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D&B’s Global Economic Outlook


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This global economic outlook gives Dun & Bradstreet's perspective on global business conditions. Based on its proprietary data and analytic insight, the outlook reviews business conditions for 2012 and gives insight on what to expect for 2013.

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D&B’s Global Economic Outlook

  1. 1. D&B’s Global Economic Outlook2012 in Review and 2013 OutlookAround the World – Regional Insights, Upgrades and Downgrades North America (US, Canada) and Mexico n Latin America n Europe n Eastern Europe and Central Asia n Asia Pacific n Middle East and North Africa n Sub-Saharan Africa 1
  2. 2. Making sense of data is what we do at D&B. We collect and analyze global data to identifypatterns, make predictions, and offer you an informed perspective. D&B’s Global EconomicOutlook is our most popular assessment of the year in review and the year ahead.2012 in Review Real GDP Growth (%) 2011 2012f 2013fGlobal growth slowed during 2012,with North America the exception World 2.6 2.0 2.3 Advanced economies 1.5 0.9 1.3A global economic recovery proved harder to come by than US 1.8 2.0 1.9originally anticipated, according to D&B’s Global Review Euroland 1.4 -0.8 0.22012. Real GDP growth will total 2 percent for the year, Japan -0.8 1.7 1.6four percentage points lower than the 2.4 percent growth UK 0.9 0.0 0.9predicted in early 2012. A number of challenges stood in Emerging economies 5.5 4.6 4.8the path to more widespread global economic growth, Brazil 2.7 1.9 4.0including a protracted Eurozone crisis, waning demand for Russia 4.3 3.6 3.7Chinese products, reduced reliance on commodities in the India 6.9 5.5 6.1Asia/Pacific region, and economic sensitivity in emerging China 9.2 7.4 7.1economies. North America proved a rare bright spot,however, thanks to a strengthening US private sector. Policymakers have addressed a number of issues in Europe but still need to do moreKey Global Growth Indicators Price Index The Eurozone crisis grabbed headlines for most of thePMI (2005=100) year as policymakers fought a rearguard action on a58 240 number of fronts. The European Central Bank (ECB) has56 220 maintained a record-low interest rate at 0.75 percent54 200 since July, earned more than $1.3 trillion in long-term52 180 financing for the banking sector, and introduced a thus-50 far unused sovereign bond-buying scheme (Outright48 160 Monetary Transactions) to buy debt from countries that46 140 request bailout funds. Meanwhile, 25 countries joined a Jun Apr Sep Oct Aug May Jul fiscal pact in March giving Brussels the power to review Global Manufacturing PMI (left-hand axis) national budgets, expand the European Financial Stability Global Services PMI (left-hand axis) Facility (effectively a firewall for indebted sovereign Global Commodity Price Index (right-hand axis) governments) and European Stability Mechanism (to helpNotes: PMI’ is the Purchasing Managers Index – a reading above 50 denotes ‘ recapitalise private sector banks) to around $1 trillion, and an expansion in sectoral activity, and one below 50 a contraction; the Global Commodity Price Index is the IMF’s price index for all primary begin discussions on a possible European banking union. commodities (2005=100). Sources: IMF; JPMorgan; DB While these moves have sustained the Eurozone in the short term, more needs to be done to stop a Greek exit. Meanwhile, national governments introduced austerity measures to reduce burgeoning fiscal deficits and public sector debt levels, a development that has additionally impacted short-term growth prospects. 2
  3. 3. US economy staggers towards recovery, Regional Comparisonswhile Chinese growth slows On-going problems in Europe were chieflyIndividual countries fared quite differently throughout behind the majority of the downgradesthe year. A rebounding corporate sector boosted the US Half of all countries that received a growth forecasteconomy in 2012, in spite of public sector debt. China downgrade reside in Europe, due to the protracted debt crisis.struggled against sluggish European demand for its With the exception of North America, Europe was the onlyexports and weak domestic demand, resulting in serious region to see no upgrades. In addition, a quarter of countriesrecessions in a range of industries, from steel-making in the Middle East and North Africa were downgraded,to construction equipment to consumer electronics. owing to problems associated with the Arab Spring andNevertheless, the country nearly hit target growth of 7.5 the downturn in Europe (a key trade and investmentpercent in 2012. Japanese growth likewise rebounded partner). However, regime change and a stabilizing politicalafter the devastating effects of the 2010 earthquake and environment resulted in an upgrade for Libya.tsunami, but stalled in Q4 2012. And austeritymeasures in the UK resulted in Upgrades and Downgradesa year of stagnation. Number