Country Risk Analysis of Country:- Spain and Austria Subject: IBF

1. COUNTRY RISK
ANALYSIS OF
SPAIN and AUSTRIA

2. NAME Roll no.
Khyati Bharucha 63
Shraddha Yadav 75
Nilay Joglekar 80
Sheetal Kasture 86
Ankit Pandey 97
Pratima Pasi 102
Fatima Shaikh 108
Maruti Yedge 119

3. Country risk refers to the risk of investing or
lending in a country, arising from possible
changes in the business environment that may
adversely affect operating profits or the value of
assets in the country.
For example, financial factors such as currency
controls, devaluation or regulatory changes, or
stability factors such as mass riots, civil war and
other potential events contribute to companies'

5. •The 13th largest Economy in the world with the capital
city Madrid.
•The Capitalist Mixed Economy is the fifth largest in
the European Union as well as the Eurozone’s 4th
largest.
•In WHERE-TO-BE-NEXT-BORN-INDEX , Spain
stands 28.
•Persistent High rates of Unemployment(excessively
cyclical) ,currently being 23.3%.

6. Spain : Strengths
• Clear reform agenda
• Modern infrastructure network
• Large companies with international
presence.
• Good performance in some industrial
and innovative sectors.
• Tourism potential.
• Efficient system for R&D, relatively
high-skilled labor.
• Banking Sector and labor MarketHigh Degree of Spain Tourism

7. •High fiscal deficit and public
debt.
•High private sector debt.
•Weak Banking System.
•Downside pressure on prices.
•Very elevated Unemployment.
•Decreasing Long term per capita
Income.
•Adjustment ongoing in theUnemployment Graph Of Spain

8. By Destination and Origin (% of total figures).

10. •The Transition from Dictatorship to Democracy in 1975,following The Spanish
Constitution in 1978.
•Has structural impediments such as limited labor flexibility.
•Corruption allegations have become a major challenge for the ruling party in
the past year.
•Rising political Uncertainty.
•Put in place fiscal austerity measures to counter the
large fiscal deficit.
• Anti-austerity strikes have continued
in response to national and regional
cost cutting plans.

11. • Spain is largely compliant with international banking
and accounting
reporting standards.
• The banking sector reform program that began in
2012 to restructure and
recapitalize Spanish banks in response to the global
financial crisis has been
very successful in stabilizing the financial sector and
boosting economic growth.
The sector, however still faces liquidity constraints due

12. • Spain’s GDP growth severely declined during the
global economic slowdown, however, sovereign funding
has been restored through low interest rates and
increased investor confidence.
• High levels of private and public debt,struggling local
industries and a sluggish
labor market.
•Spain remains susceptible to further disruption in the
Eurozone - potentially driving up bond yields and
borrowing costs.

13. • Spain benefits from a low level of economic, political
and financial system risk.
•The economy has experienced contraction in recent
years due to the unwinding of bad loans from the
extended housing boom, further fiscal constraints,
high unemployment and a sluggish global economy.
A return to growth of 0.9% is expected in 2014.
•The current account balance surplus is expected to

14. • 12th richest country in the world in terms of GDP per capita.
• Well-developed social market economy and a high standard
of living.
• Austria became a member state of the EU, it has gained
closer ties to other EU economies, reducing its
economic dependence on Germany.
• Austria is a CRT-1 country with low levels of economic risk
and
Austria- A part of Eurozone

15. • Low systemic political risk .
• Strong business environment.
• Low inflation but no deflation risk
anticipated.
• Consistent current account surpluses since
2002.
• Good regional and international relations,
EU membership .
Inflation rate of Austria

16. • Muted domestic demand since 2012.
• High trade dependency on Germany.
• Weak economic confidence since 2013.
• Banking sector vulnerabilities due to large
exposure Central and Eastern Europe,
including Russia.

17. By Destination and Origin (% of total figures).

19. •Member of the EU and adopted euro as its
currency in 1999.
•Strong and transparent legal system with very
little corruption.
•Austria lifted its labor market restrictions on
citizens from Central and Eastern European
EU member states on May 1, 2011.
•In 2012 the government tightened fiscal policy in
an attempt to lower the budget deficit to
zero in 2016 through combination of spending

20. • The insurance market in Austria is overseen
by the Financial Market Authority.
• A substantial part of Austria’s insurance
industry is in German and Italian ownership.
• The Austrian government provided the
banking sector with a deposit guarantee and
capital injections .
• Monetary policy throughout the Eurozone will
remain accommodative

21. •The service-oriented economy is supplemented
by a solid industrial and agricultural sector.
• With muted global demand from Austria’s main
trading partners of Germany and Eastern
Europe, the country experienced a further
slowdown for their goods and services in 2012
and 2013.
•Supported by very low interest rates, solid

22. •Economic Risk is Low ,while , the financial and
political risk is very low.
•Loans to NFCs have declined since December
2014, suggesting that investment is likely to
contract in 2015.
• Real GDP is forecast to expand by +0.7% in
2015 as a whole.
Following a period of economic challenges and