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D&Bs 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

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&Bs Global Economic Outlook is our most popular assessment of the year in review and the year ahead.

2012 in Review
Global growth slowed during 2012, with North America the exception
A global economic recovery proved harder to come by than originally anticipated, according to D&Bs Global Review 2012. Real GDP growth will total 2 percent for the year, four-tenths of a percentage point lower than the 2.4 percent growth predicted in early 2012. A number of challenges stood in the path to more widespread global economic growth, including a protracted Eurozone crisis, waning demand for Chinese products, reduced reliance on commodities in the Asia/Pacific region, and economic sensitivity in emerging economies. North America proved a rare bright spot, however, thanks to a strengthening US private sector.
Key Global Growth Indicators PMI 58 56 54 52 50 48 Apr Jun Sep May Aug Oct
Jul

Real GDP Growth (%) 2011 World Advanced economies US Euroland Japan UK Emerging economies Brazil Russia India China 2.6 1.5 1.8 1.4 -0.8 0.9 5.5 2.7 4.3 6.9 9.2 2012f 2.0 0.9 2.0 -0.8 1.7 0.0 4.6 1.9 3.6 5.5 7.4 2013f 2.3 1.3 1.9 0.2 1.6 0.9 4.8 4.0 3.7 6.1 7.1

Policymakers have addressed a number of issues in Europe but still need to do more
The Eurozone crisis grabbed headlines for most of the year as policymakers fought a rearguard action on a number of fronts. The European Central Bank (ECB) has maintained a record-low interest rate at 0.75 percent since July, earned more than $1.3 trillion in long-term financing for the banking sector, and introduced a thusfar unused sovereign bond-buying scheme (Outright Monetary Transactions) to buy debt from countries that request bailout funds. Meanwhile, 25 countries joined a fiscal pact in March giving Brussels the power to review national budgets, expand the European Financial Stability Facility (effectively a firewall for indebted sovereign governments) and European Stability Mechanism (to help recapitalise private sector banks) to around $1 trillion, and begin discussions on a possible European banking union. 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.

Price Index (2005=100) 240 220 200 180 160 140

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Global Manufacturing PMI (left-hand axis) Global Services PMI (left-hand axis) Global Commodity Price Index (right-hand axis)

Notes: PMI is the Purchasing Managers Index a reading above 50 denotes an expansion in sectoral activity, and one below 50 a contraction; the Global Commodity Price Index is the IMFs price index for all primary commodities (2005=100). Sources: IMF; JPMorgan; D&B

US economy staggers towards recovery, while Chinese growth slows


Individual countries fared quite differently throughout the year. A rebounding corporate sector boosted the US economy in 2012, in spite of public sector debt. China struggled against sluggish European demand for its exports and weak domestic demand, resulting in serious recessions in a range of industries, from steel-making to construction equipment to consumer electronics. Nevertheless, the country nearly hit target growth of 7.5 percent in 2012. Japanese growth likewise rebounded after the devastating effects of the 2010 earthquake and tsunami, but stalled in Q4 2012. And austerity measures in the UK resulted in Upgrades and Downgrades a year of stagnation.

Regional Comparisons
On-going problems in Europe were chiefly behind the majority of the downgrades
Half of all countries that received a growth forecast downgrade reside in Europe, due to the protracted debt crisis. With the exception of North America, Europe was the only region to see no upgrades. In addition, a quarter of countries in the Middle East and North Africa were downgraded, owing to problems associated with the Arab Spring and the downturn in Europe (a key trade and investment partner). However, regime change and a stabilizing political environment resulted in an upgrade for Libya.

