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For historical country risk data please visit the Euromoney Country risk website |
Switzerland, ranked first in September 1995 and second in March and September 1996, dropped significantly in this March’s rankings, falling eight places to tenth position. Switzerland has experienced six years of negligible growth and was the only major economy to contract last year, by approximately 0.6%. According to Euromoney‘s global economic projections, GNP growth this year will only be around 0.9% as the country contends with the deflation of the Swiss franc and a domestic banking sector in disarray.
Otherwise the top of the chart looks very similar to last September’s with Luxembourg firmly in first place and the US moving up one rung to number two. The US has been bolstered by the disappearance of budget deficit worries and the historical lows in interest rates and inflation. Steady Singapore comes in third, reaping the benefits of the government’s convincing election victory and its implications for growth and stability.
But in Europe it’s mainly a negative story with the pressure to qualify for the European Union’s single currency taking its toll. France, for example, falls from six to 14. Continued high unemployment (around 12.5%) and lack of reform in the rigid labour market have adversely affected the budget deficit. Analysts also cite the constraints of Emu, low consumer demand and a significant decline in tourism and export market share as contributory factors to recent slow growth.
Italy is also struggling to meet the Maastricht treaty criteria it falls to 25 in the overall ranking and 45 in the global economic projections as are Austria and Belgium which fell three and five places respectively.
Positive Emu stories
The positive European stories are Ireland, Portugal and Scandinavia and Spain. Ireland is well placed to join Emu in 1999 after continued success the strongest country in the OECD last year in terms of basic growth. Eleventh in the overall table, Ireland ranks fifth for economic performance alone with projected GNP growth of 5.73% in 1997 and 6.21% in 1998. Portugal is also one of the best-performing countries in the EU and Spain seems to have overcome its current account deficit problems of recent years. Scandinavian countries have also performed well. Denmark, Norway, Finland and Sweden make the top 20 in our ranking after successfully tackling public-sector problems and, in the case of Finland, recovering from the collapse of a bilateral trade agreement with Russia.
The rise of central and eastern European countries has faltered: the Czech Republic falls to 37 following last autumn’s crisis in the banking sector and Slovenia falls to 38 as structural and economic concerns impinge on export performance. Lithuania, which rose 26 places last September, drops back to 72 as worries persist about economic policy and the exchange rate. Economists expect a difficult year for Romania, which falls to 75, as the new reformist government struggles to revive the economy. Bulgaria’s recent poor performance and political unrest have cost it 19 places.
More upbeat in emerging Europe is Croatia which moves up thanks to its political risk score 11.25 up from 7.67 last September. Analysts are optimistic as the country rebuilds infrastructure, tourism develops and the economy improves. Latvia also gains ground, having recently received an investment grade rating of BBB from Standard & Poor’s.
In North America, Canada benefits from European instability and ranks ninth in both the overall survey and the table of economic performance. Genuine reform has reduced the budget deficit. An increase in the price of oil has also boosted the economy so that analysts see a 3% growth in GNP over 1997 and 1998.
Apart from Singapore, Asian countries continue to slip but less so than previously. Japan, Hong Kong, Malaysia, Thailand and Indonesia only fall between one and four places. Analysts are concerned about the Japanese government’s tightened fiscal policy and the slow pace of reform in the corporate and banking sectors. Thailand’s economy is still said to be overheating and the current account deficit is around 10% of GDP.
Sub-Saharan Africa is no longer perfoming so badly in the ranking; respondents to our poll testify to a general optimism in the region. Swaziland is the highest climber in the overall ranking, up 71 places to 68. Botswana climbs eight to 57, politically stable with huge reserves. Namibia is in a similar position despite some liquidity risks and moves up 13 to 115. Zimbabwe, however, falls to 95: political doubts as to President Mugabe’s health and political grip overshadow reasonable growth.
Research by Olivier Hue
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For historical country risk data please visit the Euromoney Country risk website |
