Political risk should be the number-one concern for investors
Euromoney’s country risk survey shows political risk rising in 64 countries this year. The march of populism is a key factor investors must consider before chasing tempting returns, but there are many others to guard against.
The elephant in the room: Investors should keep more of an eye on political risk
Political risk has always been an important element of investment decision-making.
Yet with concerns about the Chinese and US economies fading, and the European economic recovery on track, attentions are turning more exclusively to political factors.
In Europe, the election of Emmanuel Macron has removed the risk of France leaving the EU, but it has not eliminated European political risk altogether, given the onset of elections in Germany in September, and in Italy by next spring.
Germany, France and Italy are among the 84 countries worldwide that have elevated political risks – lower political scores in Euromoney’s survey – compared with a year ago, and there are 91 showing higher political risk on a longer-term, five-year historical basis.
Unsurprisingly, one of the biggest concerns is North Korea, losing 10 political risk points over the past five years, and now scoring a measly eight points out of a possible 100 – matching Haiti – as failing efforts to dismantle its nuclear weapons programme have brought regional conflict closer.