Challenges to global growth remain high

Region North America & Mexico

Number of Countries 3 20 30 15 23 19 22

Number of Countries Upgraded 0 1 0 2 1 1 2

Number of Countries Downgraded 0 2 15 2 4 5 4

Meanwhile, the Great Recession Latin America lived up to its title as recovery Europe has proven more prolonged and Eastern Europe and Central Asia challenging than any previous recession in the last century. Asia-Pacific A unique set of challenges and Middle East and North Africa opportunities face businesses Sub-Saharan Africa at the tail end of 2012. Critical growth factors in the near and long term include: 1) Fiscal challenges facing countries in the Organisation for Economic Co-operation and Development (OECD); 2) Deregulation and rebalancing in key sectors of developing economies; 3) Sectoral issues such as housing; 4) The uncertain longer-term effects of new monetary policies; 5) Commodity price uncertainty, including oil prices; and 7) Food inflation. On a positive note, growing strength in the US corporate sector could spark a quicker-than-anticipated rebound in the global economic recovery. A deeper examination of these critical factors will be discussed in D&Bs forthcoming report, The Global and Regional Outlook, 2013 and Beyond.

Only seven countries were upgraded in 2012


Lower European appetites for Asian exports resulted in four country downgrades in the Asia/Pacific region. Myanmars singular upgrade resulted from the lifting of international sanctions. Despite its proximity to Europe, only two Eastern Europe and Central Asian countries were downgraded, while two (Georgia and Uzbekistan) were upgraded as their economies improved. Two Latin American countries were downgraded as a consequence of curtailing economic growth, while Uruguays GDP growth forecast increased. Four countries were downgraded in 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.

North America and Mexico


helped boost the countrys economic performance (commodities account for more than half of exports), not to mention a stable financial sector and a relatively favorable fiscal position. By early 2011, Canada had recouped all jobs lost during the Great Recession. Be that as it may, economic growth had steadily slowed. Like its southern neighbor, Canadian economic performance in 2012 staggered toward a distant recovery and weakened further by years end. Job creation remains low, with unemployment at 7.4 percent in October, significantly higher than the 6.1 percent figure seen prior to the recession. Furthermore, 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. An economic downturn could trigger the bursting of the housing bubble. Another consequence of uncertain domestic conditions is fluctuating business insolvencies; insolvencies rose 12.8 percent year-over-year in July but fell by 17.8 percent in August. However, bankruptcy proposals (a leading indicator of bankruptcy) jumped in August, driven by sharp upturns in the construction, manufacturing, accommodation, and food services firms.

Regional Insights
The US private sector boosted growth in spite of a drag effect created by public sector debt in 2012. As with the US, Canadian growth slowed towards the end of 2012. Mexicos fortunes remained inextricably tied to US economic performance. Upgrades: None. Downgrades: None.

US
The private sector has deleveraged and helped drive growth but public sector debt continued to dampen growth prospects in 2012
The US economy staggered along in 2012, although growth slowed during the latter part of the year. The corporate sector is now in its strongest financial health in years: balance sheets have been rebuilt owing to the completion of deleveraging programs, payment performance is improving, and bankruptcies are declining. Some sectors and regions have naturally performed better than others. Meanwhile, with household deleveraging at its peak, home prices began to recover alongside new job creation, though at a far weaker pace than following previous recessions. And although the unemployment rate stood at a stubborn 7.9 percent, consumer spending managed to rise. Public sector debt nevertheless dragged on the US economy in 2012, as the fiscal deficit remained unsustainably high. By years end, the political fiscal cliff is poised to be the chief threat to a sustainable recovery. Without compromise, tax increases and spending cuts totalling $600 billion threaten to steal a couple of points of GDP growth in 2013.

Mexico
Growth in the US saw the Mexican economy perform better than expected
Mexico has also defied the global trend, with a brighter forecast for real GDP growth. Januarys prediction of 2.9 percent growth has been superseded by a 3.7 percent growth forecast. The Mexican economy benefited from growth in the US, which accounts for almost 80 percent of exports. In September alone industrial production rose 2.4 percent compared to the same month in 2011. The country also enjoyed robust US investment and remittances from its migrant workforce. Overall, Mexicos economic performance remains inextricably linked to US fortunes. On the other hand, rampant corruption, crime, and violence related to drug cartel operations continue to undermine the Mexican business environment. Despite these issues, Mexico rose a creditable five places to 48 in the World Banks Doing Business 2013 survey, with significant improvements in the areas of Starting a Business and Getting Electricity.

