Asia and EM/Europe and CIS: Select Country Risk Ratings

Asia

Afghanistan (AFG)

Afghanistan’s overall risk level remains very high. Hibatullah Akhundzada remains the supreme leader of the country, since 2021 after the Taliban captured Kabul. Political violence, political interference and legal & regulatory risk remain very high. 3 people were killed and 12 people were injured after a suicide bombing in front of a bank in Kandahar in March. A blast near a military vehicle also led to the death of 3 Taliban personnel in Northern Afghanistan. Many farmers in northern Afghanistan have been protesting against the Taliban’s decision to stop the production of opium. Finally, Taliban fired back at Pakistan forces near the border, after Pakistan fired two airstrikes at Afghan soil. The World Bank has decided to offer 300 million to Afghanistan, that will not be utilised by the Taliban leadership, but to provide essentials, such as food water and education. Meanwhile, floods in northern Afghanistan have led to the death of more than 315 people and injured more than 1,600, but also damaged massively the infrastructure in the area. Supply chain disruption remains very high. More than two years after the Taliban gained power in Afghanistan, it still remains one of the poorest countries with many humanitarian needs. Sovereign non-payment and exchange transfer remain medium high. Afghanistan’s currency the Afghani continues to appreciate against the US dollar, and is currently at its peak during the last 5 years. The risk of doing business remains very high, due to the current economic crisis after the Taliban takeover.

China (CHN)

China overall country risk score remains at medium, with the legal and regulatory risk remaining at medium high and political interference at medium.  Domestically, China’s authorities are focused on increasing control for the communist party in key policy areas, with more decision making from the centre and implementing President Xi’s vision. The current focus is on high tech manufacturing and putting less emphasis on residential property investment to support growth – in May China announced Yuan300bln to buy unsold apartments is around 10% of what is needed to clear excess housing inventory. This production-driven planning for the economy has had some success, but a structural boost of consumption is required to stop trend growth from slowing. This needs increased government spending on health, education and pensions to reduce precautionary household savings, but the government shows no interest in large scale change. Though the May politburo meeting emphasized dealing with youth unemployment, policy details remain lacking. Additionally, despite the rhetoric of a friendlier attitude to business, China authorities continue intermittent crackdowns (e.g. gaming and healthcare) and favoring state owned enterprise (SOE’s). Internationally, the key issue is U.S./China relations, with Xi trying to improve EU relations with the May 2024 visit.  In this context, the outcome of the U.S. presidential election is key, with Donald Trump threatening a trade war if elected.  This is more important than the May 2024 imposition of targeted high-tech tariffs by the Biden administration. However, a significant escalation with Taiwan remains unlikely, given the focus on other goals in 2024, the election of pro-China speaker in Taiwan parliament and the passage of restrictions on Taiwan president by parliament. Meanwhile, the exchange transfer risk remains at medium. A current account surplus, plus substantial FX reserves, helps to support this rating (China is also on a multi-year diversification from U.S. Treasuries, including into gold).  The inability to provide fiscal stimulus remains at medium.  China has room for extra fiscal stimulation should slower growth risk a hard landing, while the dominance of domestic investors means that China’s authorities can persuade investors to rollover debt. However, China is also concerned about total debt/GDP, and for now, this points to only further targeted fiscal expansion in 2024. Banking sector vulnerability also remains at a medium rating, despite worries about the long-term downturn in the residential property sector. Non-performing loans, primarily held by small and city banks, can be managed through potential takeovers by larger banks and local governments.

Korea, Dem. People’s Rep.  (PRK)

North Korea’s overall risk level remains very high. Kim Jong Un remains the supreme leader of the country. Political violence, political interference and legal & regulatory risk remain very high. North Korea continues to improve their military system with multiple new weapons and has pledged to continue doing so after the United States imposed sanctions on them. North Korea, a major ally of Russia criticised the US for providing missiles to the Ukrainian army. North Korea has been suffering from food shortages, due to UN’s sanctions over its weapons and several natural disasters that have led to the East-Asian nation to discuss deepening their agricultural ties with Russia. North Korea is also being accused of receiving refined petroleum from Russia above the 500,000-barrel annual cap that has been set by the United Nations. Following South Korea’s and US increased military trainings, Kim Jong Un has also decided to intensify war preparations. North Korea and China also committed to further improve their diplomatic relationship when official of both countries met in Beijing in March. Meanwhile, a representative of the country reportedly visited Tehran in April to discuss a possible bilateral trade with Iranian officials. North Korean officials have also been recently discussing the cooperation in the economic and cultural sectors but also the support for each other in global matters with Belarus. Supply chain disruption remains high. Sovereign non-payment remains medium high and exchange transfer remains low. The risk of doing business remains very high in North Korea

