The immediate outlook for key markets and sectors Every month, Atradius brings you an up to the minute snapshot report on a range of export markets and key trade sectors. Our underwriters have a specialist view of the world economy – and the industries that make that economy tick - that you won’t find in the general press coverage of events. Even more importantly, our underwriters use their expertise and experience to look to the future. In each edition of Atradius Market Monitor you’ll find our outlook for a number of key market economies. One of the most important factors that any business needs to know is the trend of insolvencies in their markets. The Expected Default Frequency (EDF) chart that you’ll find in each edition of Market Monitor is based on listed companies in the markets referred to, and the likelihood of default across all sectors within the next year. In this issue… …we feature the following markets: Germany – with a spotlight on the Automotive and Machines industry sectors France - with a spotlight on the Metals and Construction industry sectors United Kingdom Denmark Turkey India

1. marketmonitor
adapting to the challenging
economic environment
Dateline January 2009
The immediate outlook for key markets and sectors
Every month, Atradius brings you an up to the minute snapshot report on a range of export markets
and key trade sectors. Our underwriters have a specialist view of the world economy – and the
industries that make that economy tick - that you won’t find in the general press coverage of events,
so we hope that you will find our summary reviews a useful addition to your Atradius credit
insurance.
One of the most important factors that any business needs to know is the trend of insolvencies in
their markets. The Expected Default Frequency (EDF) chart that you’ll find in each edition of Market
Monitor is based on listed companies in the markets referred to, and the likelihood of default across
all sectors within the next year. In this context, default is defined as a failure to make a scheduled
payment, or the initiation of bankruptcy proceedings. Probability of default is calculated from three
factors: market value of a company’s assets, its volatility and its current capital structure. As a
guide, the probability of one firm in a hundred defaulting on payment is shown as 1%.
On the following pages of Market Monitor, our risk experts comment on the likely real effects on
trade of these trends, and on the impact of the global downturn on trade sectors that are vital to the
economic welfare of chosen key markets.
In this issue…
…we feature the following markets:
Germany – with a spotlight on the Automotive and Machines industry sectors
France - with a spotlight on the Metals and Construction industry sectors
United Kingdom
Denmark
Turkey
India

2. Expected default in Western Europe and USA
Source: Atradius Economic Research and KMV Credit Monitor
The impact of expected default in key markets
Germany
The business environment
Due to its high dependency on exports, Germany is much more vulnerable to a worldwide recession than
other economies. Overall, exports are expected to decrease by about 9% this year. Private consumption is
still stable, thanks to significantly lower energy and fuel costs, and can be seen as a stabilising factor. This
might change as soon as the crisis reaches the labour market, as expected in mid-2009.
Consequently, the biggest negative impact is felt by the heavily export-oriented capital goods manufacturers
in the machines sector and the automotive industry (see details below). As a result of the downturn in both
sectors, we also expect the metals/steel sector to come under extreme pressure over the course of this year.
Whereas the large manufacturers are expected to manage the cycle, there is serious concern about small
and medium-sized steel and metals traders, who have historically low solvency and high vulnerability
towards price and/or demand fluctuations.
Although there is currently no credit squeeze, banks are tightening credit conditions and requesting higher
equity shares in the refinancing of projects. There are also increasing signs that corporate credit availability
has started to deteriorate and this will undoubtedly mean that companies lacking sufficient equity reserves
will not be able to get refinancing for their projects.
The outlook for Germany
After years of declining insolvency rates in Germany, we now expect an increase in 2009. This trend is
reflected in our Expected Default Frequency indicator (see chart above). The share of companies with
clearly negative indicators (e.g. payment behaviour) has grown since the beginning of 2008, also indicating
an increasing insolvency risk. For all companies in all sectors sufficient liquidity and stable refinancing will be
the key to survive under the current circumstances.
In general, we expect that highly geared companies in whatever sector with very complex and aggressive
refinancing structures have a higher probability of default in the current environment as neither banks nor
other investors are willing to invest additional funds.

