The Middle East has seen a substantial increase in risk during the past two years, highlighting the regions political problems and civil strife. However, stabilization has begun to creep into experts perceptions on the back of rebounding scores for Israel and countries along the Gulf.
Now considered safer than Central and Eastern Europe, the regions average score improved in Q3 2012. The focus of concern remains Iran, Syria and Yemen without those three troubled states Iran is now experiencing considerable strains as a result of sanctions and a tumbling currency the region would be considered safer than the Brics.
Higher scores for Qatar, Kuwait and Israel, the three safest countries in the region, were the driving forces behind the regions third-quarter improvement.
Qatar, scoring 74.5, up 1.4 and rising three places in the rankings (to 17) since Q2 2012; Kuwait, enjoying a 2.1 point jump to 69.1 (plus three to 25); and Israel, at 27 in the rankings, up four places after a 1.2 point rise to 67.7, remain the regions trailblazers.
Yemen also improved in Q3 2012, but ranking a lowly 150, and still facing enormous domestic security threats, the country is still extremely high-risk. By contrast, many of the regions oil and gas producers, with their robust government finances, have resisted the increased risks seen elsewhere.
Only four countries underwent declining scores during the quarter. Syria, still affected by civil conflict, is perhaps unsurprisingly one of them. It has fallen to 160 in the global rankings, from 156 in Q2 2012. Five years ago, on the cusp of economic reform and attracting inward investment, Syria ranked 122, but this latest fall keeps the country well adrift of its compatriots in the region.
The others are Lebanon, Oman and Bahrain the latter highlighting economic and structural concerns, as much as political. Lebanon has tracked Syrias descent, shedding 14.0 points during the past two years and dropping to 98 in the rankings.
"The intensifying Syrian conflict [has taken] its toll on the Lebanese economy and on its outlook, with [GDP] growth expected to decline to 1.5% in 2012 from 3% the previous year," according to one of ECRs local contributors, Marwan Mikhael, head of research at BlomInvest Bank.
"The balance-of-payments deficit increased to reach $1.35 billion in the first seven months of the year, as capital inflows tumbled. Security skirmishes in the north and violent reactions to the kidnapping of Lebanese citizens in Syria led the number of tourists to decline by 12.5% in the first eight months of the year. Exports and land transportation were also hit, as exports to Syria and those to other Arab countries that have to transit through Syria were negatively affected by the conflict there.
"The banking sector was the most resilient sector in the Lebanese economy and is expected to increase its profits during 2012, despite [the fact] that banks having a presence in Syria took large provisions to cover any potential losses there since last year."