D&B's 2012 economic outlook reviews global growth, which slowed overall with North America as an exception, while Europe faced significant challenges due to the eurozone crisis. Key issues included rising public sector debt, varying national performance, and the necessity for proactive fiscal measures to spark recovery. The report anticipates ongoing struggles for global growth in 2013 despite some improvements in the U.S. corporate sector and upgraded forecasts for certain emerging economies.

1. D&B’s Global Economic Outlook
2012 in Review and 2013 Outlook
Around 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. Making sense of data is what we do at D&B. We collect and analyze global data to identify
patterns, make predictions, and offer you an informed perspective. D&B’s Global Economic
Outlook is our most popular assessment of the year in review and the year ahead.
2012 in Review Real GDP Growth (%)
2011 2012f 2013f
Global growth slowed during 2012,
with North America the exception World 2.6 2.0 2.3
Advanced economies 1.5 0.9 1.3
A global economic recovery proved harder to come by than
US 1.8 2.0 1.9
originally anticipated, according to D&B’s Global Review
Euroland 1.4 -0.8 0.2
2012. Real GDP growth will total 2 percent for the year, Japan -0.8 1.7 1.6
four percentage points lower than the 2.4 percent growth UK 0.9 0.0 0.9
predicted in early 2012. A number of challenges stood in Emerging economies 5.5 4.6 4.8
the path to more widespread global economic growth, Brazil 2.7 1.9 4.0
including a protracted Eurozone crisis, waning demand for Russia 4.3 3.6 3.7
Chinese products, reduced reliance on commodities in the India 6.9 5.5 6.1
Asia/Pacific region, and economic sensitivity in emerging China 9.2 7.4 7.1
economies. 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 more
Key Global Growth Indicators
Price Index The Eurozone crisis grabbed headlines for most of the
PMI (2005=100) year as policymakers fought a rearguard action on a
58 240
number of fronts. The European Central Bank (ECB) has
56 220 maintained a record-low interest rate at 0.75 percent
54
200 since July, earned more than $1.3 trillion in long-term
52
180 financing for the banking sector, and introduced a thus-
50
far unused sovereign bond-buying scheme (Outright
48 160
Monetary Transactions) to buy debt from countries that
46 140
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 help
Notes: 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. US economy staggers towards recovery, Regional Comparisons
while Chinese growth slows
On-going problems in Europe were chiefly
Individual countries fared quite differently throughout
behind the majority of the downgrades
the year. A rebounding corporate sector boosted the US
Half of all countries that received a growth forecast
economy 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 only
exports and weak domestic demand, resulting in serious
region to see no upgrades. In addition, a quarter of countries
recessions 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 and
Nevertheless, the country nearly hit target growth of 7.5
the downturn in Europe (a key trade and investment
percent in 2012. Japanese growth likewise rebounded
partner). However, regime change and a stabilizing political
after the devastating effects of the 2010 earthquake and
environment resulted in an upgrade for Libya.
tsunami, but stalled in Q4 2012. And austerity
measures in the UK resulted in
Upgrades and Downgrades
a year of stagnation.
Number of Number of Number of
Region Countries Countries Upgraded Countries Downgraded
Challenges to global
growth remain high North America Mexico 3 0 0
Meanwhile, the Great Recession Latin America 20 1 2
lived up to its title as recovery
Europe 30 0 15
has proven more prolonged and
challenging than any previous Eastern Europe and Central Asia 15 2 2
recession in the last century. Asia-Pacific 23 1 4
A unique set of challenges and
Middle East and North Africa 19 1 5
opportunities face businesses
at the tail end of 2012. Critical Sub-Saharan Africa 22 2 4
growth factors in the near and
long term include: 1) Fiscal challenges facing countries Only seven countries were upgraded in 2012
in the Organisation for Economic Co-operation and Lower European appetites for Asian exports resulted
Development (OECD); 2) Deregulation and rebalancing in four country downgrades in the Asia/Pacific region.
in key sectors of developing economies; 3) Sectoral issues Myanmar’s singular upgrade resulted from the lifting of
such 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 countries
including 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 Latin
spark a quicker-than-anticipated rebound in the global American countries were downgraded as a consequence of
economic recovery. A deeper examination of these critical curtailing economic growth, while Uruguay’s GDP growth
factors will be discussed in DB’s forthcoming report, The forecast increased. Four countries were downgraded in
Global 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. 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 of
The private sector has deleveraged and helped the housing bubble. Another consequence of uncertain
drive 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, bankruptcy
The US economy staggered along in 2012, although growth
proposals (a leading indicator of bankruptcy) jumped
slowed 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 completion
of deleveraging programs, payment performance is Mexico
improving, and bankruptcies are declining. Some sectors
and regions have naturally performed better than others. Growth in the US saw the Mexican economy
Meanwhile, with household deleveraging at its peak, home perform better than expected
prices began to recover alongside new job creation, though Mexico has also defied the global trend, with a brighter
at a far weaker pace than following previous recessions. forecast for real GDP growth. January’s prediction of 2.9
And although the unemployment rate stood at a stubborn percent growth has been superseded by a 3.7 percent
7.9 percent, consumer spending managed to rise. Public growth forecast. The Mexican economy benefited from
sector debt nevertheless dragged on the US economy in growth in the US, which accounts for almost 80 percent
2012, as the fiscal deficit remained unsustainably high. By of exports. In September alone industrial production
year’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 and
increases and spending cuts totalling $600 billion threaten remittances from its migrant workforce. Overall, Mexico’s
to 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 places
threatened 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 a
reasonable condition. Strong global commodity prices Business and Getting Electricity.
4

