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D&B's Global Economic Outlook to 2017

This report outlines the global macroeconomic trends that are expected to impact businesses over the next five years. Valuable insight includes the challenges of the post-recession recovery, as well as the risks and opportunities facing businesses in established and emerging regional economies.

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D&B's Global Economic Outlook to 2017

  1. 1. D&B’s Global Economic Outlookto 2017Around the World – Regional Insights, Upgrades and Downgrades North America (US, Canada) and Mexico ■ Latin America ■ Europe ■ Eastern Europe and Central Asia ■ Asia Pacific ■ Middle East and North Africa ■ Sub-Saharan Africa 1
  2. 2. Global Risk Insights • he recovery from the 2008–09 recession remains the most challenging in the past century. T • eleveraging in the private and public sectors remains an inhibitor to growth throughout the forecast period. D • These pressures are offset by substantial improvement in the health of the corporate sector. • Structural imbalances in key emerging economies are potential headwinds. • The macro-economy, fiscal imbalances, and continued quantitative easing constitute high risks. • New political risks have arisen as a result of the Arab Spring. • The recovery will be uneven across regions and in time.Global Economic Outlook: …2012 saw the third highest number of downgrades ever.Where We Are 2012 was slightly more challenging than first anticipated,The recovery from the 2008–2009 recession when global growth was predicted to be a modestis the slowest and most problematic of the 2.4%. Actual results indicate growth closer to 2%, apast century… subdued pace by any measure. Headlines confirm theThe recovery from the 2008-2009 recession is the European outlook eroded throughout the year, drivenslowest and most problematic of the past century, by the ongoing Eurozone saga which in turn fuelledhighlighted by changes in DB’s country risk ratings: global under-performance. China’s exposure to reduced56 of the 132 countries (42.4%) rate worse than in European demand resulted in the Asia/Pacific real-GDPOctober 2009 when the recovery started, while only 23 growth forecast falling by 0.5 percentage points (pp) to(17.4%) rate better. This level of downward movement is 3.9%. In turn, Chinese demand for commodities declinedextremely unusual for a recovery and reflects the unique throughout the year, impacting the growth forecastscircumstances of this cycle versus prior recoveries. of commodity rich countries. Given these factors, mostIndeed in 2012, three years into the recovery, DB regions ended 2012 below expected growth levels:downgraded 32 countries—the third highest number Regional forecasts for Latin America and the Caribbean fellof downgrades in one calendar year—while only from 4.1% to 3.0%; Eastern Europe and Central Asia fromupgrading seven. 4.5% to 3.1%; the Middle East and North Africa from 5.1% to 4.2%; and Sub-Saharan Africa from 5.5% to 4.3%.Real GDP Growth 2011 2012e 2013f 2014f 2015f 2016f 2017fNorth America 1.9 2.1 1.9 2.3 2.0 2.2 2.6Europe 1.5 -0.3 0.3 1.2 1.6 1.6 1.8Asia Pacific 4.1 4.2 3.9 3.7 4.1 3.6 3.9Latin America Caribbean 4.0 3.0 3.6 3.7 3.9 4.0 3.8Eastern Europe Central Asia 5.5 3.1 3.3 3.8 4.2 4.5 4.6Middle East North Africa 3.9 4.2 4.0 4.2 4.6 4.9 5.1Sub-Saharan Africa 4.6 4.3 4.6 4.7 4.8 4.9 4.9World 2.6 2.0 2.2 2.5 2.7 2.7 2.9 2
  3. 3. Global growth to pick up slowly through 2017, Total debt remains high…but downside factors still remain. Total debt levels in many developed economies haveAfter the 2012 slowdown global economic growth is expanded considerably since 2000, with some of theexpected to pick up gradually through 2017. Nevertheless, worst offenders being Japan (over 630% of GDP in Q2growth is still expected to be lower than in the five years 2012), the UK (556% of GDP in Q2 2012), and Franceprior to 2008, and a number of concerns still weigh heavily (over 510% of GDP in Q3 2012). Germany (around 350%on these forecasts. In a regional context, the forecasts of GDP in Q2 2012) is one of the few OECD countries tohighlight different growth patterns. The table above have controlled its overall debt levels across the period.highlights the disparities in trends across the regions, with …with household debt still growing incertain regions experiencing further slowdowns before certain economies…growth approaches near-normal levels in 2017. Thus, When broken down into household, corporate, and publicslowdowns are anticipated in North America in 2013 and sector debt, a more nuanced picture emerges. Household2015, Asia/Pacific in 