Keeping in mind the development of the economic environment and the results of the activities of state companies, the crisis in Southern Europe has caused a drop in business environment evaluation in a number of countries. It changed from A4 to A4- with a negative tendency for Spain and Italy; from B to C from Cyprus and from A2 to A3 for The Czech Republic, international credit risk insurance company Coface reports.

The Head of Coface Latvia Maris Lukins reports that Latvia’s evaluation retains a positive tendency: «Latvia’s business risk assessment currently remains on B level, but it can still change in a positive direction in the future. This shows that the business environment in Latvia is improving: business deal volumes are increasing, business environment is becoming more secure.»

Meanwhile, Southern European countries feel the negative effects of the crisis, which strongly affected the reduction of business environment evaluation. Spain felt a steep economic drop in the first quarter of 2012 because of factors such as drops in production and service sectors, 30% housing price reduction and unemployment rate increase (24%). Late payments and bankruptcy in Spain has increased not only in construction but also in agriculture and other industries. The slow growth prevents any debt reduction possibilities.

GDP keeps decreasing in Italy for the third quarter in a row, and has already decreased by 0.8% in the first quarter of 2012. Activity decreases in the manufacturing sector, unemployment has reached 10.2%. Solvency of Italian companies keeps worsening at a frightening rate, especially in industries such as metallurgy, agriculture, construction and textile manufacturing.

Cyprus, on the other hand, has become the fifth country to ask for financial aid for Eurozone countries. Debt size in the private sector is the largest in Europe (311% from GDP), but corporate debt has reached 186% from GDP. Construction industry continues to stagnate after the rupture of the property bubble; oil and chemical industry also failed to recover from disruptions in the field of energy supply.

Looking at countries of other regions of the world, a positive tendency is seen in Indonesia (from B to B with a positive tendency for the future), Nicaragua (from D to C), Côte d’Ivoire (from D to D with appositive tendency). Business environment value in India decreased from A3 to A3 with a negative tendency, Argentina (from B to C) and in Guatemala (from C to B).

Ref: 102.109.109.2536