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 foreign
Regional Review investment. While Panama (up one place to 61) and
Lower internal and external demand led to Mexico (up five places to 48) were more accommodating to
lower regional growth investors, Brazil (down 2 places to 130), Argentina (down 8
Latin American growth declined as trade with internal places to 124) and Venezuela (down one place to 180) were
and external partners moderated due to low global less supportive in 2012.
growth. Several economies mirrored this trend through
Upgrades
lower domestic private consumption. In response, key
economies such as Argentina and Brazil implemented Uruguay’s risk rating increased by one quartile to DB3b
trade 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 portfolio
also resulted in growing pressures on regional currencies, investment in the first three quarters of 2012. As such, its
prompting varying degrees of central bank intervention. foreign currency position improvement resulted in strong
While regional growth stood lower than in 2011, individual import cover and lower payment risks.
economies experienced a divergence of real GDP growth.
Downgrades
In 2012, Uruguay is expected to record real GDP growth
of 4.5 percent, while Brazil’s economy will expand by a Argentina’s risk rating was thrice downgraded: by two
more 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 downgrades
expropriation risks, rising inflation, tighter foreign came largely due to the imposition of import controls. In
currency restrictions and greater trade protectionism. addition, foreign companies grew more concerned about
Venezuela faced foreign exchange liquidity challenges rising restrictions that would affect repatriation of profits
amid speculation of devaluation. and dividends. Trinidad and Tobago’s risk rating declined
by one quartile to DB3b in February mainly on account of
Ruling parties’ generally left leaning positions weaker economic growth. Private consumption remained
were further entrenched flat and business credit growth was anemic. Furthermore,
The traditionally liberal tendencies of Latin American fragile economic growth among regional trade partners led
ruling 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. 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
Downgrades
Macroeconomic conditions remain challenging
amid weak domestic demand and softening The crisis in Europe was underscored by the high number
external demand of downgrades throughout 2012. In January, DB
Lower contributions from net external demand, weak downgraded the risk ratings by one quartile of Belgium
business 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 a
expansion in Q3 (up 0.1 percent from the previous quarter), one-quartile downgrade for France (to DB2b), Germany (to
most 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 downgrade
incapable of boosting domestic demand. Despite economic in Greece to DB5c and a one-quartile downgrade to the
weakness, inflation persisted throughout the year, propped Netherlands (to DB2b). In the July-October period, DB
up by higher taxes in several member countries and higher downgraded the risk rating of six countries (namely Czech
energy 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 to
corporate profits squeezed, the EU unemployment rate DB2a) on the back of disappointing economic trends
soared 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 by
No upturn was anticipated in Q4, and GDP was projected three notches to DB4c as persistent downbeat economic
to shrink by 0.8 percent for 2012 as a whole. Payment and developments overshadowed the island’s short-term
credit risks continue to deteriorate. outlook.
6

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 countries
Regional Review managed significant achievement. Georgia joined the top
The majority of the economies in the region 10 economies in the global ease of doing business ranking
are 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 languish
of 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
Upgrades
Tajikistan, among others. However, economic conditions
in the three largest countries (Kazakhstan, Russia, In January DB upgraded Georgia’s country risk rating
and Ukraine) fell prey to increased financial stress in by one quartile to DB5d, driven by an improving economy
the 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 to
the slowdown. While investment growth weakened, DB5d from DB6a after continued improvements in the
expansionary fiscal policies and strong credit growth in country’s economic and financial environments.
Russia and other energy exporters mitigated the negative
Downgrades
external impact on overall economic growth. Regional
growth is expected to average 4 percent in 2012 and 2013, The Eurozone crisis was partly to blame for two regional
compared 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 low
Global 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 deteriorating
Strong account surpluses in energy exporting countries
economic and political situation.
from 2011 are poised to deteriorate in 2012 and beyond
as global downside risks unfold. Any deterioration of
external balances could exacerbate capital outflows and
pressure currencies. Currencies of countries that switched
to more flexible exchange rates–in particular Kazakhstan
and Russia–proved resilient to headwinds and appeared
7