3. Spotlight on German industries
1 Automotive
How has the global economic downturn impacted the German automotive industry?
Deteriorating sales in major economies like the US and other European markets, but also in the domestic
market, have triggered a significant reduction of production levels of all large car manufacturers. This has led
to a temporary closure of production plants and extension of Christmas holidays for workers and short time
work. Additionally, the German car suppliers are affected heavily by reduced order income and order
cancellations.
What is the current trend in payment delays, payment defaults and insolvencies and why?
We have seen a strong increase in insolvencies in the automotive supplier sector. Low demand for new cars
and the cancellation of orders have led to strained liquidity, with banks and investors increasingly reluctant to
refinance the liquidity gaps. Support from the original equipment manufacturers is also lacking due to their
own problems.
What should companies selling products into the automotive industry pay particular attention to?
Companies supplying the automotive sector should ensure their retention of title rights or, even better,
arrange other collateral and be stricter in their credit management, taking immediate action on overdues.
What is Atradius’ short-term (6 months) outlook for the automotive industry?
The situation will deteriorate further with an increasing number of insolvencies in the automotive supplier
sector. Analysing recent insolvency cases in Germany we find a quite common pattern: automotive suppliers
with extremely high gearing, mostly driven by private equity investors. In this sector we expect more
insolvencies over the next 3 to 6 months and many companies exiting the market.
2 Machines
How has the global economic downturn impacted the German machines industry?
The German machines sector is extremely reliant on foreign demand. Due to the worldwide crisis this
industry is more heavily impacted by decreasing demand than other industries. To date, problems in the
machines sector have been centred on a few subsectors, notably textile machines, printing machines,
construction machines and ship yards. This has been driven by the serious problems in the underlying
textiles, printing and construction industries. However, we expect problems for the entire machines industry
if the recession deepens in 2009 and 2010.
What is the current trend in payment delays, payment defaults and insolvencies and why?
So far we have not received really critical signals from the machines industry as a whole regarding payment
delays or payment defaults. However, in the above mentioned subsectors clear warning signals are visible.
In particular, profit warnings, cancellation of orders and a reduction of order income are clearly indicating
that payment delays and defaults have to be expected in 2009 and that the overall probability of default is
growing strongly.
What should companies selling products into the machines industry pay particular attention to?
As with automotive, companies supplying the machines sector should ensure their retention of title rights or,
even better, arrange other collateral and be stricter in their credit management, taking immediate action on
overdues.
What is Atradius’ short term (6 months) outlook for the machines industry?
In the critical subsectors of this industry we expect to see further deterioration of orders and income with
subsequent further profit warnings and the probability of significantly increased default.
Because the entire machines sector is looking back on 5-6 excellent years with good profitability and
growing reserves, we assume that most of the companies in the sector will be strong enough to survive the
next 6 months. But, if the crisis continues into 2010, our concerns will grow accordingly.

4. France
The business environment
The French business environment has deteriorated in 2008, with the business climate in constant decline for
the past 18 months. Industry and construction are deeply impacted, while retail as a whole has suffered from
a drop in consumer spending and stricter access to credit. The banking system is under pressure, with direct
repercussions on the availability or renewal of credits for both corporate and consumers, negatively affecting
investments.
Direct consequences are reflected in an increase of insolvencies and default. Since the beginning of 2008
non-payment has doubled in France. Company insolvencies have increased by more than 10% on a yearly
basis to 57,000. The construction, services, retail and transport sectors are particularly affected. This
negative development is reflected in the steady increase in the Expected Default Frequency score, which
peaked at 1.3% in November 2008 (see chart)
The short-term outlook for 2009 remains pessimistic. We expect Q1 and Q2 to show negative GDP-growth (-
0.4% and 0.1% respectively), confirming that France is entering into a recessionary period.
The index measuring the industry orders received in October 2008 has sharply declined by 12.5% impacting
capital equipment (of which automotive industry -30%), consumer durables (-23%) and metallurgy (-15%).
Real estate and housing are also declining. Planning permission dropped by 23% in September 2008. The
general forecast for construction activity is definitely not favourable (see below).
The outlook for France
The rapid and harsh increase in insolvencies registered in Q3 2008 (+17%) should continue in 2009, with an
expected peak in the first 6 months of 2009. Consequently, we expect the number of insolvencies to affect
around 64, 000 companies in France in 2009 (a 12% increase). Construction, retail and transport sectors will
continue to suffer, while automotive, metals transformation and consumer durables should record increasing
number of insolvencies.
Spotlight on French industries
1 Metals
How has the global economic downturn impacted the metals industry?
The sector suffers globally from a huge decrease in commercial outlets linked to following industries:
automotive, aerospace, industrial and agricultural equipment. This decrease in outlets has led to raw
material price adjustment: after a continuing increase until September 2008, the fall in worldwide demand
pulled prices down sharply.
What is the current trend in payment delays, payment defaults and insolvencies and why?
In France, the situation differs according to company profile.
Many metal producers are strong worldwide players. Despite the economic downturn, they are strong
enough to face the decrease in volumes. In order to maintain acceptable prices, they have decided to adapt
by slowing production: lay off plans and/or plant closures are scheduled.
Metal manufacturers and wholesalers: payment delays and payment defaults have increased since October
2008. Insolvencies in this subsector should increase in the first quarter of 2009. In general, operations
require a high level of raw material stock, and working capital requirements are structurally high. Therefore,
they have to face two main issues:
- risk to profitability due to raw material price decrease => depreciation to be recorded
- risk to short-term cash due to high level of stocks and lack of orders in hand
What should companies selling products into the metals industry pay particular attention to?
The main issue is the management of working capital focused on matching stock level to demand.
What is Atradius’ short term (6 months) outlook for the metals industry?
Deterioration

