This "DB" Rating Indicates: Low risk

Transcription

1 FRANCE Region : Western Europe Edition : March 2009 D&B Country Risk Indicator DB2a This "DB" Rating Indicates: Low risk Low degree of uncertainty associated with expected returns. However, country-wide factors may result in higher volatility of returns at a future date. Trend Deteriorating The country's overall risk profile is deteriorating owing to adverse political, commercial, economic and/or external developments The 'DB' risk indicator provides a comparative, cross-border assessment of the risk of doing business in a country and encapsulates the risk that country-wide factors pose to the predictability of export payments and investment returns over a two year time horizon. The 'DB' risk indicator is a composite index of four over-arching country risk categories: Political risk - internal and external security situation, policy competency and consistency, and other such factors that determine whether a country fosters an enabling business environment; Commercial risk - the sanctity of contract, judicial competence, regulatory transparency, degree of systemic corruption, and other such factors that determine whether the business environment facilitates the conduct of commercial transactions; External risk - the current account balance, capital flows, FX reserves, size of external debt and all such factors that determine whether a country can generate enough FX to meet its trade and foreign investment liabilities; Macroeconomic risk - the inflation rate, government balance, money supply growth and all such macroeconomic factors that determine whether a country is able to deliver sustainable economic growth to provide further expansion in business opportunities. The DB risk indicator is divided into seven bands, ranging from DB1 through DB7. Each band is subdivided into quartiles (ad), with an 'a' designation representing slightly less risk than a 'b' designation and so on. Only the DB7 indicator is not divided into quartiles.

2 Key Facts Country Overview: Population: 63.6m Surface area (sq km): 551,500 Capital: Paris Timezone: GMT +01:00 Official language: Head of state: GDP (USD): French President Nicolas SARKOZY 2.6trn GDP per capita (USD): 40,737 Life expectancy (years): 81 Literacy (% of adult pop.): 99.9 France has the largest surface area of any country in Western Europe. Its biggest neighbour (and main partner for trade and foreign policy) is Germany: these two founding members of the EU have long been the driving force behind European integration. France s domestic politics are characterised by fierce ideological differences between parties of the left and right. Trade unions form an important part of the French polity; their powers of public mobilisation give them a large role in opposing government policy. Economically, France is a prosperous country with a large industrial base, substantial agricultural resources and a highly skilled labour force. Productivity is extremely high by international standards, and many big French companies are leading global players in their markets. Nonetheless, the state has an influential role in the economy, reflected in extensive public services, a strong social safety net and world-class infrastructure. Trade & Commercial Environment Trade Terms Minimum Terms: OA The minimum form of documentation or trading method that D&B advises its customers to consider when pursuing export trade with the stated country. Recommended Terms: SD D&B's recommended means of payment. The use of recommended terms, which are generally more stringent than minimum terms, is appropriate when a customer's payment performance cannot be easily assessed or when an exporter may wish to limit the risk associated with a transaction made on minimum terms. Usual Terms: days Normal period of credit associated with transactions with companies in the stated country. Transfer Situation Local Delays: 0-2 months The time taken beyond agreed terms for a customer to deposit money in their local bank as payment for imports. FX/Bank Delays: 0-1 month The average time between the placement of payment by the importer in the local banking system and the receipt of funds by the exporter. Such delays may be dependent on FX controls, FX availability and the efficiency of the local banking system.

3 Trade & Commercial Environment The French government s EUR6bn support plan for the national car industry has been criticised for its protectionist tendencies. Neelie Kroes, the EU competition commissioner, and business leaders in Germany (France s key trade partner) have expressed reservations with regard to the plan s potentially competition-distorting provisions; car-makers Renault and Peugeot-Citroen will receive EUR3bn each in preferential loans in return for maintaining jobs and production sites in France. In recent years, the French car industry has suffered a loss of competitiveness as high costs and overcapacity have made production in France less attractive than in some Eastern European countries, such as the Czech Republic or Slovakia. Export Credit Agencies US Eximbank Atradius ECGD Euler Hermes UK Full cover available Full cover available Full cover available Full ST cover available Economic Indicators e 2009f 2010f Real GDP growth, % Inflation, annual ave, % Govt balance, % GDP Unemployment, % C/A balance, % GDP "Payments Performance" chart reflects experiences of EU rather than US companies; European average refers to payments from France, Germany, Italy, the Netherlands, Spain and UK. Currency Information Exchange Rates (London, 16 Feb 09) GBP JPY* USD *(x 100)

4 Local Currency (Euro [EUR]:USD) Local Currency (Euro [EUR]:USD) Sep 08 Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Week Week Week Week Week Payments Performance Payments Performance (% of payments made 30 or more days over terms) Data Table Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q

