POSSIBLE IMPACT OF COVID-19

ON THE ECONOMY

GRZEGORZ SIELEWICZ
Economist Central & Eastern Europe

18th March 2020

COFACE WEBINAR: IMPACT OF COVID-19 ON THE ECONOMY

YOUR HOST Questions?

Grzegorz Sielewicz Please submit any questions in

the Questions Panel.

Economist Central & Eastern Europe Your host will answer them at the end of the
grzegorz.sielewicz@coface.com presentation.

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COVID-19: THE BIGGEST THREAT FOR THE GLOBAL ECONOMY
NOVEL CORONAVIRUS OUTBREAK

Total confirmed coronavirus cases worldwide Daily new confirmed cases of coronavirus
As of March 9, 2020 As of March 9, 2020

3 COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY
CHINA GROWTH TO SLOW FASTER THAN EXPECTED
STRUCTURAL HEADWINDS, TRADE WAR, COVID-19

China: GDP Scenarios

16

14

12

10

0
Real GDP YOY Baseline Risk
-2

Source: NBS and Coface

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PROBLEMS WITH CHINA DATA FOR JAN-FEB
WE ARE KEPT IN A BLACK BOX FOR NOW…

China: Main activity trackers China: Alternative high frequency indicators

18 55 25

16

50 0
14

12
45 -25
10

8
40 -50
6
Caixin PMI
4
35 NBS Manufacturing PMI -75

2 Industrial Production YoY Retail Sales YoY Auto sales YOY %

0 30 -100
Apr-14
Aug-14
Dec-14
Apr-15
Aug-15
Dec-15
Apr-16
Aug-16
Dec-16
Apr-17
Aug-17
Dec-17
Apr-18
Aug-18
Dec-18
Apr-19
Aug-19
Dec-19

Sep-17
Nov-17

Sep-18
Nov-18

Sep-19
Nov-19
Mar-17

Jul-17

Mar-18

Jul-18

Mar-19

Jul-19
May-17

May-18

May-19
Jan-18

Jan-19

Jan-20
Source: NBS, Bloomberg and Coface Source: NBS, Markit, Bloomberg and Coface

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CHINA IS MORE INTEGRATED IN THE GLOBAL ECONOMY
COVID-19 WILL HAVE A LARGER ECONOMIC IMPACT THAN THE SARS EPISODE IN 2003

Share of China in world (%)

Source: OECD

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CORONAVIRUS TO IMPACT GLOBAL SUPPLY CHAINS
SE ASIA MOST EXPOSED DOWNSTREAM; KOREA AND JAPAN UPSTREAM

Downstream and upstream exposures to supply chain disruptions

due to coronavirus capacity closures in China
40%

35%

30%

25%

20%

15%

10%

5%

0%
Cambodia South Vietnam Japan Australia Malaysia Indonesia Philippines Chile Russia Peru South New India Colombia Brazil Argentina
Korea Africa Zealand

Downstream Upstream Source: OECD and Coface

NB: Downstream is defined as gross imports of intermediate goods from China as a percentage of total gross imports of intermediate goods. Upstream is defined as gross exports of intermediate goods to China as a
percentage of total gross exports of intermediate goods

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COVID-19: WHAT IMPACT FOR BUSINESSES?
NOVEL CORONAVIRUS OUTBREAK

Share of all intermediate products imported from China, Central European countries: Share of all intermediate
By country products imported from China, by country

8 COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY
COVID-19: WHAT IMPACT FOR BUSINESSES?
NOVEL CORONAVIRUS OUTBREAK

Central European countries: Share of China among gross

intermediate manufactured goods imports (1)

9 COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY
COVID-19: WHAT IMPACT FOR BUSINESSES?
NOVEL CORONAVIRUS OUTBREAK

Central European countries: Share of China among gross

intermediate manufactured goods imports (2)

