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Isaac Leung

Economic Outlooks Diverge in Advanced and Emerging Countries

by Isaac Leung | Dun & Bradstreet Editor

December 6, 2016 | No Comments »

At least half of the world’s largest economies and key emerging economies are performing relatively well, according to the latest short-term economic risk assessments completed by Dun & Bradstreet’s country insight team. But several countries that are among the world’s biggest commodity producers — Saudi Arabia, South Africa, and Brazil — are in more difficult territory, while Russia is on the cusp of recovering from the high-risk category.

Dun & Bradstreet’s country insight team assesses the country risk of 132 global economies, assigning an overall risk rating and a narrower short-term economic outlook rating. Both the overall country risk and the short-term economic outlook are scored on a scale of 1 to 7. A score of 7 is the worst possible, indicating the country has reached the lowest point of its business cycle. A score of 1 indicates the most favorable conditions possible.

These macroeconomic risk surveillance scores can help companies doing business around the world track opportunities and manage exposure. The scores also demonstrate that the past four years have been a time of rapid change in prospects for the leading advanced and emerging economies.

Macroeconomic Fortunes Diverge

This heat map, which is focused on the short-term economic risk score for all 132 economies, indicates that at least half of the G20 advanced and emerging economies are in a relatively favorable portion of the economic cycle.

Zeroing in on the G20, commodity producers Saudi Arabia, South Africa, and Brazil are in more difficult territory, with Russia on the cusp of recovering from the high-risk band, as indicated here. China’s economy is still supported by high growth in the services sector, but the country is not performing in the top bracket any more. In Europe, the UK is beginning to wrestle with Brexit, and Italy has financial sector problems; these nations are likewise not in the safe “blue” zone.

Moving to a comparison of the short-term economic outlook score and the broader country risk score (in this view, a slider selects the year of interest), the economic situation has changed for many countries over the past four years. In 2012 Italy and France were due to be rocked by the euro crisis, while the energy producers Saudi Arabia and Russia were still enjoying near-optimum conditions.

However, in 2014 Brazil and Russia had catapulted into the ranks once held by countries experiencing the euro crisis. By early 2016 most European countries had seen their economic cycle score improve, while the commodity producers were deep into the “red” zone in the upper half of the chart. Most of the high-income and commodity-importing countries such as India were enjoying more benign conditions.

Best Performers

Ranking the economies in terms of their short-term economic outlook, this list of country rankings shows the best and worst performers macroeconomically. Because the score takes into account each country’s own individual history, many countries that had traumatic experiences have now seen marked improvement and have risen to the top of the rankings.

A key example of this is Côte d’Ivoire (Ivory Coast), which boasts the most promising short-term economic outlook after suffering a civil war for much of the 2000s. This is illustrated in the remarkable relocation of the International Cocoa Organization’s headquarters from London to Abidjan, the Ivory Coast’s economic capital, earlier in 2016 as a result of the country’s radically improved security situation.

Myanmar, a frontier market emerging from the dictatorship and sanctions that held it back for decades, follows the Ivory Coast in the rankings. Myanmar, formerly known as Burma, has been enjoying robust growth despite poor infrastructure and business capacity.

The Philippines ranks third in the table. It stands out among emerging markets thanks to its 20%+ year-on-year growth rate for fixed capital investment and more than 7% economic growth in recent quarters, amid low inflation pressures.

India and Pakistan are ranked fourth and seventh, thanks to the helpful moderation in oil prices compared to early-2010s levels. Among the advanced economies, smaller ones such as Ireland, New Zealand, and Sweden rank among the top 30 best-performing economies. All these are in the 2-3 Low Risk zone, with the exception of Côte d’Ivoire and Myanmar, just inside the Lowest Risk 1-2 zone.

Worst Performers

By contrast, war-devastated Syria and Libya rank in the Very High Risk and High Risk zones, with scores of 5.6 and 6.2 respectively. Other highly stressed emerging markets ranked in the bottom 20 countries include commodity-dependent Brazil, Mozambique, Azerbaijan, and Kazakhstan, all of which are located in the High Risk (5-6) zone. This is a marked reversal from the situation in 2012, when most were in the Low Risk (2-3) zone.

Isaac Leung is a senior economist on D&B’s Global Data, Insight & Analytics team. Based in Marlow/United Kingdom, he covers China, India, and other parts of the Asia/Pacific region as a contributor to D&B Macro Market/Country Insight Products. His areas of interest include maritime economics. He has degrees from Cambridge University and the London School of Economics.

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Photo by Basile Zoma (courtesy of the United Nations), used here under a Creative Commons license.

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