Canada
Growth staggered along in 2012 but is threatened by a bursting of a housing bubble
The Canadian economy entered 2012 in comparatively reasonable condition. Strong global commodity prices

Latin America
will serve until 2019 unless health problems (unspecified cancer) intervene; at present there is no clear succession plan for the Venezuela presidency. Argentina President Cristina Kirchners increasingly protectionist policies could not prevent public protests against rising prices, wage cuts, and speculation surrounding a constitutional reform that would allow Kirchner to run for a third term. And Brazil President Dilma Rousseff suffered declining popularity owing to a corruption trial (and subsequent conviction) of a senior government official.

Regional Insights
Regional growth slowed as export demand and domestic consumption moderated. Currencies rose as quantitative easing in the US created arbitrage opportunities. Various capital account restrictions helped to stem capital flight and conserve foreign reserves. Upgrades: Uruguay Downgrades: Argentina (thrice), Trinidad, and Tobago

The commercial environment for key economies in the region worsened in 2012
The World Banks Doing Business 2013 report revealed that regional economies are varyingly open to foreign investment. While Panama (up one place to 61) and Mexico (up five places to 48) were more accommodating to investors, Brazil (down 2 places to 130), Argentina (down 8 places to 124) and Venezuela (down one place to 180) were less supportive in 2012. Upgrades Uruguays risk rating increased by one quartile to DB3b in September on the back of improved growth prospects, rising foreign direct investment, and improved portfolio investment in the first three quarters of 2012. As such, its foreign currency position improvement resulted in strong import cover and lower payment risks. Downgrades Argentinas risk rating was thrice downgraded: by two quartiles DB5d in March; in May by a further two quartiles; and finally by one notch in July to DB6c. The downgrades came largely due to the imposition of import controls. In addition, foreign companies grew more concerned about rising restrictions that would affect repatriation of profits and dividends. Trinidad and Tobagos risk rating declined by one quartile to DB3b in February mainly on account of weaker economic growth. Private consumption remained flat and business credit growth was anemic. Furthermore, fragile economic growth among regional trade partners led to generally weak intra-regional trade.

Regional Review
Lower internal and external demand led to lower regional growth
Latin American growth declined as trade with internal and external partners moderated due to low global growth. Several economies mirrored this trend through lower domestic private consumption. In response, key economies such as Argentina and Brazil implemented trade protectionist measures in an effort to shield local manufacturers. Quantitative easing adopted by the US also resulted in growing pressures on regional currencies, prompting varying degrees of central bank intervention. While regional growth stood lower than in 2011, individual economies experienced a divergence of real GDP growth. In 2012, Uruguay is expected to record real GDP growth of 4.5 percent, while Brazils economy will expand by a more modest 1.9 percent. Argentinas attractiveness to foreign investors declined further on account of higher expropriation risks, rising inflation, tighter foreign currency restrictions and greater trade protectionism. Venezuela faced foreign exchange liquidity challenges amid speculation of devaluation.

Ruling parties generally left leaning positions were further entrenched


The traditionally liberal tendencies of Latin American ruling parties were further entrenched in 2012. Hugo Chavez won a third term as Venezuelas president and

Europe
(EU + Iceland, Norway and Switzerland)

Regional Insights
Domestic austerity measures, rising unemployment rates, and slowing external demand dented growth in 2012. With payment and credit risk on the rise across most countries in 2012, D&B expects an increase in business failures. The risk of a Eurozone break-up is still limited, thanks to policy intervention. However, this outlook can change quickly. Upgrades: None Downgrades: Belgium, Denmark, Luxemburg, Spain, France, Germany (twice), Hungary, Slovenia (twice), Greece, Netherlands, Czech Republic, Romania, Austria, Switzerland, Cyprus.