2016, and Latin America in 2017. debt is still growing in France (66.3% of GDP in Q2 2012), Italy (51.2% of GDP in Q2 2012), and Canada (91.5% of GDPWhere We Are Going: in 2012). However, significant deleveraging has taken place2013 to 2017 in the US (down from a peak of 97.5% of GDP in Q2 2009 to 81.4% of GDP in Q3 2012) and the UK (down from a peak ofThe healing process following the 2008–09 110.6% of GDP in Q1 2009 to 98.8% of GDP in Q3 2012). Inrecession will continue to make slow, erratic Spain household debt has peaked and is falling slowly. Inprogress over the next five years… contrast, German household debt has fallen consistentlyThe healing process following the 2008–09 recession since 2000 (now standing at 58.8% of GDP), and Japanesewill continue to make slow, erratic progress over the household debt has remained relatively static (76.6%next five years. The significant restructuring of the US of GDP).private sector is a chief driver, which, according to DB’s …and non-financial sector debt fallingunique data, is resulting in slowing bankruptcies across significantly in the US and UK…most sectors and improved payment performance.Furthermore, the boom in unconventional gas and oil in When looking at the non-financial sector, a similarlythe US is driving down energy prices, boosting business confused picture emerges. French companies (158.2% ofconfidence and supporting growth in key sectors like GDP in Q2 2012) are still building debt, while Japanesemanufacturing. (down from 146.2% of GDP in Q2 2008 to 135.8% of GDP in Q3 2012), UK (down from 129.2% of GDP in Q4 2008…but risks remain. to 117.1% of GDP in Q3 2012), and Spanish (down fromDespite this cautious optimism a number of risks 198.4% of GDP in Q2 2009 to 184.4% of GDP in Q2 2012)remain, namely: company debt appears to have peaked in 2008-09 and • High levels of debt, particularly in the public sector; is now slowly falling. German, Italian, and Canadian • nintended consequences of the unprecedented U company debt levels have been relatively static since the monetary easing policies; crisis erupted. • nravelling of sectoral imbalances, particularly in U …but public sector is the main cause emerging markets; and for concern. • olitical risks associated with the transformation P However, the increase in public sector debt since 2008 is of countries to new governmental systems most concerning, as governments ramped up spending (e.g., Arab Spring). to boost economic growth. Furthermore, as the table 3
  4. 4. below indicates, the problem is not only in advanced capital flows, thereby weakening their exporteconomies; emerging economies to a lesser extent competitiveness. Importantly, exchange rate distortionshave seen their fiscal positions worsen. As a result, are boosting “beggar-my-neighbor” trade protectionistgovernment spending in many countries will remain policies, threatening global growth.constrained and tax levels high over the next few years …which encourage excessive risk-taking,as governments attempt to balance their books. That, in distorting capital markets and fuellingturn, will constrain growth in economies such as the US, asset bubbles.where private sector restructuring has begun. Furthermore, inward capital flows to emerging marketsGovernments and central banks have used quantitative are creating asset bubbles fuelled by easy access toeasing (QE) policies, allied with record low interest rates. cheap credit. In Turkey domestic bank lending to theIn five short years the Bank of Japan has increased total private sector has increased from 33.1% of GDP atassets by 73.1%. In the US, the Federal Reserve’s assets end-Q3 2008 to 52.5% of GDP at end-Q3 2012, andhave increased by 224.7%, while total assets of the Bank Brazil has seen similar growth. These flows are furtherof England have risen by 301.4%. Finally, the European distorting existing sectoral imbalances and creatingCentral Bank’s total assets rose by 117.0%. significant policy challenges for governments. For example, in the four years from end-Q3 2008 to end-Q3Fiscal deterioration 2006 2012 Change 2012, China’s domestic banking claims on the privateAdvanced Economies -1.4 -5.4 -4.0 sector have risen from 105.7% of GDP to 133.8% of GDP,(% of GDP) fuelling a boom in home prices. While home prices haveEmerging Economies -0.1 -2.3 -2.2 unravelled since early 2011 (see chart below), concerns(% of GDP) linger that a collapse in home prices similar to thatG7 (% of GDP) -2.3 -6.5 -4.2 experienced in the US six years ago would have majorG20 (% of GDP) -1.2 -4.4 -3.2 implications for the global economy.No. of countries in excess 12 30 18of 2.5% of GDP Socio-political tensions raised