information or material discussed.

• As binding information exists the Q1-2017 Consolidated Financial Statements and complete this information with the Registration Document for the year 2016. The Registration Document for

2016 was registered by the Autorité des marchés financiers (“AMF”) on April 12th, 2017 under the No. R.17-016. These documents all together present a detailed description of the Coface Group, its business, strategy, financial condition, results of operations and risk factors.

• This presentation contains certain forward-looking statements. Such forward looking statements in this presentation are for illustrative purposes only. Forward-looking statements relate to

expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements are based on Coface Group’s current beliefs, assumptions and expectations of its future performance, taking into account all information currently available. The Coface Group is under no obligation and does not undertake to provide updates of these forward-looking statements and information to reflect events that occur or circumstances that arise after the date of this document.

• Forward-looking information and statements are not guarantees of future performance and are subject to various risks and uncertainties, many of which are difficult to predict and generally

beyond the control of the Coface Group. Actual results could differ materially from those expressed in, or implied or projected by, forward-looking information and statements. These risks and uncertainties include those discussed or identified under paragraph 2.4 “Report from the Chairman of the Board of Directors on corporate governance, internal control and risk management procedures” (Paragraphe 2.4 “Rapport du président sur le gouvernement d’entreprise, les procédures de contrôle interne et de gestion des risques”) and Chapter 5 “Main risk factors and their management within the Group” (Chapitre 5 “Principaux facteurs de risque et leur gestion au sein du Groupe”) in the Registration Document.

• This document contains certain information that has not been prepared in accordance with International Financial Reporting Standards (“IFRS”). This information has important limitations as an

analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under IFRS.

• More comprehensive information about the Coface Group may be obtained on its Internet website (http://www.coface.com/Investors).
• This document does not constitute an offer to sell, or a solicitation of an offer to buy COFACE SA securities in any jurisdiction.

14 COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY

DISCLAIMER