Papua New Guinea (PNG)

Papua New Guinea’s overall risk level remains medium high. James Marape, has remained prime minister of the country, since May 2019. Political violence and political interference remain medium high, with legal & regulatory risk at a high. The World Bank stated that Papua New Guinea has a human capital crisis and urged PNG to invest into the educational system, as children seem to suffer from stunted growth and illiteracy. Papua New Guinea has also granted the military the ability to arrest, after an increase in tribal violence, with 26 people found dead. Marape met with the prime minister of Australia, Anthony Albanese and the foreign minister of China Wang Yi, countries that account for more than 70% of PNG’s trade. Marape walked a historic World War 2 trail with Albanese to mark the historical defence ties. Marape mentioned that the relationship between the two countries is the best it has ever been. China’s foreign minister separately arrived to discuss the cooperation in various sectors. China is willing to accelerate negotiations on a free trade agreement between the two countries, but also assist in fields, such as economy, trade, finance, energy and infrastructure. Papua New Guinea has a defence deal in place with the US that gives access to their ports and airports. Supply chain disruption remains medium high. Growth is expected to increase to 4.5% in 2024, but slow to 3.7% in 2025, according to the IMF. CPI is forecast to rise by 1.9% in 2024 to 4.2% and reach 4.8% by 2025. However, the central bank of PNG decided to drop the key interest rate to 2% in late February. Papua New Guinea’s current account surplus is projected to decline to 12.2% of GDP in 2024 and rebound to 14.4% in 2025. Sovereign non-payment and exchange transfer remain medium high. PNG’s currency the kina, is pegged to a basket of currencies and has slightly depreciated against the US dollar over the past 6 months. The risk of doing business remains high and the inability of government to provide fiscal stimulus remains medium high.

Taiwan (TWN)

The Taiwan overall country risk score of medium-low reflects economic strength and only moderate and intermittent tensions with China over reunification.  China’s gray warfare has continued in 2024 with military aircraft intermittently flying close to Taiwan and China naval exercises in May.  However, the gray warfare has not escalated compared to recent years, nor has it been as intense.  China will likely be pleased that a pro-China politician from Kuomintang, Han Kuo Yu, has been elected speaker of the Taiwan parliament. Additionally, the parliament has passed a bill that requires the president to make regular reports to parliament, which is seen as a China friendly policy. This could be a route to a more China friendly view in some sections of Taiwanese society, which China would want to play out in the coming years and avoiding the alternative very high risk option of invasion. The current parliamentary domestic focus is also on KMT proposed infrastructure projects for eastern Taiwan, rather than China. Thus, China will likely to continue to pressure Taiwan but stop short of major escalation. Elsewhere, structural economic indicators remain strong helped by a well-balanced economy, controlled inflation and a huge current account surplus.  This leaves exchange transfer at a low rating, while the risk of doing business also remains at a low rating. Risk of sovereign non-payment is medium-low, which reflects the low government debt/GDP trajectory. 

Timor-Leste (TLS)

Timor-Leste’s overall risk level remains medium high. José Ramos-Horta remains president of the country, since 2022.  Parliamentary elections were held in 2023, where the CNRT party won 41.6% of the votes, followed by the Fretlin party that won 25.8% of the votes. CNRT’s leader Xanana Gusmao is now the prime minister of the country. Political violence remains high, political interference remains medium high and legal & regulatory risk remains high. The Minister of Foreign Affairs and Cooperation, Bendito Dos Santos Freitas met with his counterpart in China, where China assured Timor-Leste of their support towards economic development, specifically regarding infrastructure, agriculture and the industry sectors. Prime Minister Gusmao and president Ramos-Horta also met with the secretary general of ASEAN, where they discussed the preparations for Timor-Leste’s full membership of ASEAN. Meanwhile, Timor-Leste has launched a program named “Future Leaders of ASEAN” and targets individuals between the age of 23-37 to understand this political and economic union. Supply chain disruption remains medium high. Growth is expected to rise to 3.5% in 2024, but rebound to 3.2% in 2025, according to the IMF. Timor-Leste depends highly on the oil sector, that accounts for more than 90% of its GDP and more than 70% of the government’s revenue. CPI is forecast to drop by 4.9% in 2024 to 3.5% and continue to decline in 2025 to 2.2%. Timor Leste’s current account deficit is projected to increase immensely to -42% of GDP (oil exports have slowed in recent years, but imports have held up), with a government debt/GDP ratio of 14.2% in 2024. Sovereign non-payment remains medium high and exchange transfer remains medium. The currency utilised in Timor-Leste is the US dollar. The risk of doing business and the inability of government of provide fiscal stimulus remain medium high.

