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For historical country risk data please visit the Euromoney Country risk website |
A cautiously optimistic outlook for European and US growth emerges from Euromoney’s latest poll of economists. The imprecision of judgements on the strength of the US recovery over the next year as well as the resilience of the EU consumer in the face of a possible gradual rise in unemployment make these forecasts highly provisional.
In Europe the value of the euro has fallen by over 10% since its launch, adding to consumer price inflation and squeezing real household incomes. Average growth continues to be relatively slow in 2002 in all the major eurozone economies. Growth estimates for Germany (7) have been reduced to 1% for 2002 but move back towards the Euroland average in 2003. Germany is particularly vulnerable to the slowdown in world trade growth, which is expected to continue during the first half of 2002. Other major Euroland economies are expected to grow more rapidly than Germany in 2002, with growth in France (13), Spain (18) and the Netherlands (6) getting back to 2.5% to 3%.
Prospects for candidate EU countries rest on the benefits of continued but slowing Russian growth relative to the losses from the slowdown in EU-related trade. Growth forecasts for the Baltic states dip slightly in 2002 but for 2003 range between 4.2% for Lithuania (62) and 5.5% for Estonia (45) in 2003. Poland (41) climbs up the rankings despite the troubles of the ex-communist Democratic Left Alliance (SLD) government, which won parliamentary elections held in November. Unemployment has jumped to almost 3 million, 16.8% of the workforce, and is expected to exceed 18% in 2002.
Elsewhere, the electoral cycle appears to be the main influence on Euromoney’s first risk rankings of 2002. India (60) fell three places with uncertainty surrounding the result of a state election in Uttar Pradesh, India’s most populous state and largest provincial legislature. As the magazine went to press the result indicated that the BJP had lost ground, though the vote swing did not appear damaging enough to destabilize Atal Behari Vajpayee’s BJP-led coalition government in New Delhi.
In Australia (17) the November parliamentary elections were won by the conservative Liberal party led by John Howard, consolidating personal income tax cuts worth A$12 billion (US$6 billion) annually and a business rate reduction from 36% to 30%, effective July 2001. Australia is set to continue to benefit from a housing upswing and strong growth in consumer spending for at least the next 12 months. At the moment, its growth rate is faster than just about all other industrialized countries’.
Argentina (107) could not avoid a dramatic downgrading this year as it plummeted 30 places from September in Country Risk, additionally suffering the greatest fall (39 places) in the entire economic performance category. In Venezuela (75), president Hugo Chávez is taking an increasingly uncompromising stance towards critics of his populist statism. Analysts fear that this could spur a new wave of capital flight, which could soon result in banking and capital restrictions comparable to those imposed in Argentina. After growing street protests, public criticism from two senior military officers and a dramatic drop in poll numbers from a peak of over 80% to a current level of under 30%, speculation is now growing that Chávez won’t complete his term, which ends in 2006.
In Ecuador (157) analysts doubt whether a planned auction of 17 state-owned electricity companies will take place. Unions and social organizations have staged demonstrations in Quito against the sale and several legal hurdles still stand in its path. The country also continues to suffer spillover effects from campaigns against Colombia’s drug trade and could face up to 11,000 refugees in a six-month period if Colombia’s 38-year-old war intensifies, according to the UN High Commissioner for Refugees in January 2002.
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For historical country risk data please visit the Euromoney Country risk website |