The ECBs focus has partially shifted from fighting inflation to supporting growth and financial stability
With a view to boosting economic growth, the ECB lowered the key policy rate in July 2012 to an all time low of 0.75 percent to stimulate growth rather than fight inflation. The Bank also provided 1 trillion in long-term financing for the banking sector in December 2011 and February 2012. The cash infusion increased bank liquidity in ailing periphery economies and stemmed further problems in the financial sector. That said, ultra low interest rates, predicted ECB bond purchases, and a potential new round of quantitative easing in the US and other countries could create uncertain EU price stability, exchange rate volatility, and asset bubbles. Meanwhile, protracted turmoil in Greece and other Eurozone economies has placed downward pressure on the euro: the currency depreciated 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. Downgrades The crisis in Europe was underscored by the high number of downgrades throughout 2012. In January, D&B downgraded the risk ratings by one quartile of Belgium (to DB2d), Denmark (to DB2c), and Spain (to DB4d). Luxemburg received a two-notch downgrade (to DB2c) due to disappointing economic performance. In February, worsening short-term economic prospects prompted a one-quartile downgrade for France (to DB2b), Germany (to DB1d), Hungary (to DB4d), and Slovenia (to DB2d). In June, rising political risks prompted a two-notch downgrade in Greece to DB5c and a one-quartile downgrade to the Netherlands (to DB2b). In the July-October period, D&B downgraded the risk rating of six countries (namely Czech Republic to DB3c, Germany to DB2a, Romania to DB4c, Austria to DB2b, Slovenia to DB3a, and Switzerland to DB2a) on the back of disappointing economic trends and sluggish domestic and external demand. Finally, in November, D&B cut Cyprus country risk rating by three notches to DB4c as persistent downbeat economic developments overshadowed the islands short-term outlook.

Regional Review
Macroeconomic conditions remain challenging amid weak domestic demand and softening external demand
Lower contributions from net external demand, weak business and consumer confidence (dampened by rising unemployment rates and restrictive credit conditions), and draconian fiscal austerity weighed heavily on Europes economic growth throughout 2012. Despite a mild real GDP expansion in Q3 (up 0.1 percent from the previous quarter), most economic indicators deteriorated toward years end, suggesting that current macroeconomic conditions remain incapable of boosting domestic demand. Despite economic weakness, inflation persisted throughout the year, propped up by higher taxes in several member countries and higher energy and other commodities prices, particularly food. Particularly worrisome is the rise in unemployment. With corporate profits squeezed, the EU unemployment rate soared to a record 10.6 percent as firms shed jobs (especially in manufacturing, financial services, and construction). No upturn was anticipated in Q4, and GDP was projected to shrink by 0.8 percent for 2012 as a whole. Payment and credit risks continue to deteriorate.

Eastern Europe and Central Asia


better prepared for global risk aversion than during the Great Recession. On the contrary, energy importers are less resilient, especially those with large external financing needs such as Ukraine. Meanwhile, Russias economic slowdown has negatively affected the region, given its tight linkages with other economies via trade, foreign direct investment, and remittances. Banking systems in some countries remain far from repaired. Ukraine still suffers from significant non-performing loans, and Kazakhstan, Kyrgyz Republic, and Tajikistan struggle against poor capital adequacy ratios.

Regional Insights
The global slowdown led to easing economic growth in the region. Domestic demand became the main driver for the economic expansion. Expansionary fiscal stances and credit growth proved key components of domestic growth. Upgrades: Georgia, Uzbekistan Downgrades: Serbia, Bosnia & Herzegovina

Risk of doing business in most countries is high


Despite a difficult economic environment, some countries managed significant achievement. Georgia joined the top 10 economies in the global ease of doing business ranking according to the World Banks Doing Business 2013 report. Nevertheless, overall regional trade continues to languish against red tape, corruption, weak contract enforcement, and the lack of a sound legal framework. Upgrades In January D&B upgraded Georgias country risk rating by one quartile to DB5d, driven by an improving economy and more promising relations with neighboring Russia. Furthermore, Uzbekistans risk rating was upgraded to DB5d from DB6a after continued improvements in the countrys economic and financial environments. Downgrades The Eurozone crisis was partly to blame for two regional downgrades. Serbias country risk rating was cut by one quartile to DB5a from DB4d in October on the back of low growth and a looming fiscal deficit. In the same month, D&B downgraded Bosnia and Herzegovinas risk rating by two quartiles to DB6d from DB6b amid the deteriorating economic and political situation.