EM Europe and CIS

Bosnia and Herzegovina (BIH)

Bosnia’s overall risk level remains medium high. The presidency in Bosnia is composed of three members from each of the constituting nations, the Bosniak, the Croat and the Serb. Denis Bećirović remains the Bosniak member, Željko Komšić the Croat member and Željka Cvijanović the Serb member of the presidency, since the 2022 elections. Political violence remains medium high, legal & regulatory risk remains high and political interference has increased from medium high to high. Bonsia’s High Representative Christian Schmidt has decided to change the country’s election law, in an effort to restore voters trust and integrity. However, the president of the Serb Republic, Milorad Dodik has stated that the Serbs will not pass the election law. Bosnian Serb MPs have also embraced a report that denies the killing of 8,000 Muslims in Srebrenica during the war of being a genocide. Meanwhile, the Serb Republic of Bosnia is planning to increase its gas imports from Russia, due to a supply shortage in the industry. The European Union leaders agreed to meet with Bosnia and open negotiation talks for the European membership, while suggesting that the country would require further reforms to become a member.  Supply chain disruption remains medium high. Growth is expected to rise by 0.7% to 2.5% in 2024 and reach 3% by 2025, according to the IMF. CPI is forecast to drop by 3% in 2024 to 3% and continue to drop in 2025 to 2.7%. Bosnia’s current account deficit is projected to increase to -4.5% of GDP in 2024, but narrow to -4.3% in 2025. Sovereign non-payment and exchange transfer remain medium. Bosnia’s currency the convertible Marka is pegged to the euro at a rate of 1 Marka per 0.51 euro. The risk of doing business remains medium high and banking sector vulnerability remains medium low.

Georgia (GEO)

Georgia’s overall risk level remains medium. Salome Zourabichvili remains president of the country, with Irakli Kobakhidze as prime minister. Parliamentary elections are scheduled for later in 2024 with Kobakhidze’s Georgian Dream being the favourite to win with polls suggesting he will win over 45% of the votes. Political violence remains medium high, with political interference and legal & regulatory risk at a medium. A bill was recently passed in the Georgian parliament that requires organisations that receive more than 20% of their funding from abroad to be considered as foreign agents. This bill has received criticism from the European Union, which has stated that this law goes against its core values and has urged the Georgian government to withdraw it. The European Union has warned Georgia that such an action would set back the process of entering the bloc. The Georgian prime minister has rejected the criticism from the European Union. Thousands of Georgian citizens have flooded the streets to protest against this law, claiming that it is a “Russian law”. Supply chain disruption remains medium low. Growth is expected to drop by 1.5% in 2024 to 5.7% and reach 5.2% by 2025, according to the IMF. Georgia is mainly focused on the service industry, with the agricultural and the manufacturing sector also being important. CPI is forecast to stay below 3% again in 2024 at 2.6%, but rise to 4.2% in 2025. Georgia’s current account deficit is projected to increase to a high -5.8% of GDP in 2024, but rebound to -5.6% in 2025. Thus sovereign non-payment and exchange transfer remains medium. Georgia’s currency, the Lari has slightly appreciated over the past 6 months against the US dollar. The risk of doing business remains medium low, because of their low labour costs, free trade regime and low taxation, corruption and bureaucracy. Banking sector vulnerability and the inability of government to provide fiscal stimulus remain medium low.

