MENA Q1 results: Morocco challenges Gulf-based appeal


Jeremy Weltman
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Economists’ perceptions of sovereign risk deteriorated again for many parts of Middle East and North Africa during Q1 2013, according to Euromoney’s Country Risk Survey.

However, while the nation-building difficulties in Egypt, Iraq and Tunisia, and internecine strife in Syria, still affect the region’s prospects, Morocco’s improving score suggests it is not only the Gulf states that offer an oasis of safety from the Arab Spring crisis.

It was a mixed picture for the Middle East and North Africa (MENA) countries during Q1 2013. In total, 10 of the 18 regional sovereigns became riskier, while eight became safer.

Five of the improvers continued trend score shifts established last year, namely Kuwait, Morocco, Oman, the United Arab Emirates and low-scoring (i.e. high-risk) Yemen – which still has a long way to go to improve its investor appeal.

The region as a whole remained firmly within the mid-range risk category, as of end-March, on an unweighted average mean score of 46.8. That makes it riskier still than Central and Eastern Europe, on a score differential of 4.2 points, and safer than Latin America – but only just.

Less than one point now separates the two, compared with a 9.6 point gap three years ago, as Latin America’s prospects have brightened considerably and MENA remains dogged by its lingering economic and political problems.

However, the region itself is broadly split. On the one hand there are the Gulf states and Israel – they all score more than 50 out of 100 points, with all except Bahrain lying in the top 40 on Euromoney’s 186-nation global risk data table.

On the other are the countries lying on the Mediterranean cusp and further east, which to a lesser or greater extent have been affected by the Arab Spring or have succumbed to other domestic instabilities and budget-related weaknesses, increasing their risks.

Some countries are still struggling to obtain capital access, which is one of three risk factors – along with the debt indicators and credit ratings – that are aggregated with the political, economic and structural evaluations provided by economists and country-risk experts on a quarterly basis, and which are used to compile the ECR scores.

Yet within the region, Morocco, Jordan and even Lebanon, to a lesser extent, are all fighting back. Defying the worst of the turmoil in the region, and yet offering less safety than the calming Gulf sands still awash with enormous sovereign wealth, some of the area’s more interesting emerging nations are beginning to catch attention again.

This article was originally published in Euromoney Country Risk.