by the ongoing Arab Spring have produced new risks. Finally, the Arab Spring—sparked by high levels ofThe unintended consequences of quantitative poverty and unemployment and exacerbated byeasing policies are concerning… cutbacks in government spending—has producedWhile debate surrounds the short-term success of such significant risk. These socio-economic factors couldpolicies, longer-term unintended consequences are more lead to similar situations in countries outside the Arabconcerning, including excessive risk-taking. Already, world as governments fight to rebalance their budgetsyields between high-risk bonds and US treasuries while appeasing their populations. The transition toare narrowing, stock markets have boomed in many democracy is by no means certain in Egypt, Libya andcountries, speculative activity in commodity markets are Tunisia, while the civil war in Syria continues unabated.keeping prices higher than fundamentals would dictate, Furthermore, the situation in Lebanon, Iraq, Jordan,and distortions mar the foreign currency markets. Algeria, and Yemen is anticipated to deteriorate overCurrencies in countries using QE remain artificially 2013. Regional stability is important in maintainingweak, boosting export potential. Other countries are downward pressure on oil prices and global energyfinding their currencies strengthening from increased prices, not to mention ensuring supply-chain continuity. 4
  5. 5. Y/Y % Change in New Residential Property Prices in China Key Observations • lobal rebalancing is underway. G10% • he US business sector is healthy and T8% Beijing has become leaner and meaner. Shanghai • n addition, enablers such as the I6% energy boom in the US are putting Chongqing 70-city Average downward pressure on energy prices.4% • owever, macro-economic risks H2% remain—largely due to fiscal issues in developed markets and risks in0% emerging markets.-2% • he longer-term impact of enormous T quantitative-easing programs is-4% concerning. Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 • he recovery process will not be a T straight line and businesses need to be prepared for ups and downs. 5
  6. 6. North America and Mexico 2013–17 …but under-trend growth is likely. Risk Insights A drag on growth below normal recovery will continue • S real-GDP growth will likely bounce inside a 2–2.5% U due to challenges in the public sector and the country’s annual range from 2013 to 2017. trading partners. Negative headwinds will cut 0.5-0.7 • ealthy corporate finances, rebounding investment, H pp from annual real-GDP growth through 2017, owing and pent-up consumer demand support more robust to a fiscal drag from public finances, rising taxes, and growth. new spending cuts. The net effect will place US real-GDP • eadwinds include shaky public finances, slower export H growth in a 2-2.5% range for the period, with higher growth, and US household deleveraging. growth possible closer to 2017. • anada’s high consumer indebtedness and overvalued C housing market leave the economy vulnerable to an ex- Negative news from overseas markets and US household ternal shock, but US growth should ultimately shield it. deleveraging will also likely constrain growth. However, • Deteriorating: Canada US household deleveraging will moderate, and US shale oil will also boost real-GDP growth by up to 0.3 pp • Stable: Mexico, US annually. In 2012 and 2013, domestic production will have risen by 1 million barrels per day.OutlookUS real-GDP growth of 3% is still possible… ImplicationsWith the deepest financial market in the world, a • he Federal Reserve’s conditions for raising policy Tunique record of innovation, and relatively dynamic interest rates (an unemployment rate of under 6.5%demographics for an OECD country, the US stands and inflation of over 2.5%) are unlikely to be met beforeout among developed countries. DB estimates the Q1 2015.US will enjoy 1-1.5 annual pp productivity growth in • anada and Mexico will enjoy moderately supportive C2013-17. Expanding capital investment drives that conditions across the border.optimism, growing by 4.4% year on year in Q3 2012. • ore fiscal policy standoffs loom, but household and MCapital investment in the US remains the one demand business sectors will endure.component not overshadowed by the debt crisis of2008-09, and it continues to expand as if the country • he NAFTA economy will be at least 10% larger in 2017 Twere in a normal recovery. With increasingly healthy than in 2012 in real terms.corporate financials, the US private sector can underpinreal-GDP growth of 2.7-2.9% per year in 2013-17, with Recommendationssome modest upside potential. • et more