Regional Review
The majority of the economies in the region are slowing
Strong economic growth was welcomed at the beginning of 2012, supported by high key regional commodity prices (oil, gas and metals), robust 2011 harvests, and strong remittance flows from Russia to Uzbekistan and Tajikistan, among others. However, economic conditions in the three largest countries (Kazakhstan, Russia, and Ukraine) fell prey to increased financial stress in the Eurozone countries and higher global risk aversion. Weakening demand from China also contributed to the slowdown. While investment growth weakened, expansionary fiscal policies and strong credit growth in Russia and other energy exporters mitigated the negative external impact on overall economic growth. Regional growth is expected to average 4 percent in 2012 and 2013, compared to 5 percent in 2011.

Global risks put pressure on the local currencies and the banking systems
Strong account surpluses in energy exporting countries 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 ratesin particular Kazakhstan and Russiaproved resilient to headwinds and appeared

Asia-Pacific
Regional Insights
Chinese credit risks rose due to recession in specific industrial sectors. Indias development model struggled against rising inflation and stalling investment. The end may have come into view for Australias ongoing, still-intense resource boom. Upgrades: Myanmar Downgrades: China, India, Singapore, Hong Kong.
Japans post-tsunami recovery stalled in Q4 2012, while Australias powerful resource sector-driven boom will likely fade as early as 2013, earlier than anticipated. Credit growth is likewise weak in most countries outside China and Southeast Asia. Vietnam is still recovering from its balance of payment problems and collapse in investment in 2011. Central banks have been cautious in this context, with few changes to monetary policy outside of India and Vietnam, where calibrating policy has been harder. India tightened policy by 3.5 percentage points in April, only to relent by 50 basis points two months later; Vietnam has steadily cut its policy rate as it recovers from its macroeconomic nearemergency. In India and Pakistan, inflation and balance-ofpayments pressures reflect structural problems. With Asia-Europe trade due to be depressed for several quarters (European container imports fell an estimated 5 percent year over year, and Asian container exports fell 4 percent in Q3), the region must find new sources of economic growth beyond OECD demand for Chinese manufacturing goods and Chinese demand for upstream natural resources. Not all economies will succeed. Upgrades D&Bs July upgrade to Myanmar by two quartiles to DB6a reflected the opening of political and economic reforms and the consequent lifting of EU and US sanctions. Downgrades Chinas one quartile downgrade to DB4a in July echoed the unravelling of its building boom as well as serious recessions in a range of industries, from steel-making to construction equipment to consumer electronics. In the same month a similar downgrade was applied to India, which reflected the marked stall in growth in Q2, with real GDP growth excluding the net effects of subsidies totalling under 4 percent year over year and investment growth falling to less than 1 percent. The one quartile downgrade to Hong Kong to D2b in August reflected concerns for the mainland Chinese economy and the spending of Chinas wealthy visitors to Hong Kong. Singapores July one quartile downgrade to DB2d reflected its high potential exposure to China and Europe.

Regional Review
With the exception of four downgrades, the Asian region presented stable prospects in 2012. However, pessimism about the short-to-medium term outlook increased, primarily for economies dependent upon Chinese and OECD demand. China and India, home to most of the Asia/Pacific regions population, received downgrades to the DB4 range in Q2. Singapore and Hong Kong, the most prominent entrept economies and financial centres of Asia/Pacific, also garnered downgrades, underlining a shift in expectations. A divergence between countries driven by domestic demand, those addressing the slowdown in Asia-Europe trade and export-oriented investment, and those struggling with classic liquidity and supply bottleneck problems of developing economies became clearer. Indonesia and Thailand saw private consumption and investment growth surpass 5 percent and 10 percent, respectively, year over year, in Q2 and Q3, while domestic and foreign credit rose strongly. Malaysia and the Philippines experienced less optimism on all counts, but remain part of a strong Southeast Asian development story that seems more sound than Chinas. In contrast, Taiwan, South Korea and Japan are in a more muted economic cycle. Taiwanese investment has dropped noticeably in recent quarters, and South Korea, New Zealand, and Singapore all posted at least a quarter of year-over-year decline in investment in 2012. Private consumption growth in these high-income economies will reach 1 to 2 percent in 2012.