of Number of Number of Region Countries Countries Upgraded Countries DowngradedChallenges to globalgrowth remain high North America Mexico 3 0 0Meanwhile, the Great Recession Latin America 20 1 2lived up to its title as recovery Europe 30 0 15has proven more prolonged andchallenging than any previous Eastern Europe and Central Asia 15 2 2recession in the last century. Asia-Pacific 23 1 4A unique set of challenges and Middle East and North Africa 19 1 5opportunities face businessesat the tail end of 2012. Critical Sub-Saharan Africa 22 2 4growth factors in the near andlong term include: 1) Fiscal challenges facing countries Only seven countries were upgraded in 2012in the Organisation for Economic Co-operation and Lower European appetites for Asian exports resultedDevelopment (OECD); 2) Deregulation and rebalancing in four country downgrades in the Asia/Pacific key sectors of developing economies; 3) Sectoral issues Myanmar’s singular upgrade resulted from the lifting ofsuch as housing; 4) The uncertain longer-term effects of international sanctions. Despite its proximity to Europe,new monetary policies; 5) Commodity price uncertainty, only two Eastern Europe and Central Asian countriesincluding oil prices; and 7) Food inflation. On a positive were downgraded, while two (Georgia and Uzbekistan)note, growing strength in the US corporate sector could were upgraded as their economies improved. Two Latinspark a quicker-than-anticipated rebound in the global American countries were downgraded as a consequence ofeconomic recovery. A deeper examination of these critical curtailing economic growth, while Uruguay’s GDP growthfactors will be discussed in DB’s forthcoming report, The forecast increased. Four countries were downgraded inGlobal and Regional Outlook, 2013 and Beyond. Sub-Saharan Africa mainly due to political concerns and weakened economic conditions. Nonetheless, Angola and Sierra Leone experienced improved growth forecasts as their economies strengthened. 3
  4. 4. North America and Mexico helped boost the country’s economic performance Regional Insights (commodities account for more than half of exports), not to • he US private sector boosted growth in T mention a stable financial sector and a relatively favorable spite of a drag effect created by public sector fiscal position. By early 2011, Canada had recouped all jobs debt in 2012. lost during the Great Recession. Be that as it may, economic growth had steadily slowed. Like its southern neighbor, • s with the US, Canadian growth slowed A Canadian economic performance in 2012 staggered towards the end of 2012. toward a distant recovery and weakened further by year’s • exico’s fortunes remained inextricably tied M end. Job creation remains low, with unemployment at to US economic performance. 7.4 percent in October, significantly higher than the 6.1 – Upgrades: None. percent figure seen prior to the recession. Furthermore, – Downgrades: None. unlike the US, the Canadian housing market has failed to course-correct; home prices and household debt remain high despite government attempts to cool the market.US An economic downturn could trigger the bursting ofThe private sector has deleveraged and helped the housing bubble. Another consequence of uncertaindrive growth but public sector debt continued to domestic conditions is fluctuating business insolvencies;dampen growth prospects in 2012 insolvencies rose 12.8 percent year-over-year in July but fell by 17.8 percent in August. However, bankruptcyThe US economy staggered along in 2012, although growth proposals (a leading indicator of bankruptcy) jumpedslowed during the latter part of the year. The corporate in August, driven by sharp upturns in the construction,sector is now in its strongest financial health in years: manufacturing, accommodation, and food services firms.balance sheets have been rebuilt owing to the completionof deleveraging programs, payment performance is Mexicoimproving, and bankruptcies are declining. Some sectorsand regions have naturally performed better than others. Growth in the US saw the Mexican economyMeanwhile, with household deleveraging at its peak, home perform better than expectedprices began to recover alongside new job creation, though Mexico has also defied the global trend, with a brighterat a far weaker pace than following previous recessions. forecast for real GDP growth. January’s prediction of 2.9And although the unemployment rate stood at a stubborn percent growth has been superseded by a 3.7 percent7.9 percent, consumer spending managed to rise. Public growth forecast. The Mexican economy benefited fromsector debt nevertheless dragged on the US economy in growth in the US, which accounts for almost 80 percent2012, as the fiscal deficit remained unsustainably high. By of exports. In September alone industrial productionyear’s end, the political “fiscal cliff” is poised to be the chief rose 2.4 percent compared to the same month in 2011.threat to a sustainable recovery. Without compromise, tax The country