UK Placed on Watch List; Argentina and Poland Upbeat

Rising interest rates in the UK will affect consumer spending in households whose debt is largely concentrated in variable-rate debt. A freeze on public-sector employment, falling immigration, and higher taxation will put further stress on growth. The number of personal bankruptcies is already on the rise, up 24% in the first quarter of 2007 after increasing 60% in 2006. "It is retailing, and in particular sales of home improvement items, that is most vulnerable in the cooler economic climate," says Coface Chief Economist Sylvia Greisman.

Healthy domestic demand and strong exports caused Poland to out perform expectations, a trend which should continue for the year. With only moderate inflation, businesses are expected to enjoy satisfactory solvency, especially in high-growth sectors such as automobiles, construction and related sectors.

Argentina's growth is also expected to remain high in 2007 and pick up even more in 2008. Rising salaries and employment, consumer credit development, and expansive economic policies will continue to drive domestic demand, Greisman continued.

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