5. 2 Construction
How has the global economic downturn impacted the construction industry?
Tighter credit conditions have impacted French real estate sales since 2008. Due to a slowdown in the real
estate market, overstock of homes and an uncertain economy, housebuilding decreased by 15.8% in the
first nine months of 2008.
For other reasons, non-residential construction recorded the same trend (-15.7% in September 2008).
However, at the beginning of 2008, construction companies benefited from a high level of orders in hand (on
average, 7 months of turnover) which enabled them to maintain a strong level of activity during the year.
What is the current trend in payment delays, payment defaults and insolvencies and why?
The real estate companies were the first to be confronted with the difficulties, which explained the large
increase in insolvencies. In 2008 the number increased by 42% compared to 2007. In the construction
sector the number of bankruptcies increased by 13% to 14,150. Small and mid-sized companies, which are
very vulnerable to cash flow crises, have been most affected. In addition, according to the French
Construction Federation (FFB), payment delays have increased, especially since October 2008.
What should companies selling products into the construction pay particular attention to?
A significant deterioration of activity in the construction sector is expected in 2009, due to the reduction of
volume of orders in hand and a slump in new housing. It would be wise for anyone intending to do business
with a company in this sector to undertake a balance sheet analysis to evaluate their financial structure –
including a detailed evaluation of the order book. In addition, the effects of the recent package launched by
the French government to stimulate the real estate market should be monitored.
What is Atradius’ short term (6 month) outlook for the construction industry?
Atradius expects another increase in bankruptcies, strongly accelerating in the second half of 2009.
Together with small and mid-sized companies some large companies could be impacted and become
insolvent.
United Kingdom
The business environment
Early indications are that in the final quarter GDP fell by 1.1% to 1.5% - the fastest rate of contraction since
1980. There can no longer be any doubt that the UK is going through a period of recession.
Company insolvencies rose in the third quarter of 2008 by 10.5% on the previous quarter and a massive
26.3% year on year. The median Expected Default Frequency for the UK rose sharply from 0.35% in
January 2008 to 2.05% in November (see chart).
The outlook for the UK
As far as insolvencies go, we have only seen the tip of the iceberg. If GDP contracts by 2.5% in 2009 – and
some believe this to be optimistic – our view is that insolvencies could increase by 53%. A GDP contraction
of more than 2.5% could spell catastrophe.
Even the most optimistic of analysts will be looking at the middle of 2010 before they see any light at the end
of the tunnel. Most industries are now reporting negative trends. However, we anticipate that retail,
construction/construction materials, automotive and services will continue to be the areas that struggle to
adapt to the current market trends. Looking at retailers in particular, many didn’t have the funds to meet
their quarterly rental payments due at the end of December, and the likelihood is that many more will be
unable to meet their payments in 2009.
Attempts to stimulate growth via interest rate cuts and a reduction in VAT do not appear to have helped.
Ultimately the banks need to start lending again as the lack of available funding is strangling the economy.

6. Denmark
The business environment
Denmark’s general business climate is currently deteriorating. GDP is expected to decrease by -0.25% to -
0.5% in 2009 (y-o-y). Export growth is forecast to contract from 3.3% in 2008 to -0.1% in 2009. Consumer
spending may be supported by some tax cuts and wage increases, but, as households have lost more than
20% of their assets in 2008 due to falling housing and share prices, further reductions in consumer spending
are expected.
As elsewhere, the finance sector was severely hit by the credit crunch. Many companies are now facing
credit shortage and/or stricter credit terms. The construction sector was already hit by stricter lending terms
in spring 2008, following falling housing prices since 2007. Therefore, construction and related sectors such
as construction materials and real estate business have been the first sectors facing recession and
increasing insolvencies. Other sectors severely hit so far are clothing, furniture, consumer durables, various
retail sectors and car sales.
During the second half of 2008 corporate insolvencies rose sharply. In 2008 the total number of insolvencies
registered by Experian increased by 61.6% from 2,386 in 2007 to 3,856. In December 2008 Experian
registered 596 insolvencies, the highest monthly amount ever.
The outlook for Denmark
The short-term (3 month) and mid-term outlooks are gloomy for the Danish business environment. All
relevant indicators point to further recession in the coming months, affecting all industries. More insolvency
increases are expected. The only exception seems to be non-durable consumer goods, e.g. food.
Turkey
The business environment
Turkey is faced with negative growth expectations for 2009 (-1%), together with rising unemployment, lower
consumption and reduced lending appetite. Turkey’s foreign trade volume is estimated to decline by 20-25%
in 2009, mainly affecting the automotive and textile sectors. These adverse developments are forcing
companies and individuals to postpone investment and consumption, tightening cost management and
liquidating assets. This trend is expected to increase the pressure on the retail sector and then expand to the
main manufacturing sectors such as Metals and Chemicals.
The increase in non-performing loans (both corporate and individual) and the ‘bounced cheque’ statistics are
also indicative of an upward trend in insolvencies.
The very restrictive strategy of banks on the back of negative outlook also restrains borrowing opportunities
for companies and individuals. One issue is external borrowing by Turkish companies, which rose
significantly from USD 25 billion in 2002 to USD 150 billion in 2008. In addition to the uncertainty of revolving
these loans, another threat is the short currency position supported by external borrowing, especially for the
non-exporter borrowers.
The outlook for Turkey
All sectors are affected by the economic downturn, especially the close-to-retail ones. Textile, automotive,
electronics and construction look to be relatively higher-risk sectors at the moment due to the dramatic fall in
consumption, shrinking borrowing opportunities and worsening liquidity conditions.
Textiles is one of the most vulnerable sectors, due to a combination of excess capacity, lack of branded
production, low capitalisation, diminishing demand in domestic and export markets, Far East competition,
and non-performing loans (NPL) in the banking system, which is around 11%.