generous credit terms in growing US sectors SIn a normal recovery cycle, the US would post real-GDP as credit risk falls in even the worst affected states.growth surpassing 3% in 2013-15. In light of pent-up • xpect moderate credit risks in Mexico in 2013, given Edemand—including demand for consumer durables— high US dollar liquidity.this is still a theoretical possibility. However, real-GDPgrowth has trended distinctly below 2.7-2.9% in the • onsider caution given Canada’s low growth trajectory Cpast few quarters, and DB does not expect the Federal and high household debt. The Mexican peso will likelyReserve’s forecast to be consistently met or surpassed remain weak against the US dollar into 2013.before 2016. 6
  7. 7. Latin America 2013–17 the next five years as the external environment rebounds; Risk Insights however, high crime rates, inflation, and inadequate • neven economic performance is expected U infrastructure will continue to weigh on productivity. throughout the forecast period as the region Meanwhile, Argentina’s 2017 outlook is less optimistic registers moderate improvement. due to significant political and institutional challenges. • olitical uncertainty will rise amid discontent with P The continued risk of expropriation and foreign currency socio-economic policies and leadership challenges imbalances also threaten the business environment. in major economies. As such, Argentina should see annual average real-GDP • apital account restrictions and trade protectionism C growth of 3% to 3.5% between 2014 and 2017. will be the centerpieces of government initiatives to defend local industries and foreign currency holdings. Implications • Deteriorating: Argentina and Venezuela. Monetary policies are neutral to accommodative. • Improving: Brazil. • urrent lending rates will hold (and possibly decline) C while government initiatives in economies such as Argentina and Brazil will improve funding access forOutlook local companies.Risks will vary across the region… • apid currency movements could undermine the RLatin America experienced regional growth of around ability (or willingness) of some firms to service their3% in 2012. The region will register 4% growth in 2013, liabilities in a timely manner.owing to meager or declining growth in European • olitical risk will remain high in several countries beyond Peconomies, a struggling US recovery, and a decelerating 2013, notably Argentina, Nicaragua, and Venezuela.Chinese economy. This outlook is accompanied bynotable downside risks tied to currency and commodity Trade protectionism continues.price volatility as well as supply side shocks. Domestic • razil and Argentina will implement ad-hoc trade Brisks will vary from country to country in the first half protectionist positions as the former shields localof 2013. With inflation contained, stronger domestic manufacturers and the latter faces dwindling foreignand external demand will keep Chile at 4.5%. Brazil’s currency reserves, impacting intra-regional trade andmoderate rebound will be driven by rising household threatening capital inflows.consumption, higher public spending, increased foreign • ower demand from major emerging markets and/or a Ldirect investment (FDI), and higher portfolio investment; continued easing of commodity prices will take someaccommodative policies are expected despite continuing of the shine off the region’s natural resources sectorprice pressures. Argentina will maintain a protectionist through at least 2015.stance as its external accounts come under pressure;business confidence, the commercial environment, traderelationships, and foreign investment will deteriorate Recommendationsfurther. Conditions are also deteriorating in Venezuela • nternational arbitration clauses are recommended, Iwith uncertainty surrounding President Hugo Chavez’s particularly for countries with high levels of political risk.return to the helm and doubts about the long-term • f customers’ payment performance deteriorates, Isurvival of the ruling party without him. revise trade terms and collection practices to minimize…moderate growth in 2013 will improve with accounts receivable and exposure.external conditions. • xchange rate volatility will remain a concern: hedging EBrazil should grow by an average annual rate of 4% for policies should be considered. 7