Kyrgyz Republic (KGZ)

Kyrgyzstan’s overall risk level remains high. Sadyr Japarov remains president of the country, since 2021. Political violence and political interference remain medium high, with legal & regulatory risk remains very high, due to very high levels of corruption. A non-governmental organisation has been shut down that ran a famous news website in Kyrgyzstan, an action that has raised concerns over the independence of media. Kyrgyzstan has adopted a law similar to Russia’s “foreign agents law”, which requires NGO’s that are being funded from abroad and are engaged in political activities to provide further information to the government. It allows the government to imply criminal sanctions over the organisations if they don’t comply with the law. The foreign ministry of Kyrgyzstan has suggested to its citizens to avoid travelling to Russia, after several Kyrgyz individuals have been arrested for suspected connection to the concert hall attack that killed 143 people. The labour ministry announced that several Kyrgyz people that work in Russia have been approached by militant groups to participate in terrorist attacks. Supply chain disruption remains high. Growth is expected to rise to 4.4% in 2024 and rebound to 4.2% in 2025, according to the IMF. Kyrgyzstan is highly depends on the agricultural sector, which employs around 40% of the labour force. CPI is forecast to drop in 2024 to 6.7% and to 6.6% in 2025. Kyrgyzstan’s current account deficit is projected to drop to a still chronic -9.5% of GDP in 2024, with a government debt/GDP ratio of 47.2%. Sovereign non-payment remains medium and exchange transfer remains medium high. The Kyrgyzstani Som has slightly appreciated against the US dollar of the past 6 months. The risk of doing business remains medium high, due to high levels of corruption and poor infrastructure. Banking sector vulnerability remains medium and the inability of government to provide fiscal stimulus has decreased from medium high to medium.

Moldova (MDA)

Moldova’s overall risk level remains high. Maia Sandu currently remains president of the country, with presidential elections being held in October and Sandu seeking re-election. Political violence remains very high, legal & regulatory risk remains high and political interference has decreased from high to medium high. A drone hit a military facility in Transdniestria, an area which is officially recognised as Moldovan territory, but is known as the Pridnestrovian Moldavian Republic (PMR) and is a breakaway state. It is a very poor state, which is allied with Russia, in contrast to the Moldovan government. Moldova fears an attack from Russia, and has decided to sign a defence agreement with the European Union. According to president Sandu, Moldova is hoping to join the bloc by 2030. The Moldovan government has summoned the Russian ambassador for allegedly trying to open six polling stations at the Transdniestria region. The Justice Ministry are also seeking to suspend the Chance party from the presidential elections in October, a pro-Russian party which has been linked to exiled businessman Ilan Shor, who has been charged for the disappearance of $1 billion of the banking system in 2014. The parliament has voted to hold a referendum regarding the European membership in October, on the same day as the presidential elections. Supply chain disruption remains medium high. Moldova’s growth is expected to rise to 2.6% in 2024 and reach 4.8% by 2025, according to the IMF. Norway and Moldova have reached an energy agreement, with Moldova trying to end its reliance on Russia in that sector.  CPI is forecast to drop to 5% in 2024 and remain at 5% in 2025. Moldova’s current account deficit is projected to decrease to a still high -11.5% of GDP in 2024 and continue to decrease in 2025 to -10.3%. Thus sovereign non-payment remains high and exchange transfer remains very high. Moldova’s leu has been relatively stable over the past 6 months against foreign currencies. The risk of doing business remains medium and the inability of government to provide fiscal stimulus medium low. 

Serbia (SRB)

Serbia’s overall risk level remains medium. Milos Vucevic, leader of the Serbian Progressive Party (SNS) has been elected prime minister of the country, receiving 48% of the total votes and was appointed with his cabinet on May 2. Originally the elections were scheduled for 2026, however the president of Serbia, Aleksandar Vusic called for a snap election. Political violence and political interference remain medium, with legal & regulatory risk at a medium high. There will now be a coalition government in Serbia between SNS and five smaller parties. Serbia’s elections were characterised as below the standards of a EU candidate country, by MEPs. They were accused for abusing the institutions and media to gain an unfair advantage, for breaches in secrecy of the vote and frequent overcrowding by the European Parliament, which requests further investigation into the elections. It also condemns the absence of media pluralism and threatens to suspend EU funding if the local authorities were somehow involved. Chinese president Xi Jinping visited Serbia in May to discuss China’s multibillion dollar investment in the country and possible new deals. However, Serbia is also close to sign an agreement with France for 12 Rafale fighter jets that will cost around 3 billion euros and would boost the country’s military. Supply chain disruption remains medium. Growth is expected to rise to 3.5% in 2024 and reach 4% by 2025, according to the IMF. CPI is forecast to decline by 7.6% in 2024 to 4.8% and continue to decline in 2025 to 3.1%. Serbia’s current account deficit is projected to rise to -3.9% of GDP in 2024 and to -4.7% in 2025 with a government debt/GDP ratio of 49.1%. The IMF has come into a staff-level agreement with Serbia for 400 million Euros, given the wide C/A deficit. Sovereign non-payment remains medium, with exchange transfer at a medium low.  The Serbian dinar officially floats, but the NBS has often pegged it to the euro in recent years. The risk of doing business and banking sector vulnerability remain medium low.