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 several
presented stable prospects in 2012. However, pessimism quarters (European container imports fell an estimated
about the short-to-medium term outlook increased, 5 percent year over year, and Asian container exports
primarily for economies dependent upon Chinese and fell 4 percent in Q3), the region must find new sources
OECD demand. China and India, home to most of the of economic growth beyond OECD demand for Chinese
Asia/Pacific region’s population, received downgrades to manufacturing goods and Chinese demand for upstream
the DB4 range in Q2. Singapore and Hong Kong, the most natural resources. Not all economies will succeed.
prominent entrepôt economies and financial centres of
Asia/Pacific, also garnered downgrades, underlining a shift Upgrades
in expectations. DB’s July upgrade to Myanmar by two quartiles to DB6a
A divergence between countries driven by domestic reflected the opening of political and economic reforms
demand, those addressing the slowdown in Asia-Europe and the consequent lifting of EU and US sanctions.
trade and export-oriented investment, and those struggling
Downgrades
with classic liquidity and supply bottleneck problems of
developing economies became clearer. Indonesia and China’s one quartile downgrade to DB4a in July echoed
Thailand saw private consumption and investment growth the unravelling of its building boom as well as serious
surpass 5 percent and 10 percent, respectively, year over recessions in a range of industries, from steel-making to
year, in Q2 and Q3, while domestic and foreign credit construction equipment to consumer electronics. In the
rose 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 real
Southeast Asian development story that seems more sound GDP growth excluding the net effects of subsidies totalling
than 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 a
more muted economic cycle. Taiwanese investment has The one quartile downgrade to Hong Kong to D2b in August
dropped noticeably in recent quarters, and South Korea, reflected concerns for the mainland Chinese economy and
New 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 reflected
consumption growth in these high-income economies will its high potential exposure to China and Europe.
reach 1 to 2 percent in 2012.
8

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.
Upgrades
Regional Review The only country to experience an upgrade in the
Political and security problems continued to region was Libya. With the end of the civil war and the
threaten many countries across the region… consequent improved security and political position, DB
Arab Spring and its consequent uncertainty dominated upgraded the risk rating by one quartile to DB6d.
the risk outlook across the region throughout 2012.
Downgrades
The situation is most serious in Syria, where the civil
war has catapulted the country into the highest risk In January DB downgraded four regional countries by
category. 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 downgraded
Bahrain are still experiencing high levels of protest, while from DB5c to DB5d as it became obvious that the ouster of
the final outcome in Libya and Egypt is uncertain. Jordan President Hosni Mubarak resulted in a number of groups
and to a lesser extent Algeria remain at risk of increased competing for power, including the military, the moderate
levels of demonstrations against authoritarian regimes. Muslim Brotherhood, radical salafists and young secular
Protests have impacted significantly on government liberals who had been the prime movers behind the
budgets as spending on security and subsidies have risen revolution. Meanwhile, Lebanon was downgraded as the
dramatically, 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 to
security issues in Lebanon, Iraq, Iran, and Israel continued DB5c was implemented in September as the situation
to 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 as
support of their populations worsening economic conditions brought large-scale
On a positive note, hydrocarbon-rich Gulf states, with the demonstrations against the government, threatening to
notable exception of Bahrain, have to a large extent been bring the Arab Spring belatedly to the kingdom. Finally
able to use their oil wealth to isolate themselves from Kuwait was also downgraded in January, resulting
global problems, thereby dissipating the socio-economic from increased tensions between parliament and the
tensions that drove the Arab Spring across the rest of government that forced the resignation of the cabinet.
9

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 to
Regional 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 Upgrades
Despite the global slowdown prompting weaker primary DB upgraded Angola’s risk rating by one quartile to DB5b
commodities markets, growth held up reasonably across in January on the back of a number of positive economic
the region. In particular, low-income countries proved developments, including lower inflation, reduced sovereign
more successful than the developed economies of Nigeria risk, investment in the power sector, and increased oil
and South Africa, with their stronger dependency on the production. Meanwhile, the government has stepped up its
European economy. Investment in the resource sector in efforts to diversify away from oil exports. This was followed
countries such as Sierra Leone, Mozambique, and Ghana in March by a one-quartile upgrade to DB6a in Sierra Leone
boosted 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 Downgrades
undermined the risk outlook Three countries were downgraded by one quartile each
Worryingly, the hike in global wheat prices in Q4 will fuel at the start of 2012. Botswana’s country risk rating fell
increased food prices and could create socio-economic to DB3b amid increased socio-political tensions and an
tensions 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 growing
the two regional powerhouses, South Africa and Nigeria. political uncertainty, instability, and a weakening economic
The former experienced a wave of strikes in the latter part outlook. Zambia’s rating reduction tallied DB4d as concerns
of the year, starting with mineworkers and spreading grew for the crucial copper sector, and uncertainty remained
to other industries. In addition, political tensions have about the increased level of royalties the government may
increased ahead of elections set for December 2012, with charge mineral producers. In November, South Africa
the ruling ANC party facing high levels of discontent. was downgraded by one quartile to D4d amid a wave of
Sectarian 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

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