also enjoyed robust US investment andincreases and spending cuts totalling $600 billion threaten remittances from its migrant workforce. Overall, Mexico’sto steal a couple of points of GDP growth in 2013. economic performance remains inextricably linked to US fortunes. On the other hand, rampant corruption, crime,Canada and violence related to drug cartel operations continue to undermine the Mexican business environment.Growth staggered along in 2012 but is Despite these issues, Mexico rose a creditable five placesthreatened by a bursting of a housing bubble to 48 in the World Bank’s Doing Business 2013 survey,The Canadian economy entered 2012 in comparatively with significant improvements in the areas of Starting areasonable condition. Strong global commodity prices Business and Getting Electricity. 4
  5. 5. Latin America will serve until 2019 unless health problems (unspecified Regional Insights cancer) intervene; at present there is no clear succession • egional growth slowed as export demand R plan for the Venezuela presidency. Argentina President and domestic consumption moderated. Cristina Kirchner’s increasingly protectionist policies could not prevent public protests against rising prices, wage cuts, • urrencies rose as quantitative easing in the C and speculation surrounding a constitutional reform that US created arbitrage opportunities. would allow Kirchner to run for a third term. And Brazil • arious capital account restrictions helped V President Dilma Rousseff suffered declining popularity to stem capital flight and conserve foreign owing to a corruption trial (and subsequent conviction) of reserves. a senior government official. – Upgrades: Uruguay – owngrades: Argentina (thrice), D The commercial environment for key economies Trinidad, and Tobago in the region worsened in 2012 The World Bank’s Doing Business 2013 report revealed that regional economies are varyingly open to foreignRegional Review investment. While Panama (up one place to 61) andLower internal and external demand led to Mexico (up five places to 48) were more accommodating tolower regional growth investors, Brazil (down 2 places to 130), Argentina (down 8Latin American growth declined as trade with internal places to 124) and Venezuela (down one place to 180) wereand external partners moderated due to low global less supportive in 2012.growth. Several economies mirrored this trend through Upgradeslower domestic private consumption. In response, keyeconomies such as Argentina and Brazil implemented Uruguay’s risk rating increased by one quartile to DB3btrade protectionist measures in an effort to shield local in September on the back of improved growth prospects,manufacturers. Quantitative easing adopted by the US rising foreign direct investment, and improved portfolioalso resulted in growing pressures on regional currencies, investment in the first three quarters of 2012. As such, itsprompting varying degrees of central bank intervention. foreign currency position improvement resulted in strongWhile regional growth stood lower than in 2011, individual import cover and lower payment risks.economies experienced a divergence of real GDP growth. DowngradesIn 2012, Uruguay is expected to record real GDP growthof 4.5 percent, while Brazil’s economy will expand by a Argentina’s risk rating was thrice downgraded: by twomore modest 1.9 percent. Argentina’s attractiveness to quartiles DB5d in March; in May by a further two quartiles;foreign investors declined further on account of higher and finally by one notch in July to DB6c. The downgradesexpropriation risks, rising inflation, tighter foreign came largely due to the imposition of import controls. Incurrency restrictions and greater trade protectionism. addition, foreign companies grew more concerned aboutVenezuela faced foreign exchange liquidity challenges rising restrictions that would affect repatriation of profitsamid speculation of devaluation. and dividends. Trinidad and Tobago’s risk rating declined by one quartile to DB3b in February mainly on account ofRuling parties’ generally left leaning positions weaker economic growth. Private consumption remainedwere further entrenched flat and business credit growth was anemic. Furthermore,The traditionally liberal tendencies of Latin American fragile economic growth among regional trade partners ledruling parties were further entrenched in 2012. Hugo to generally weak intra-regional trade.Chavez won a third term as Venezuela’s president and 5
