Coface upgrades Switzerland to top risk assessment rating

07 February 2024 09:19

Zurich CCGreater Zurich

Zurich/Paris - The trade credit insurance and risk management specialist Coface has upgraded Switzerland from A2 to A1 in its latest risk barometer. The reason for this is the relatively low inflation and the export focus on less price-sensitive products such as in the pharma and luxury sectors.

Coface assesses Switzerland as one of the countries with the lowest default risk for export credits. Accordingly, the global trade credit insurance and risk management specialist, which is headquartered in Paris but operates out of sites in Zurich and Lausanne in Switzerland, has upgraded Switzerland’s rating from A2 to A1 in its current risk barometer for countries and sectors.

Coface justifies this by stating that the Swiss inflation rate has been below the Swiss National Bank's 2 per cent target without interruption since June 2023. Coface also assumes that the Swiss inflation rate will remain below the SNB target in 2024. The Swiss National Bank (SNB) has raised interest rates “relatively mildly“ to 1.75 per cent and has left them at this level since June 2023. In addition, a chart on the development of individual sectors in Western European countries shows that the Swiss agri-food sector has been upgraded from high to medium risk. Only Italy and France are rated just as highly.

Of the 162 countries evaluated, Norway was previously the sole country in which Coface assessed the default risk as being very low (A1). In addition to Switzerland, Denmark was also upgraded to a rating of A1 as part of this most recent risk barometer. For its part, Belgium was upgraded to A2. The majority of European countries are rated at A3, with just a single country, namely Israel, being downgraded from A2 to A3.

Overall, after global economic growth of 2.6 per cent last year, Coface expects a growth rate of 2.2 per cent for the current year 2024 and points to the uncertainties in various regions of the world: “Geopolitical risks play an increasingly important role in economic risks. As these are almost impossible to predict, the uncertainty of economic forecasts remains extremely high,“ says Christiane von Berg, Coface economist for Switzerland, Germany and Austria.

Given that core inflation in the majority of developed economies remains at double the target rate set by the respective central banks, the report states that “the challenge for 2024 will be to see whether the restrictive monetary policy that has been underway for over 18 months is enough to go the last mile and bring inflation back to 2 percent. And to keep it there”. ce/mm

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