Tajikistan (TJK)

Tajikistan’s overall risk level remains high. Enomali Rahmon remains president of the country since 1994. Political violence and political interference remains high, with legal & regulatory risk very high, due to very high levels of corruption. Nine individuals have been arrested for being linked to the mass shooting at the Russian concert hall in Tajikistan, but also the Islamist group that claimed responsibility for the attack. Four of the gunmen that have been arrested for the attack that killed at least 143 people are Tajik citizens. A Russian security official has accused Ukraine of acquiring Tajik mercenaries to fight in their war against Russia, through their embassy in Dushanbe, something that the government of Tajikistan has denied. The foreign ministry of Tajikistan has summoned the Russian ambassador to discuss the alleged mistreatment of Tajik individuals in Moscow, after the attack at the concert hall. Supply chain disruption remains medium high. Growth is expected to drop by 1.8% to 6.5% in 2024 and continue to decrease in 2025 to 4.5%, according to the IMF. The trade of aluminium and cotton account for more than 75% of the country’s exports. Tajikistan will receive $550 million from the Islamic Bank and Institutions in order to build its Rogun hydroelectric power plant megaproject. The government suggest that the total investment required to complete the project are $6.2 billion. CPI is forecast to rise by 1.2% in 2024 to 4.9% and reach 6.3% by 2025. Tajikistan’s current account deficit is projected to increase to -2.1% of GDP, with a government debt/GDP ratio of 30.8%. Sovereign non-payment remains high and exchange transfer remains medium high. The Tajikistani Somoni has appreciated by about 2% over the past 6 months against the US dollar. The risk of doing business remains medium high and banking sector vulnerability remains medium low. The inability of government to provide stimulus has decreased from medium to medium low.

Turkmenistan (TKM)

Turkmenistan’s overall risk level remains high. Serdar Berdimuhamedov, leader of the Democratic Party of Turkmenistan remains president of Turkmenistan, since 2022. Political violence remains medium high, with legal & regulatory risk and political interference at a very high. Corruption continues to exist at great levels in Turkmenistan. Elsewhere, the UK’s Lord David Cameron visited Turkmenistan and other countries in Central Asia in an effort to boost trade between the two countries, but also to form security and environmental ties with the UK. Negotiations occurred between the president of Tajikistan, Enomali Rahmon and the chairman of the Khalk Maslakhaty, Gurbanguly Berdimuhamedov on topics such as trade, but also technical and scientific cooperation. President Berdimuhamedov is starting to prioritize certain policies to achieve the improvement of the well-being of the population, the popularisation of mass physical exercise and health movement and the development of the agricultural sector. Supply chain disruption remains medium high. Growth is expected to rise to 2.3% in 2024 stay at 2.3% in 2025, according to the IMF. Turkmenistan’s economy depends on its agriculture and its huge gas and oil resources, which account for 87% of the exports. CPI is forecast to increase to 5% in 2024 and reach 7.9% in 2025, due to the government’s policy of increasing public sector wages and pensions by 10%. Turkmenistan’s current account surplus is projected to decline to 4.1% of GDP in 2024, with a government debt/GDP ratio of 4.7% and continue to decline in 2025 to 2.8%. Sovereign non-payment remains medium and exchange transfer remains high. The currency of Turkmenistan is the Manat and it is pegged to the US dollar at a rate of 1 Manat per 0.29 USD. The risk of doing business is very high, due to great levels of corruption, weak infrastructure, no access to finance and its lack of diversification.