  6. 6. Europe(EU + Iceland, Norway and Switzerland) The ECB’s focus has partially shifted from Regional Insights fighting inflation to supporting growth and • Domestic austerity measures, rising financial stability unemployment rates, and slowing With a view to boosting economic growth, the ECB lowered external demand dented growth in 2012. the key policy rate in July 2012 to an all time low of 0.75 • ith payment and credit risk on the rise across W percent to stimulate growth rather than fight inflation. most countries in 2012, DB expects The Bank also provided €1 trillion in long-term financing an increase in business failures. for the banking sector in December 2011 and February 2012. The cash infusion increased bank liquidity in ailing • he risk of a Eurozone break-up is still limited, T periphery economies and stemmed further problems thanks to policy intervention. However, this in the financial sector. That said, ultra low interest rates, outlook can change quickly. predicted ECB bond purchases, and a potential new round – Upgrades: None of quantitative easing in the US and other countries could – owngrades: Belgium, Denmark, D create uncertain EU price stability, exchange rate volatility, Luxemburg, Spain, France, Germany and asset bubbles. Meanwhile, protracted turmoil (twice), Hungary, Slovenia (twice), in Greece and other Eurozone economies has placed Greece, Netherlands, Czech Republic, downward pressure on the euro: the currency depreciated Romania, Austria, Switzerland, Cyprus. by around 10.7 percent against the US dollar between January 2010 and September 2012. The euro is further expected to remain relatively weak in the outlook period.Regional Review DowngradesMacroeconomic conditions remain challengingamid weak domestic demand and softening The crisis in Europe was underscored by the high numberexternal demand of downgrades throughout 2012. In January, DBLower contributions from net external demand, weak downgraded the risk ratings by one quartile of Belgiumbusiness and consumer confidence (dampened by rising (to DB2d), Denmark (to DB2c), and Spain (to DB4d).unemployment rates and restrictive credit conditions), Luxemburg received a two-notch downgrade (to DB2c)and draconian fiscal austerity weighed heavily on Europe’s due to disappointing economic performance. In February,economic growth throughout 2012. Despite a mild real GDP worsening short-term economic prospects prompted aexpansion in Q3 (up 0.1 percent from the previous quarter), one-quartile downgrade for France (to DB2b), Germany (tomost economic indicators deteriorated toward year’s end, DB1d), Hungary (to DB4d), and Slovenia (to DB2d). In June,suggesting that current macroeconomic conditions remain rising political risks prompted a two-notch downgradeincapable of boosting domestic demand. Despite economic in Greece to DB5c and a one-quartile downgrade to theweakness, inflation persisted throughout the year, propped Netherlands (to DB2b). In the July-October period, DBup by higher taxes in several member countries and higher downgraded the risk rating of six countries (namely Czechenergy and other commodities prices, particularly food. Republic to DB3c, Germany to DB2a, Romania to DB4c,Particularly worrisome is the rise in unemployment. With Austria to DB2b, Slovenia to DB3a, and Switzerland tocorporate profits squeezed, the EU unemployment rate DB2a) on the back of disappointing economic trendssoared to a record 10.6 percent as firms shed jobs (especially and sluggish domestic and external demand. Finally,in manufacturing, financial services, and construction). in November, DB cut Cyprus’ country risk rating byNo upturn was anticipated in Q4, and GDP was projected three notches to DB4c as persistent downbeat economicto shrink by 0.8 percent for 2012 as a whole. Payment and developments overshadowed the island’s short-termcredit risks continue to deteriorate. outlook. 6
  7. 7. Eastern Europe and Central Asia better prepared for global risk aversion than during the Regional Insights Great Recession. On the contrary, energy importers are less • The global slowdown led to easing economic resilient, especially those with large external financing growth in the region. needs such as Ukraine. Meanwhile, Russia’s economic slowdown has negatively affected the region, given its tight • omestic demand became the main driver for D linkages with other economies via trade, foreign direct the economic expansion. investment, and remittances. Banking systems in some • xpansionary fiscal stances and credit growth E countries remain far from repaired. Ukraine still suffers proved key components of domestic growth. from significant non-performing loans, and Kazakhstan, – Upgrades: Georgia, Uzbekistan Kyrgyz Republic, and Tajikistan struggle against poor – owngrades: Serbia, Bosnia D capital adequacy ratios. Herzegovina Risk of doing business in most countries is high Despite a difficult economic environment, some countriesRegional Review managed significant achievement. Georgia joined the topThe majority of the economies in the region 10 economies in the global ease of doing business rankingare slowing according to the World Bank’s Doing Business 2013 report.Strong economic growth was welcomed at the beginning Nevertheless, overall regional trade continues to languishof 2012, supported by high key regional commodity against red tape, corruption, weak contract enforcement,prices (oil, gas and metals), robust 2011 harvests, and and the lack of a sound legal framework.strong remittance flows from Russia to Uzbekistan and