INTERNATIONAL. Emerging Asian economies remain a challenging operating environment according to new risk ratings released today.
In their first jointly produced economic and political risk ratings, Oxford Economics and Control Risks have evaluated the outlook for 164 countries worldwide, producing for each country a score based on a weighting of key political, economic, business and security risks.
The ratings, drawn from the new Economic and Political Risk Evaluator, show that in the Asia Pacific region, Singapore holds the lowest economic and political risk, followed by New Zealand, Australia, Brunei, Taiwan, and Japan.
All have a score lower than 3.0 on a scale of 0.0 to 10.0, where 10.0 represents the highest combined risk. Factors weighed include debt default, exchange rate movement, trade credit risk, political stability, ideology and international relations, the business environment, and the outlook for domestic security.
The Economic and Political Risk Evaluator is an online subscription service developed jointly by Control Risks and Oxford Economics which will be launched in Singapore on September 22.
In most Asia Pacific markets, economic risks outweigh political risks as a negative factor in ratings. However, in several countries such as Malaysia and Thailand political uncertainty is a notable downside risk, and concerns over policymaking are a growing factor in the outlook for key markets including China.
Unsurprisingly, North Korea (9.1) presents the highest risk in the region, and sits only behind Syria among all countries assessed. Other Asia Pacific countries with notably high risk scores include Myanmar (7.7), Nepal (7.5), Papua New Guinea (7.4), and Laos (7.0).
Commenting on the risk scores, Adrian Cooper, CEO and Chief Economist at Oxford Economics said, “The prospect of a China hard landing or a turn in investor sentiment are both very real risks to the regional economic outlook, though some economies will weather the storm better than others. Political uncertainties and current policies are leaving a number of Asian economies increasingly vulnerable to the prospect of sharply lower growth.”
In fact, of the 24 countries monitored in the region, 14 have a rating of 5.0 or higher. India (5.9) will see some modest improvements in its business environment, but is hampered by gaps between policy promises and implementation, slow bureaucracy and a persistent medium-level threat of terrorism.
Indonesia (5.0) has shown lukewarm economic growth in 2015, which has been revised downward, and Thailand (5.6) presents a significant risk of political instability. China is ninth in the region and 55th in the world with a rating of 4.3, due in part to Oxford Economics forecasting slower growth in the 5% to 7% range in the next five years.
Control Risks views the next 6 to 18 months as a critical period for political and policy choices in China that may impact Economic and Political Risk Ratings going forward.
“Political risk is a key differentiator among Asian economies as governments face growing challenges in a slower growth environment. Politics and policymaking will increasingly determine which economies adapt, and which fall further behind their potential amid domestic frictions and populist pressures. As well as impacting economic growth, this has implications for practical business risk and the foreign investment climate in these countries – something we are already seeing on the ground here throughout the region,” said Toby Latta, CEO, Asia Pacific at Control Risks.
Asia Pacific risk profile from Oxford Economics and Control Risks
Country Rating, Region rank, Global rank out of 164
Singapore: 2.0, 1, 5
New Zealand: 2.2, 2, 8
Australia: 2.3, 3, 11
Brunei: 2.7, 4, 18
Taiwan: 2.8, 5, 24
Japan: 2.9, 6, 26
South Korea: 3.5 7 39
China: 4.3, 9, 54
Philippines: 4.3, 8, 55
Malaysia: 4.6, 10, 59
Indonesia: 5.0, 11, 71
Vietnam: 5.3, 12, 78
Cambodia: 5.4, 13, 80
Thailand: 5.6, 14, 88
Fiji: 5.8, 15, 93
Sri Lanka: 6.1, 17, 107
Mongolia: 6.3, 18, 113
Bangladesh: 6.8, 19, 128
Laos: 7.0, 20, 131
Papua New Guinea: 7.4, 21, 148
Nepal: 7.5, 22, 150
Myanmar:7.7, 23, 152
North Korea: 9.1, 24, 163
About the ratings
Risk scores are drawn from the Economic and Political Risk Evaluator a just-launched service developed jointly by Control Risks and Oxford Economics. The partnership brings together market leaders in political and economic analysis, combining more than 20 years in-region experience from Control Risks’ network of analysts with Oxford Economics’ world-class global forecasting and modelling capabilities on 200 countries, 100 industries and 3,000 cities.
By coming together to develop subscription tools and a joint research capacity, the two firms are able to provide the most complete risk analysis in the market, examining a full range of interconnected economic and political risks.
Photo Caption: Singapore Financial District
About Control Risks
Control Risks is a global risk consultancy specialising in political, security and integrity risk. The company enables its clients to understand and manage the risks of operating in complex or hostile environments. Through a unique combination of services, wide geographical reach and by adopting a close partnership approach with clients, Control Risks helps organisations effectively solve their problems and realise new opportunities across the world.
For more information, please visit www.controlrisks.com
About Oxford Economics
Oxford Economics is one of the world’s foremost independent global advisory firms, providing reports, forecasts and analytical tools on 200 countries, 100 industrial sectors and over 3,000 cities. Its best-of-class global economic and industry models and analytical tools provide an unparalleled ability to forecast external market trends and assess their economic, social and business impact.
For more information, please visit www.oxfordeconomics.com
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