7. Automotive, Turkey’s 2nd largest sector in terms of exports and an important customer of several other
sectors, has a negative outlook for both its global and domestic markets. Almost all the main manufacturers
have periodically suspended production during recent months.
Electronics is heavily affected, with the macroeconomic developments leading to reduced consumer
confidence. Manufacturers, distributors and retailers are facing liquidity problems and suffer from narrowing
margins due to the fierce competition in a shrinking market.
Metals, which is an important supplier to the machinery, automotive, construction and durables sectors, is
experiencing decreased production, postponed investments and falling product prices as a result of the
downturn in these sectors. Nevertheless, metals are not yet considered among the Turkish high-risk sectors.
With the impact of deteriorating expectations, the companies/sectors which provide goods and services with
low-demand elasticity and the ones more dependent on external financing will be particularly exposed.
India
The business environment
The economy of India has grown at or above 9% for the past three years, but the global credit crisis is
expected to slow this growth rate. The current 2008/09 economic growth forecast of 7.5% to 8% by India’s
central bank is considered, by many independent analysts, to be optimistic. A Reuters’ poll showed that
economists expect India's economy to grow 6.8% in 2008/09; the slowest in six years, and 6.2% the
following year.
Specific indicators of the slowdown are now emerging. Figures published in December showed a nearly 20%
decline in November car sales, the worst fall in eight years, as high borrowing costs, tight credit and a
slowing economy reduced demand. Sales of trucks and buses which are a key indicator of the level of
industrial activity, slumped by nearly 50% compared to 2007. Other published figures show that
manufacturing output in November shrank for the first time in three and a half years.
We have noted that major sectors such as steel and information and communication technology (ICT) have
been hit by global commodity price fluctuations and the slowdown in more developed western economies.
Indian ICT companies are affected when the US economy slows due to their heavy involvement in
outsourced business processing for US companies. Automotive and real estate sales are suffering from the
lack of easily obtainable finance. Buyers in the steel sector have had a rollercoaster ride this year. Initially
squeezed by huge increases in the cost of iron ore and coking coal on the one hand and government
imposed selling price restrictions on the other. Input prices have since fallen but more recently demand from
automotive and construction companies has fallen even more sharply; forcing them to cut prices and slow
expansion plans.
The outlook for India
We have not yet experienced a significant upturn in notifications of non-payment, but press reports suggest
major companies are slowing payments to smaller suppliers or sub contractors.
Given the developments in the broader world situation and its certain impact on India, the forthcoming six
months are anticipated to continue to be tough.

8. The Atradius advantage
We hope that you’ll find Atradius Market Monitor a useful tool to keep yourself informed of what is
unquestionably a deteriorating economic picture, at home and across the globe.
We see the current downturn as a natural correction to what over recent years has been an
unsustainably and unrealistically rosy economic situation. As an Atradius customer, you have the
advantage of sharing our unique viewpoint, and our own experience gleaned through our global
data on markets and companies, and of course our claims and collections experience.
Atradius Copyright. While we have made every attempt to ensure that the information contained in this report has been obtained from
reliable sources, Atradius is not responsible for any errors or omissions, or for the results obtained from the use of this information. All
information in this document is provided ’as is’, with no guarantee of completeness, accuracy, timeliness or of the results obtained from
the use of this information, and without warranty of any kind, express or implied. In no event will Atradius, its related partnerships or
corporations, or the partners, agents or employees thereof be liable to you or anyone else for any decision made or action taken in
reliance on the information in this report or for any consequential, special or similar damages, even if advised of the possibility of such
damages.