UpgradesTajikistan, among others. However, economic conditionsin the three largest countries (Kazakhstan, Russia, In January DB upgraded Georgia’s country risk ratingand Ukraine) fell prey to increased financial stress in by one quartile to DB5d, driven by an improving economythe Eurozone countries and higher global risk aversion. and more promising relations with neighboring Russia.Weakening demand from China also contributed to Furthermore, Uzbekistan’s risk rating was upgraded tothe slowdown. While investment growth weakened, DB5d from DB6a after continued improvements in theexpansionary fiscal policies and strong credit growth in country’s economic and financial environments.Russia and other energy exporters mitigated the negative Downgradesexternal impact on overall economic growth. Regionalgrowth is expected to average 4 percent in 2012 and 2013, The Eurozone crisis was partly to blame for two regionalcompared to 5 percent in 2011. downgrades. Serbia’s country risk rating was cut by one quartile to DB5a from DB4d in October on the back of lowGlobal risks put pressure on the local currencies growth and a looming fiscal deficit. In the same month,and the banking systems DB downgraded Bosnia and Herzegovina’s risk rating by two quartiles to DB6d from DB6b amid the deterioratingStrong account surpluses in energy exporting countries economic and political situation.from 2011 are poised to deteriorate in 2012 and beyondas global downside risks unfold. Any deterioration ofexternal balances could exacerbate capital outflows andpressure currencies. Currencies of countries that switchedto more flexible exchange rates–in particular Kazakhstanand Russia–proved resilient to headwinds and appeared 7
  8. 8. Asia-Pacific Japan’s post-tsunami recovery stalled in Q4 2012, while Regional Insights Australia’s powerful resource sector-driven boom will likely • Chinese credit risks rose due to recession in fade as early as 2013, earlier than anticipated. Credit growth specific industrial sectors. is likewise weak in most countries outside China and Southeast Asia. Vietnam is still recovering from its balance • ndia’s development model struggled against I of payment problems and collapse in investment in 2011. rising inflation and stalling investment. • he end may have come into view for Austra- T Central banks have been cautious in this context, with few lia’s ongoing, still-intense resource boom. changes to monetary policy outside of India and Vietnam, where calibrating policy has been harder. India tightened – Upgrades: Myanmar policy by 3.5 percentage points in April, only to relent by – owngrades: China, India, Singapore, D 50 basis points two months later; Vietnam has steadily cut Hong Kong. its policy rate as it recovers from its macroeconomic near- emergency. In India and Pakistan, inflation and balance-of-Regional Review payments pressures reflect structural problems.With the exception of four downgrades, the Asian region With Asia-Europe trade due to be depressed for severalpresented stable prospects in 2012. However, pessimism quarters (European container imports fell an estimatedabout the short-to-medium term outlook increased, 5 percent year over year, and Asian container exportsprimarily for economies dependent upon Chinese and fell 4 percent in Q3), the region must find new sourcesOECD demand. China and India, home to most of the of economic growth beyond OECD demand for ChineseAsia/Pacific region’s population, received downgrades to manufacturing goods and Chinese demand for upstreamthe DB4 range in Q2. Singapore and Hong Kong, the most natural resources. Not all economies will succeed.prominent entrepôt economies and financial centres ofAsia/Pacific, also garnered downgrades, underlining a shift Upgradesin expectations. DB’s July upgrade to Myanmar by two quartiles to DB6aA divergence between countries driven by domestic reflected the opening of political and economic reformsdemand, those addressing the slowdown in Asia-Europe and the consequent lifting of EU and US and export-oriented investment, and those struggling Downgradeswith classic liquidity and supply bottleneck problems ofdeveloping economies became clearer. Indonesia and China’s one quartile downgrade to DB4a in July echoedThailand saw private consumption and investment growth the unravelling of its building boom as well as serioussurpass 5 percent and 10 percent, respectively, year over recessions in a range of industries, from steel-making toyear, in Q2 and Q3, while domestic and foreign credit construction equipment to consumer electronics. In therose strongly. Malaysia and the Philippines experienced same month a similar downgrade was applied to India,less optimism on all counts, but remain part of a strong which reflected the marked stall in growth in Q2, with realSoutheast Asian development story that seems more sound GDP growth excluding the net effects of subsidies totallingthan China’s. under 4 percent year over year and investment growth falling to less than 1 percent.In contrast, Taiwan, South Korea and Japan are in amore muted economic cycle. Taiwanese investment has The one quartile downgrade to Hong Kong to D2b in Augustdropped noticeably in recent quarters, and South Korea, reflected concerns for the mainland Chinese economy andNew Zealand, and Singapore all posted at least a quarter the spending of China’s wealthy visitors to Hong Kong.of year-over-year decline in investment in 2012. Private Singapore’s July one quartile downgrade to DB2d reflectedconsumption growth in these high-income economies will its high potential exposure to China and Europe.reach 1 to 2 percent in 2012. 8
