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Wednesday, February 23, 2011
by Andrew Mortimer
Euromoney’s latest country risk results reflect political turmoil in the Middle East and the continued uncertainty within the Eurozone. The global recovery is in serious danger of being undermined by a host of financial and political risks. Andrew Mortimer reports.
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Country risk rankings
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For more information contact Andrew Mortimer,
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Singapore considered the safest country in
Egypts finances will weather the
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Sluggish growth, high inflation and high levels of government
debt continued to weigh upon the UK and the US in the
Euromoney rankings. The UK fell one place to 16th in
the table after the economy contracted by 0.6% in the fourth
quarter of 2010. Although business activity ticked up sharply
in January, inflation hit 4% in the same month, double the Bank
of Englands target. The US rose one place in the rankings
after posting positive production and job figures in 2011.
Uncertainty still remains over the sluggishness of the
recovery in the US and UK given the looseness of monetary
policy, says Johann Krijgsman, formerly head of country
risk at BCI. Neither countrys banking industry is
out of the woods yet. The continued problems in mainland Europe
have done nothing to improve sentiment.
Both Portugal and Ireland fell into the third tier of the
Euromoney Country Risk rankings. Since being
forced to negotiate an 85 billion programme for
assistance from the EU and IMF, Ireland has fallen from 21st in
the table to 38th. Portugal fell 12 places to 44th as
economists responded negatively to the countrys
escalating public debt problems. The Portuguese economy
contracted by 0.3% in the fourth quarter of 2010.
A number of countries in the Middle East have struggled after
mass protests shook the Arab world Egypt (down 23
places), Tunisia (down 12), Yemen (down 25) and Saudi Arabia
(down 3). In the Gulf, the political risk posed by the protests
was offset by the resurgent price of oil, with Qatar (up one)
and UAE (up one) seeing modest gains. Nevertheless, the survey
results highlight the seismic changes taking place in the
region: the average political risk score for MENA countries has
fallen by 9% since September.
The Nordic countries remain the worlds favourite safe
havens. The combination of broadly diversified economies,
strong social welfare provisions and institutional strength
continues to reassure investors and economists alike. The
Nordics are joined at the top of the table by Singapore, whose
stellar growth in 2010 has propelled it to 6th in the table.
Spurred by the strong performance of Malaysia and Indonesia and
by a rebound in domestic manufacturing, Singapore has climbed
six places since September. The city state, which retained its
number one position in the World Banks Doing Business
Survey, overtook Hong Kong, whose close links to China affected
its performance. It fell by two places, dropping out of the top
Russia, India and China all fell in the first half of the year.
Weighed down by low scores in political risk and corruption,
Russia fell five places and now ranks below Mexico, Turkey,
Indonesia and Lithuania in the table. Political risk in
Russia remains elevated due to the dominant position of United
Russia and the inability for a credible plural opposition to
operate freely, says Mandy Kirby, a political analyst at
Maplecroft. The harsh verdict on and sentencing of
businessmen Mikhail Khodorkovsky and Platon Lebedev in late
2010 on charges of theft and money laundering drew strong
international criticism for apparent political
India also fell by eight places as concerns mounted about the
effect of food inflation on the countrys poor and the
recent corruption scandal over the Commonwealth Games.
Recent corruption scandals in India are definitely
damaging to the economy, in both the short and medium
term, says Rebecca Jackson, principal analyst at
Maplecroft. Besides the direct impact on the economy, the
political turmoil caused by the 2G auction scandal has
paralysed parliament, having a detrimental impact on key
reforms, such as further delaying the Goods and Services Tax
(GST) needed to keep the country competitive. The
possibility that the Chinese economy might be in danger of
overheating pushed the country down four places to
40th in the table.
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