5 Risk Factor According to the latest data from the national statistics office (INSEE), the French economy contracted sharply in Q Output in real terms shrank by 1.2% quarter on quarter (q/q) in Q4, following meagre growth of 0.1% in Q3, a contraction of 0.3% in Q2 and an expansion of 0.4% in Q1. Overall, this took the annual growth rate in 2008 to only 0.8%, which compares unfavourably with an annual average growth rate of 2.2% between 2004 and The quarterly contraction in Q4 was the sharpest recorded since the data series began in the 1970s. The data breakdown reveals that the fall in exports (-3.7% q/q) outpaced the decline in imports (-2.2%), leading to a net detraction of foreign trade from growth of 0.3 percentage points in Q4. This reflects the dramatic deterioration in demand in France s trade partners, particularly in Germany, Italy and Spain; other EU countries receive around two-thirds of French exports. Domestic demand also remained weak, although private consumption rose by 0.5% q/q, up from only 0.1% in both Q2 and Q3. Low inflation is likely to have supported consumer spending, with the harmonised inflation rate falling to just 1.2% in December, down from 1.9% in November and compared with an annual average of 3.2% in 2008 as a whole. Meanwhile, gross fixed capital formation declined by 1.1% q/q in Q4, the third consecutive quarterly contraction, with credit conditions remaining weak and business confidence plummeting. Worryingly, capacity utilisation has fallen from 82.2% in October to 75.8% in January, the largest decline ever recorded. We do not see much reason for optimism with regard to France s economic prospects in Unemployment has risen since August 2008 and is likely to accelerate in This, along with falling house and equity prices, will harm household purchasing power and will more than offset the positive effects of falling inflation. Hence, consumer spending will weaken in the course of Meanwhile, investment growth will deteriorate amid tighter lending conditions and weak business confidence. Exports will continue to slide as demand from other EU countries is unlikely to pick up before late D&B believes that a large drop in real GDP will be recorded in 2009, while lower interest rates and inflation, the government s fiscal stimulus and rising global demand will contribute to a small recovery in Downside risks to this projection stem from uncertainties about credit conditions and about the speed and scale of a recovery in global demand, as well as the possibility of a harmful deflationary spiral (although the latter is unlikely, despite plunging inflation). There is also a risk of further public unrest paralysing the country in response to the economic downturn, following a national strike in late January. Glossary & Definitions DEFINITIONS Minimum Terms: The minimum form of documentation or trading method that D&B advises its customers to consider when pursuing export trade with the stated country. Recommended Terms: D&B's recommended means of payment. The use of recommended terms, which are generally more stringent than minimum terms, is appropriate when a customer's payment performance cannot be easily assessed or when an exporter may wish to limit the risk associated with a transaction made on minimum terms. Usual Terms: Normal period of credit associated with transactions with companies in the stated country. Local Delays: The time taken beyond agreed terms for a customer to deposit money in their local bank as payment for imports. F/X Bank Delays: The average time between the placement of payment by the importer in the local banking system and the receipt of funds by the exporter. Such delays may be dependent on FX controls, FX availability and the efficiency of the local banking system. C/A (current account) balance, % GDP:

6 Part of the balance of payments that records a nation's exports and imports of goods and services, and income and transfer payments. DSR (debt service ratio), %: Annual interest and principal payments on a country's external debts as a percentage of exports of goods and services. Govt balance, % GDP: The balance of government expenditure and receipts. Real GDP growth, %: GDP adjusted for inflation. Inflation, %: The increase in prices over a given period. GLOSSARY CiA CLC CWP FX LC LT MT OA SD ST Cash in Advance Confirmed Letter of Credit Claims Waiting Period Foreign Exchange Letter of Credit Long term Medium term Open Account Sight Draft Short term Customer Service & Support Copyright 2008 Dun & Bradstreet - Provided subject to the terms and conditions of your contract. D&B Country Risk Services For information relating to D&B s Country Risk Services. UK Telephone: Fax: CountryRisk@dnb.com USA Inquiry Telephone: ext 7002 CountryRiskServices@dnb.com Rest of World Telephone: CountryRisk@dnb.com D&B Customer Services For all other information or queries relating to D&B products and services. UK Telephone: (UK) / (IR) CustomerHelp@dnb.com USA Telephone: CustomerService@dnb.com Rest of World You can contact your local D&B Customer Services departments by clicking here. Whilst D&B attempts to ensure that the information provided is accurate and complete, by reason of the immense quantity of

7 detailed matter dealt with in compiling the information and the fact that some of the data are supplied from sources not controlled by D&B which cannot always be verified, including information provided direct from the subject of enquiry as well as the possibility of negligence and mistake, D&B does not guarantee the correctness or the effective delivery of the information and will not be held responsible for any errors therein or omissions therefrom. Dun & Bradstreet Inc., 2008.