Middle East and North Africa


the region. However, in the longer term, these states must increase the non-hydrocarbon sector and control government spending in order to stop deteriorating ratings.

Regional Insights
Civil war in Syria threatens to spill over into neighboring countries. Political risks related to the Arab Spring remained high in Bahrain, Egypt, Libya and Yemen, and threaten Jordan and Algeria. Oil-rich countries used government spending to boost the economy and reduce the threat from the Arab Spring. Upgrades: Libya. Downgrades: Egypt, Jordan (twice), Kuwait, Lebanon (twice), and Syria.

Commercial risks remain challenging across most of the region


The commercial environment remained challenging across most of the region. Of the 18 countries ranked by the World Bank in its annual Doing Business Survey (Libya is not scored), half are ranked in the bottom 50%, with four in bottom 25% (Syria, Iran, Algeria and Iraq). Only three countries improved their ranking in the year (Egypt, Saudi Arabia, and the UAE), two remained static (Oman and Qatar), while the rest deteriorated, with Yemen falling 17 places to 118 and Syria 7 places to 144. Upgrades The only country to experience an upgrade in the region was Libya. With the end of the civil war and the consequent improved security and political position, D&B upgraded the risk rating by one quartile to DB6d. Downgrades In January D&B downgraded four regional countries by one quartile each as a result of deteriorating political and/ or socio-economic conditions. Egypt was downgraded from DB5c to DB5d as it became obvious that the ouster of President Hosni Mubarak resulted in a number of groups competing for power, including the military, the moderate Muslim Brotherhood, radical salafists and young secular liberals who had been the prime movers behind the revolution. Meanwhile, Lebanon was downgraded as the civil war in Syria threatened to spill over into the sectariandivided country; a further one quartile downgrade to DB5c was implemented in September as the situation deteriorated further. Jordan also experienced two separate one-quartile downgrades (in January and in November) to DB4c as worsening economic conditions brought large-scale demonstrations against the government, threatening to bring the Arab Spring belatedly to the kingdom. Finally Kuwait was also downgraded in January, resulting from increased tensions between parliament and the government that forced the resignation of the cabinet.

Regional Review
Political and security problems continued to threaten many countries across the region
Arab Spring and its consequent uncertainty dominated the risk outlook across the region throughout 2012. The situation is most serious in Syria, where the civil war has catapulted the country into the highest risk category. Furthermore, the war threatens to spill over into neighboring Lebanon and Turkey. Worryingly, Yemen and Bahrain are still experiencing high levels of protest, while the final outcome in Libya and Egypt is uncertain. Jordan and to a lesser extent Algeria remain at risk of increased levels of demonstrations against authoritarian regimes. Protests have impacted significantly on government budgets as spending on security and subsidies have risen dramatically, raising concerns in a number of countries about rising public debt levels. Meanwhile, different security issues in Lebanon, Iraq, Iran, and Israel continued to undermine these countries outlook.

although the oil-rich states were able to buy support of their populations
On a positive note, hydrocarbon-rich Gulf states, with the notable exception of Bahrain, have to a large extent been able to use their oil wealth to isolate themselves from global problems, thereby dissipating the socio-economic tensions that drove the Arab Spring across the rest of

Sub-Saharan Africa
undermining the risk outlook. Meanwhile, renewed rebel activity in the later part of 2012 in the Democratic Republic of Congo, allegedly supported by Rwanda, could destabilise neighboring countries. Furthermore, arms have flowed out of Libya since the overthrow of Col. Gaddafi in 2011, threatening the stability of drought-stricken countries in the Sahel.