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TRANSPORT SECTOR
COVID-19 IS A HARD HIT TO THE SECTOR

Knock on effects of COVID-19 on freight

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AUTOMOTIVE SECTOR
COVID-19 DISRUPTIONS ADD TO A YEAR OF WOES

Monthly annualized net debt ratio Monthly annualized net margin

50 10
Global Carmakers Net Debt Ratio Global Carmakers Net Margin

45 Global Car Parts Makers Net Margin

Global Car Parts Makers Net Debt Ratio 8

40 Global Tires Makers Net Margin

Global Tires Makers Net Debt Ratio
6
35

4
30

25 2

20
0

15
-2
10

-4
5

0 -6

Q1 2000
Q1 2001
Q1 2002
Q1 2003
Q1 2004
Q1 2005
Q1 2006
Q1 2007
Q1 2008
Q1 2009
Q1 2010
Q1 2011
Q1 2012
Q1 2013
Q1 2014
Q1 2015
Q1 2016
Q1 2017
Q1 2018
Q1 2019
Q1 2000
Q1 2001
Q1 2002
Q1 2003
Q1 2004
Q1 2005
Q1 2006
Q1 2007
Q1 2008
Q1 2009
Q1 2010
Q1 2011
Q1 2012
Q1 2013
Q1 2014
Q1 2015
Q1 2016
Q1 2017
Q1 2018
Q1 2019

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TRACKING THE EPIDEMIC: ITALY AHEAD OF THE CURVE, NEIGHBORS FOLLOWING
T0= DAY ON WHICH NEW CASES REACHES 100

Other major European economies are broadly following the progression in Italy, with Spain showing strong momentum
Italy had been progressing similarly to South Korea, but kept growing exponentially in the third week of the outbreak while Korea
stabilized. South Korea has been the most thorough country for testing.

New confirmed cases per day Total Confirmed cases

4000 25000
Italy Korea Italy Korea
3500
20000
3000 Spain France Spain France

2500 Germany 15000 Germany

2000

1500 10000

1000
5000
500

0 0
1 3 5 7 9 11 13 15 17 19 21 23 1 3 5 7 9 11 13 15 17 19 21 23

Source: Johns Hopkins CSSE, Coface Source: Johns Hopkins CSSE, Coface

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ITALY: DOMESTIC OUTBREAK SHOCK
DEMAND SHOCK: A BLOW TO SERVICES

For a number of service sectors, the epidemic means several months of lost revenue that will not be compensated even if the
rest of the economy sees a « v-shaped recovery »

Italy: GVA as a share of GDP Exposed services* GVA as a share of GDP

30%
Agriculture, forestry and fishing 1,90% 25,80%
25% 23,00%
Arts, entertainment and recreation; other service activities 3,60%
20% 18,30% 18,00%
Construction 3,90% 15%

Manufacturing 14,90% 10%

Wholesale and retail trade, transport, accommodation and food 5%

service activities 19,40%
0%
0% 5% 10% 15% 20% Spain Italy France Germany

Sources: Eurostat, Coface Sources: Eurostat, Coface

*:Wholesale and retail trade, transport, accommodation and food service activities, rts, entertainment and
recreation; other service activities

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ITALY IS A KEY SUPPLIER FOR EASTERN EUROPE AND IT IS EXPOSED TO MAJOR
WESTERN ECONOMIES

Italian intermediate goods as a share of all Main Export Markets

intermediate good imports
18%
14,99%
14,32% Germany 13%
14%
12,15%

11%
8,59% France 10%

7% 5,96% 6,35%
4,88% 5,20%
United States 9%
4%

0% Spain 5%
Germany Poland Spain France Switzerland Croatia Slovenia Tunisia

United Kingdom 5%

Source : IMF
Sources: Comtrade, Coface

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CEE TRADE LINKS WITH ITALY

External trade of CEE countries with Italy

(% of GDP, 2018)

Source: Eurostat

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WEAK PERSPECTIVES FOR TOURISM
TOURISM IS AN IMPORTANT PART OF BALKAN ECONOMIES

Tourism in CEE countries

(% of GDP, 2018)

Source: World Bank

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Commodity prices are expected to remain low in 2020,
especially hard ones

Oil price
(USD, Brent barrel)
 Q&A SESSION

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Note: Today’s presentation is being

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next few days.

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