  9. 9. Middle East and North Africa the region. However, in the longer term, these states Regional Insights must increase the non-hydrocarbon sector and control • Civil war in Syria threatens to spill over into government spending in order to stop deteriorating ratings. neighboring countries. Commercial risks remain challenging across most • olitical risks related to the Arab Spring re- P of the region mained high in Bahrain, Egypt, Libya and Ye- The commercial environment remained challenging across men, and threaten Jordan and Algeria. most of the region. Of the 18 countries ranked by the • il-rich countries used government spending to O World Bank in its annual Doing Business Survey (Libya is boost the economy and reduce the threat from not scored), half are ranked in the bottom 50%, with four in bottom 25% (Syria, Iran, Algeria and Iraq). Only three the Arab Spring. countries improved their ranking in the year (Egypt, Saudi – Upgrades: Libya. Arabia, and the UAE), two remained static (Oman and – owngrades: Egypt, Jordan (twice), D Qatar), while the rest deteriorated, with Yemen falling 17 Kuwait, Lebanon (twice), and Syria. places to 118 and Syria 7 places to 144. UpgradesRegional Review The only country to experience an upgrade in thePolitical and security problems continued to region was Libya. With the end of the civil war and thethreaten many countries across the region… consequent improved security and political position, DBArab Spring and its consequent uncertainty dominated upgraded the risk rating by one quartile to DB6d.the risk outlook across the region throughout 2012. DowngradesThe situation is most serious in Syria, where the civilwar has catapulted the country into the highest risk In January DB downgraded four regional countries bycategory. Furthermore, the war threatens to spill over into one quartile each as a result of deteriorating political and/neighboring Lebanon and Turkey. Worryingly, Yemen and or socio-economic conditions. Egypt was downgradedBahrain are still experiencing high levels of protest, while from DB5c to DB5d as it became obvious that the ouster ofthe final outcome in Libya and Egypt is uncertain. Jordan President Hosni Mubarak resulted in a number of groupsand to a lesser extent Algeria remain at risk of increased competing for power, including the military, the moderatelevels of demonstrations against authoritarian regimes. Muslim Brotherhood, radical salafists and young secularProtests have impacted significantly on government liberals who had been the prime movers behind thebudgets as spending on security and subsidies have risen revolution. Meanwhile, Lebanon was downgraded as thedramatically, raising concerns in a number of countries civil war in Syria threatened to spill over into the sectarian-about rising public debt levels. Meanwhile, different divided country; a further one quartile downgrade tosecurity issues in Lebanon, Iraq, Iran, and Israel continued DB5c was implemented in September as the situationto undermine these countries’ outlook. deteriorated further. Jordan also experienced two separate one-quartile…although the oil-rich states were able to buy downgrades (in January and in November) to DB4c assupport of their populations worsening economic conditions brought large-scaleOn a positive note, hydrocarbon-rich Gulf states, with the demonstrations against the government, threatening tonotable exception of Bahrain, have to a large extent been bring the Arab Spring belatedly to the kingdom. Finallyable to use their oil wealth to isolate themselves from Kuwait was also downgraded in January, resultingglobal problems, thereby dissipating the socio-economic from increased tensions between parliament and thetensions that drove the Arab Spring across the rest of government that forced the resignation of the cabinet. 9