Regional Insights
Investment, particularly from China, in the resource sector continued to boost growth in a number of countries. Security and political issues adversely affected risk ratings in a number of countries, including the regional powerhouses South Africa and Nigeria. The commercial environment remained challenging across the region, with the notable exception of Mauritius. Upgrades: Angola, Sierra Leone Downgrades: Botswana, Mauritius, South Africa, Zambia

The commercial environment remained challenging


According to the World Banks annual Doing Business Survey, the commercial environment remained challenging across the region, with the notable exception of Mauritius (ranked 19, up from 24). Of the 22 regional countries covered by D&B, 17 are ranked in the bottom 50 percent, of which 12 are in bottom 25 percent. In addition 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 39), two remained static (Nigeria, 171 and Cote DIvoire, 177) while the rest deteriorated. Upgrades D&B upgraded Angolas risk rating by one quartile to DB5b in January on the back of a number of positive economic developments, including lower inflation, reduced sovereign risk, investment in the power sector, and increased oil production. Meanwhile, the government has stepped up its efforts to diversify away from oil exports. This was followed in March by a one-quartile upgrade to DB6a in Sierra Leone as economic conditions improved owing to the substantial increase in activity at the countrys two iron ore mines. Downgrades Three countries were downgraded by one quartile each at the start of 2012. Botswanas country risk rating fell to DB3b amid increased socio-political tensions and an uncertain economic outlook in the face of rising inflation. Mauritius rating also fell to DB3b on fears of growing political uncertainty, instability, and a weakening economic outlook. Zambias rating reduction tallied DB4d as concerns grew for the crucial copper sector, and uncertainty remained about the increased level of royalties the government may charge mineral producers. In November, South Africa was downgraded by one quartile to D4d amid a wave of industrial strikes that spread from the mining sector to other industries, causing a slide in the rand against the US dollar.

Regional Review
Growth held up well across the region, particularly in the low income countries
Despite the global slowdown prompting weaker primary commodities markets, growth held up reasonably across the region. In particular, low-income countries proved more successful than the developed economies of Nigeria and South Africa, with their stronger dependency on the European economy. Investment in the resource sector in countries such as Sierra Leone, Mozambique, and Ghana boosted growth.

Political and security issues in South Africa, Nigeria and the Democratic Republic of Congo undermined the risk outlook
Worryingly, the hike in global wheat prices in Q4 will fuel increased food prices and could create socio-economic tensions in low-income countries. Political and security issues are already high in a number of countries, including the two regional powerhouses, South Africa and Nigeria. The former experienced a wave of strikes in the latter part of the year, starting with mineworkers and spreading to other industries. In addition, political tensions have increased ahead of elections set for December 2012, with the ruling ANC party facing high levels of discontent. Sectarian violence flared sporadically in Nigeria,

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D&B Risk Ratings
The DB risk indicator is divided into seven bands, ranging from DB1 through DB7. Each band is subdivided into quartiles, (a-d) with an a designation representing slightly less risk than a b designation and so on. Only the DB7 indicator is not divided into quartiles. We monitor each country on a daily basis and produce analysis bulletins (Country RiskLine Reports), as well as more detailed 50-page Full Country Reports. For further details please contact our Customer Service Center at 1.800.234.3867or via email CountryRisk@dnb.com .

Additional Resources
The information contained in this publication was correct at press time. For the most up-to-date information on any country covered here, refer to D&Bs monthly International Risk & Payment Review. For comprehensive, in-depth coverage, refer to the relevant countrys Full Country Report.

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D&B relies a team of trained economists dedicated to analyzing the risks of doing business across the world. We currently cover 132 countries.

Dun & Bradstreet is the worlds leading source of commercial information and insight on businesses, enabling companies to Decide with Confidence for over 170 years. D&Bs global commercial database contains more than 210 million business records, enhanced by our proprietary DUNSRight Quality Process, providing our customers with quality 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)

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