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For historical country risk data please visit the Euromoney Country risk website |
GDP GROWTH IN east Asia exceeded expectations in 2002, averaging about 6.1%. “There are real signs of recovery in the region since the Asian financial crisis,” says Linda Yueh, lecturer in economics at the London School of Economics. “Net private lending to the affected countries is positive for the first time since 1997. Excluding China (56) from the region’s calculations reduces the region’s rate of growth to closer to 5% for the past year. With the sober external environment and the global economic slowdown, recovery in the region will likely continue but at a moderate rate.”
By contrast, there have been seismic changes in Latin America’s risk levels and perceptions. “Argentina has fallen into an expected crisis, but with a magnitude that will make any significant rebound and exit from acute difficulties much more complex and probably unstable,” says Thierry Apoteker, managing director, TAC Financial. “Differentiation between countries has increased, with Mexico slowly making the gap to reach a Chilean-type of country risk. Brazil (79) looks increasingly a potential candidate for a parallel move. Country risk has decisively moved away from pure financial and debt considerations, towards more explicit political issues, such as the stability of the Chávez government in Venezuela.”
Africa insulated
“Initiatives to integrate sub-Saharan economic markets into the global economy are still very much in the early stages.” says Sruti Patel, head of the research department at Afrinvest. “As a result, their relative isolation served to insulate them from the global economic downturn in 2002. Foreign investment and interest in the telecommunications and energy sectors, in particular in Nigeria, remained very strong and we anticipate high growth in these areas in 2003-05 as the dividends continue to outweigh the risks.” Positive developments in Nigeria (up 40 places to 119) were lower inflation, a more realistic exchange rate and progress on privatization. In the run-up to presidential elections next month, fiscal policy has been expansionary. The current account showed a deficit of N394.9 billion ($3.4 billion) in the first half of 2002 and Nigeria remains highly vulnerable to lower oil prices. In South Africa (down five places to 57), Thabo Mbeki’s government wants to reassure investors that it is committed to privatization. It plans to list Telkom in New York and Johannesburg by the end of March 2003.
Short-term growth in central and eastern Europe is forecast to speed up in 2003-04, with EU accession expected to bring large foreign direct investment flows that may underpin longer-term economic progress. Russia (up one place to 76) and oil-exporting Commonwealth of Independent States (CIS) countries have been cushioned by high oil prices.
Central Asian countries are growing further apart as disputes about frontiers and water rights prevent economic and regional integration. Uzbekistan (down two places to 117) recently closed its border with Kazakhstan (up two places to 67). At the end of 2002, Turkmenistan (down 16 places to 117) expelled the Uzbek ambassador after accusing the government in Tashkent of involvement in a plot to kill the Turkmen president. The US administration’s policy towards Iraq has also highlighted the disunity of the region.
Uzbekistan’s strategic alliance with Washington after the September 11 attacks on the US has strengthened president Islam Karimov’s position. He wants to remain politically independent of Russia, and favours stronger ties with Europe, South Korea and Japan. Turkmenistan has been standoffish in relations with the US and has also fallen out with Moscow over energy deals. Diplomatically isolated even within central Asia, Turkmen president Saparmurat Niazov has chosen to court other regional powers such as Turkey and Iran.
The country risk score for Pakistan (145) has been hard hit by massive debt restructuring following the conclusion of the war in Afghanistan. The good news is it’s economy has improved. Growth averaged 3.6% in 2002, up from 2.5% in 2001. Expatriate remittances moving through banks rather than informal money changers have helped reserves reach record highs.
A wait-and-see attitude to the extent of economic and political fallout from any war in Iraq means that analysts have downrated five of Iraq’s six immediate neighbours only slightly in the rankings – by between one and four places – over the past six months. Of these, only Jordan (down seven places in the year to March 2003) has recorded consecutive falls in the last two country risk rankings. By contrast, Iran has risen six places to 70th overall in the year.
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For historical country risk data please visit the Euromoney Country risk website |