  10. 10. Sub-Saharan Africa undermining the risk outlook. Meanwhile, renewed Regional Insights rebel activity in the later part of 2012 in the Democratic • nvestment, particularly from China, in the I Republic of Congo, allegedly supported by Rwanda, could resource sector continued to boost growth destabilise neighboring countries. Furthermore, arms have in a number of countries. flowed out of Libya since the overthrow of Col. Gaddafi in 2011, threatening the stability of drought-stricken • ecurity and political issues adversely affected risk S countries in the Sahel. ratings in a number of countries, including the The commercial environment remained challenging regional powerhouses South Africa and Nigeria. According to the World Bank’s annual Doing Business • he commercial environment remained chal- T Survey, the commercial environment remained lenging across the region, with the notable challenging across the region, with the notable exception exception of Mauritius. of Mauritius (ranked 19, up from 24). Of the 22 regional – Upgrades: Angola, Sierra Leone countries covered by DB, 17 are ranked in the bottom 50 – owngrades: Botswana, Mauritius, D percent, of which 12 are in bottom 25 percent. In addition South Africa, Zambia to Mauritius only three other countries improved their ranking in the year (Angola up to 2 places to 172, Sierra Leone up 8 places to 140, and South Africa up two places toRegional Review 39), two remained static (Nigeria, 171 and Cote D’Ivoire,Growth held up well across the region, 177) while the rest deteriorated.particularly in the low income countries UpgradesDespite the global slowdown prompting weaker primary DB upgraded Angola’s risk rating by one quartile to DB5bcommodities markets, growth held up reasonably across in January on the back of a number of positive economicthe region. In particular, low-income countries proved developments, including lower inflation, reduced sovereignmore successful than the developed economies of Nigeria risk, investment in the power sector, and increased oiland South Africa, with their stronger dependency on the production. Meanwhile, the government has stepped up itsEuropean economy. Investment in the resource sector in efforts to diversify away from oil exports. This was followedcountries such as Sierra Leone, Mozambique, and Ghana in March by a one-quartile upgrade to DB6a in Sierra Leoneboosted growth. as economic conditions improved owing to the substantial increase in activity at the country’s two iron ore mines.Political and security issues in South Africa,Nigeria and the Democratic Republic of Congo Downgradesundermined the risk outlook Three countries were downgraded by one quartile eachWorryingly, the hike in global wheat prices in Q4 will fuel at the start of 2012. Botswana’s country risk rating fellincreased food prices and could create socio-economic to DB3b amid increased socio-political tensions and antensions in low-income countries. Political and security uncertain economic outlook in the face of rising inflation.issues are already high in a number of countries, including Mauritius’ rating also fell to DB3b on fears of growingthe two regional powerhouses, South Africa and Nigeria. political uncertainty, instability, and a weakening economicThe former experienced a wave of strikes in the latter part outlook. Zambia’s rating reduction tallied DB4d as concernsof the year, starting with mineworkers and spreading grew for the crucial copper sector, and uncertainty remainedto other industries. In addition, political tensions have about the increased level of royalties the government mayincreased ahead of elections set for December 2012, with charge mineral producers. In November, South Africathe ruling ANC party facing high levels of discontent. was downgraded by one quartile to D4d amid a wave ofSectarian violence flared sporadically in Nigeria, industrial strikes that spread from the mining sector to other industries, causing a slide in the rand against the US dollar. 10
  11. 11. 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® Quality Process, which provides our customers with qualitybusiness information. This quality information is the foundation of our global solutionsthat customers rely on to make critical business decisions every day around the world.DB Risk Ratings We monitor each country on a daily basis and produceThe DB risk indicator is divided into seven bands, ranging analysis bulletins (Country RiskLine Reports), as well asfrom DB1 through DB7. Each band is subdivided into more detailed 50-page Full Country Reports. For furtherquartiles, (a-d) with an ‘a’ designation representing slightly details please contact our Customer Service Center atless risk than a ‘b’ designation and so on. Only the DB7 1.800.234.3867or via email .indicator is not divided into quartiles. Additional ResourcesOur Team and Products The information contained in this publication was correctDB relies a team of trained economists dedicated to at press time. For the most up-to-date information on anyanalyzing the risks of doing business across the world. country covered here, refer to DB’s monthly InternationalWe currently cover 132 countries. Risk Payment Review. For comprehensive, in-depth coverage, refer to the relevant country’s Full Country Report.Dun 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® Quality Process, providing our customers withquality business information. This quality information is the foundation of our global solutions that customers rely on to make critical business decisions.© Dun Bradstreet, Inc. 2012. All rights reserved. (DB-3380 12/12) 11