  8. 8. Europe 2013–17(EU + Iceland, Norway and Switzerland) lead to a period of higher payment and credit risks. Risk Insights Positively, if these painful but necessary measures • The regional risk outlook depends on future are not abandoned by newly elected governments, developments in the Eurozone crisis. the EU implements a new fiscal framework, and the • ositively, no breakup of the European area is P ECB continues with its supportive monetary policy (as anticipated in the forecast period. expected), the EU should move toward trend growth • owever, the region will experience below-trend H after 2014. Overall, DB expects real GDP in Europe to growth in 2013 and very uneven growth until 2017. grow by slightly less than 2% in 2014-17, after a meager • ayment and credit risk will remain elevated until P expansion of only 0.5% in 2013. 2014 at least, especially in southern European member states. Implications • eteriorating: France, Greece, Italy, Poland, Spain, UK D (16 out of 30 in total). Growth will be uneven. • Improving: None. • Economic growth will be uneven; growth in Northern Europe will be higher than in Southern Europe; however, growth is likely to be exposed to severeOutlook downside risks in better-performing countries.2013 will be challenging but a Eurozone breakup • ncertainty stemming from the Eurozone crisis and Uis not expected… the questionable survival of the common currency will impact the exchange rate and threaten further volatility.The risk outlook for the region depends largely on theresolution of the ongoing Eurozone crisis. Given the close • urrencies of countries like Norway, Sweden, and Ceconomic links between the Eurozone and non-Eurozone Switzerland will remain under appreciation pressure,Europe, the crisis in the common currency area will arising from safe-haven investment inflows from thecontinue to influence regional and global growth Eurozone.over the next few years. DB expects no breakup of Exchange rate volatility is likely to be an issue.the Eurozone in the forecast period; on the contrary, • f much-needed reforms are not implemented in due time Ipolicymakers will likely introduce much-needed reforms and/or national governments abandon the austerity pathof the EU’s legal framework in 2013. Nevertheless, (a precondition for financial help from donor countries), aimplementation risks are high (due to elections in Italy, Eurozone breakup is the most likely outcome.Austria, and Germany this year). If member states andthe EU cannot agree on treaty changes, the Eurozone • eyond 2017, the poor demographic development Bcould at least partially disintegrate in 2013-14. The undermines growth prospects but rule of law and theregion (and potentially the global economy) would quality of infrastructure remain world class.consequently fall into a severe prolonged recession.…the region could pursue trend growth after 2014. RecommendationsFor the next few years, DB expects continued and • n 2013–14, companies doing business in the fragile Ieven increased austerity measures in countries such peripheral economies of the Euro area should expectas Greece, Italy, and Spain. France, Germany, Austria, a higher frequency of payment delays and mightand the Netherlands will reduce government spending consider tighter trade terms.and/or increase taxes in 2013 to meet deficit targets. • lthough it is not DB’s core scenario, a breakup of the AThis will weigh on the region’s growth potential and Eurozone cannot be ruled out. DB advises to stay out of Greece until late 2014 at least. 8
  9. 9. Eastern Europe and Central Asia2013–17 performing loans (NPLs), will continue to drag down Risk Insights output in Kazakhstan and Ukraine. In addition, while • External factors will force economic growth below it moderated in 2012, inflation may rise due to global the pre-crisis trend. food prices and strong demand pressures, especially • igh external pressures on current accounts H in energy exports. Overall, bureaucracy, rampant undermine potential growth in countries such as corruption, weak contract enforcement, and politically Ukraine. biased judicial systems continue to hamper the region’s • ussia’s decelerating growth weighs on most R trade and commercial environment. Insecurity risk economies in the region. will remain a concern in several countries, such as • dequate policy measures facilitate macroeconomic A Kazakhstan and Russia. stability, but political and insecurity risks are still high. • Improving: Turkmenistan. Implications • eteriorating: Azerbaijan, Belarus, Kyrgyz Republic, D Improved macroeconomic stability stands Tajikistan, Ukraine. challenged by the slowing global environment. • ecelerating growth on the back of historically high oil DOutlook prices will result in limited structural reforms in Russia.Economic growth will be lower than in the • he availability of credit in Kazakhstan and Ukraine Tpre-crisis period for most of countries. will remain poor.Europe’s bumpy recovery and deceleration in China will • mposed