Recovery too modest for ‘fragile’ Europe

The anticipated global economic recovery will be too modest to fully benefit many industries and countries around the world with Europe one of the biggest causes for concern.

That is the finding of a report by trade credit insurer Euler Hermes, which examines the risk profile of various countries and industries globally. It found that sector risks globally are better oriented since mid-2013 but that the anticipated 2014-2015 global economic recovery will be too modest and heterogeneous to fully benefit a majority of sectors all around the world.

“It will take some time for the global economic growth to feed through to the bottom lines of companies of all sizes and sectors, especially in still-fragile Europe,” said Ludovic Subran, chief economist, Euler Hermes. “In many sectors we do not foresee an accelerating recovery path in 2014.”

Euler Hermes monitors sector risks for 17 industries in 72 countries, representing 95 percent of worldwide GDP. Sector ratings (low, medium, sensitive and high risk) are established for each country and aggregate proprietary forecasts in demand, financing, profitability and the business environment.

In nine out of 10 cases, sector risks by country remain at 2013 levels. Overall, sectors rated “at risk” remain in the majority for 2014: 49 percent at medium risk and approximately 25 percent at sensitive or high risk. In other words, only 25 percent of sectors exhibit sound enough fundamentals or outlooks to begin 2014 with a low level of risk.

On a global scale, textile, construction and air transport sectors began 2014 with the highest level of risk, while chemicals, pharmaceuticals and agrifood kept their risk levels lowest.

“As a recovery starts to take shape, certain sectors plod sorely towards a future that is still much too uncertain,” the report said. “Even though sector risks seem to show an improvement in 2014, certain hotspots remain, in construction, the metal industry and retailing.”