capital control measures in Ukraine will lift Iweigh on the region largely through trade for major the immediate pressure on foreign exchange reserves,regional economies like Russia, Ukraine, and Kazakhstan. but offers no long-term solution for the country’sStrong current account surpluses in energy exporting current account crises.countries are set to ease in 2013. Deterioration of external • ersistent capital outflows defer modernization and Pbalances will pressure local currencies. In some countries, much-needed investment in the Russian economy.particularly Kazakhstan and Russia, more flexibleexchange rates and strong foreign exchange reserves will • mproved macroeconomic stability via diminishing Imitigate any potential economic downturn. In others, such inflation, government deficits, and debt standsas Ukraine, a fixed exchange rate regime coupled with challenged by the slowing global environment.high financing needs is likely to expose currency.Regional business risk remains high. RecommendationsOil prices, set to remain above $100 per barrel for the • ownside risks for doing business in the region prevail; Dnext four years, will support exporting economies different combinations of downside risks in differentlike Kazakhstan, Azerbaijan, Uzbekistan and locations require an in-depth assessment of particularTurkmenistan. However, growth in Russia, a systemic countries and industries.regional economy, will decelerate despite high • edging against the volatility of some local currencies Hcommodity prices, due to internal imbalances associated should be considered.with underinvestment in non-energy sectors. Russia’s • trict trade terms are recommended when doing Sslowing growth will affect most countries in the region business with counterparties in the region; cash inthrough trade and FDI; in addition, Kyrgyz Republic and advance is DB’s recommended trade policy in theTajikistan may see their remittance inflows weaken. majority of countries.The banking sector, still overburdened with high non- 9
  10. 10. Asia/Pacific 2013–17 Demographic dividend will sour for more of Asia Risk Insights in the mid-2010s. • Convergence” of low- and mid-income countries “ Japan faces headwinds from declines in its working-age will continue... population, which shrank over 1% in 2012. Furthermore, • but demographics in China, South Korea, … demographic factors could sour sooner than expected Singapore, and Thailand pose a negative factor. elsewhere. China’s 15-to-64 population could peak in • uccessful “convergence” depends on provision of S 2016 and fall thereafter. But China’s National Statistics key public goods. Bureau pinpoints the turning point for the 15-to-59 • egative shocks could arise from issues such as N population in 2012, when it declined more than 3 million. water use in energy production. Meanwhile, the UN predicts the South Korean workforce • eteriorating: Australia, China, India, Japan, South D will start to shrink and growth in Singapore and Thailand’s Korea, Singapore worker populations will be almost nil by 2017. A decline • table: Indonesia, Malaysia, The Philippines, S in Australia’s 35- to 54-year-olds will hurt investment if Thailand patterns in other high-income countries repeat. China’s demographic inflection point encourages wageOutlook hikes and a re-migration of export capacity by Chinese and foreign firms to Bangladesh, Vietnam, and Indonesia.Asia needs new sources of economic growth… This will boost FDI outside China, despite the country’sOnly Southeast Asian countries achieved strong unparalleled scale and export infrastructure. Other shocksdomestic-led growth in 2012, while exporters across could arise from the water-energy nexus. The region willAsia were hit by European woes, sectoral imbalances likely increase energy consumption by 30% betweenin China, inflationary pressure in India, and a banking 2010 and 2017; China’s will rise by 39%. Asia/Pacific willcrisis in Vietnam. A shock seems unlikely; nevertheless, burn over 1 billion more tons of coal in 2020 than in 2010.DB suggests the region reorient capacity and The high demand for water from coal-fired and otheremployment away from supplying consumer items and thermal power generation could stress water supplies toresources to Europe and China over the next five years. businesses, agriculture, and households.DB forecasts imply a moderately successful searchfor new growth sources in 2013–17 for most low- and Implicationsmid-income economies in South/Southeast Asia. • hina faces sub-7% annual growth from 2014, as credit CNew infrastructure will encourage growth, and rising risks from the excesses of 2008-12 damage confidence,disposable incomes will spur investment in services. If exports stagnate, and demographics arable and energy production can supply food • demographic inflection point is descending: Japan’s Aand hydrocarbons, then demographics in Bangladesh, working age population began declining in 1997, theIndia, Indonesia, and the Philippines will strongly rest of Asia could follow suit starting in consumption and return on capital. However,failure to mobilize tax revenues and provide security, • onfidence ranges for growth forecasts in 2013–17 are Cjustice, higher education, and other public goods will wider than in the pre-crisis 2000s.cap annual growth rates at 6% in India and at 4% inPakistan. By contrast, Indonesia, Thailand, and the RecommendationsPhilippines will have fiscal space to support growth. • irms serving domestic consumer markets and in more F sophisticated services sectors may prove better sales opportunities. 10
  11. 11. Middle East and North Africa 2013–17 Risk Insights Implications • xtreme political and commercial risks face Iran, E Flat oil prices and security issues will slow Syria, and Yemen, and will be particularly significant business activity… in Algeria, Bahrain, Egypt, Iraq, Jordan, Lebanon, • usiness opportunities will increase over the forecast B and Libya. period in post-conflict countries such as Egypt, Iraq, Libya, • lat oil prices and low growth in Europe and China F and Syria (expected to emerge from conflict in 2013). will curtail growth prospects throughout the region until at least 2016. • owever, until the end of 2014, instability in Bahrain, H • he hydrocarbon economies will continue to T Egypt, Iraq, Lebanon, Libya, Syria, and Yemen will be perform stronger than other countries as significant, while Algeria, Jordan, and Tunisia will governments continue to spend heavily. experience elevated instability. • he commercial environment will remain T • ighter international sanctions against Iran will T challenging in most countries. undermine the economic outlook and expected returns • Deteriorating: Egypt, Iran, Israel, Morocco. from trade and investment in the short term. • Improving: Turkey, United Arab Emirates. • onstruction and service companies in oil-rich countries C will benefit from strong government spending. • owever, DB expects payment performance in HOutlook government-related companies in oil-rich countries toFlat oil prices and regional political and security deteriorate.issues will curtail growth… …impacting payment performance, profitability,Flat oil prices, alongside political and security issues, and bankruptcies.will push growth in most countries lower through • n turn, this will impact cash flow, payment performance, I2017 than in the period from 2002 to 2008. However, profits, and bankruptcies in the private sector.those emerging from conflict such as Egypt (growth • lower growth in oil-rich countries means slower Swill increase to 6.5% by 2017 from only 1.8% in 2012), investment, remittances, aid, and trade flows to oil-Iraq (average annual growth of 9.5% in 2013–17), Libya poor countries, undermining growth; however, these(average annual growth of 7.4% in 2013–2017), and Syria countries will see lower import bills as energy costs fall.(average annual growth of 6.5% in 2013–2017), will seehigher growth rates in the latter period. Nevertheless,the commercial environment will remain challenging in Recommendationseach of these countries as political tensions persist and • ompanies dealing with firms based in Algeria, Cgovernments fail to address issues such as corruption and Bahrain, Egypt, Iraq, Jordan, Lebanon, Libya, Syria,the weak legal and regulatory environment. and Yemen should exercise extreme caution, owing to the weak and/or deteriorating political and…but post-conflict states will see growth rates commercial risk outlook.improve. • n view of the increase in international sanctions IA quicker than expected global recovery would boost targeting the financial and hydrocarbon sectors,oil prices and growth across the region, but a potential DB advises customers to remain vigilant towardmilitary strike against Iran significantly undermines companies with ties to Iran.growth prospects in the short term. • ncrease monitoring on the payment performance of I government-related businesses in oil-rich states as governments delay payments. 11
  12. 12. Sub-Saharan Africa 2013–17 Risk Insights Implications • hina’s economic slowdown has weakened demand C Strong commodity prices will boost investment, for commodities from the region. Nevertheless, current account balances and government Chinese regional investment will remain strong. budgets, strengthening the economy… • nrest in the Democratic Republic of Congo threat- U • lthough stagnant, commodity prices (mainly oil) will A ens neighboring countries, while the growth of remain high, maintaining the sector’s attractiveness radical Islamist groups in the north is also a concern. for investment and boosting current account and • ountries with fiscal, inflation, and balance of C revenue opportunities for governments with access to payments challenges (e.g., Ghana, Kenya, Tanzania, those resources. and Uganda) face severe economic difficulties. • lobal risk aversion toward sovereign debt will G • eteriorating: Botswana, Ghana, Kenya, Nigeria, D continue to increase pressure on African governments South Africa. to improve their budget positions. • Improving: Senegal, Sierra Leone. • trong commodity prices will encourage governments S to attempt to balance their budgets by raising royalties/taxes in extractive industries with foreignOutlook operators, raising commercial risks.The region will continue to show resilience in the • ndeed, fiscal vulnerability will rise, undermining Iwake of slowing world demand… contract renewal prospects for firms reliant on stateDespite the hesitant global economic recovery, DB procurement.expects the region to experience solid growth in the …but will encourage resource nationalism,forecast period from 2013 to 2017. Most economies will undermining the commercial environment.experience average annual growth over 5%, driven by • ny spillover of security issues from the Democratic Aremittance, investment (particularly in the commodity Republic of Congo and Mali will increase pressure onsector), and export flows. One notable exception is the supply chains in these areas.region’s largest economy, South Africa, where annualaverage growth will reach only 3.3%. Furthermore, • overnments must address structural issues—such Gcountries such as Ghana, Kenya, Tanzania, and Uganda as poor infrastructure, corruption, and weak legal andface severe economic challenges and slowing growth as regulatory environments—to build stronger growth.a result of fiscal, balance of payments, and inflationary • nflows of capital looking for higher returns than Idifficulties. In addition, the failure to address the weak available in developed markets could increase the debtcommercial environment will ensure business risks burden for countries over the long term, thus raisingremain high across the region during the forecast period. external financing risks.…but growth will be uneven across the region.Downside risks stem from significantly slower-than- Recommendationsexpected growth in China, curtailing investment flows • ommercial opportunities in businesses in the commodities Cand demand for exports. DB is additionally concerned sector will remain strong throughout the period.about the threat of violence spreading outside the • owever, investors should be aware of the possibility HDemocratic Republic of Congo to neighboring of forced contract renewals as governments attempt tocountries as well as from radical Islamist groups in maximize short-term returns in this sector.Mali: escalation in either situation will adversely impact • uilding domestic contacts can help offset the Bgrowth in surrounding countries. challenging business environment. 12
  13. 13. DB is the world’s leading source of commercial information and insight on businesses,enabling companies to Decide with Confidence® for 171 years. DB’s global commercialdatabase contains more than 215 million business records. The database is enhanced byDB’s proprietary DUNSRight® Process, which provides our customers with quality businessinformation. This quality information is the foundation of our global solutionsthat customers rely on to make critical business decisions every day around the world.Additional ResourcesThe information contained in this publication was accurate as of press time. For the most up-to-date information onany country covered here, refer to DB’s monthly International Risk Payment Review. For comprehensive, in-depthcoverage, refer to the relevant country’s Full Country Report. For additional resources and insight, visit Bradstreet is the world’s leading source of commercial information and insight on businesses, enabling companies to Decide with Confidence® for over 170 years.DB’s global commercial database contains more than 210 million business records, enhanced by our proprietary DUNSRight® Process, providing our customers with qualitybusiness information. This quality information is the foundation of our global solutions that customers rely on to make critical business decisions.© Dun Bradstreet, Inc. 2013. All rights reserved. 13