New trends in country risks: AU G-GRADE 3Q 2016

This new country risk assessment covers the period from the 1st of April to the 30th of June 2016, and therefore, does not reflect the recent major events like “Brexit” or the attempted coup in Turkey. Insurers will definitely integrate these political facts into their next assessment, and this will impact those two countries and their economic partners and neighbours.

Thus, the key changes to the “Country Risk” in the second quarter mainly focus on Africa and Europe where we note the following significant changes:

  • Ivory Coast: improving situation. This is the main difference in the G-Grade changing from 7.50 to 6.50. The country seems to have regained some stability since the re-election of Alassane Ouattara, the dynamism of economic growth (one of the most important GDP growth of the continent) is obvious, and macroeconomic indicators (inflation, standard of living of the population, exports) are showing good trends.
  • Mozambique: deteriorating situation. The International Monetary Fund has decided to suspend its financial assistance to the country, following the revelation of concealment of a debt of over a billion dollars. Therefore, uncertainties about the actual level of debt, have reduced foreign investment and this impacts growth forecasts. So far the government has committed a clarification process of the situation, and asked the financial advisor Lazard, to evaluate its external debt in order to reassure its partners. The G-Grade falls from 7.75 to 8.25.
  • Italy: improving situation. From 3.75 to 3; this variation of the G-Grade reflects several positive signals in recent months: renewed growth, reduced unemployment and a better economic situation of households. However, the latent banking crisis, as well as the impact of Brexit will be under watch in the coming months.
  • Romania: improving situation. The economic growth of the country displays a constant dynamism (IMF source: + 3.0% in 2014, + 3.7% in 2015, + 4.2% expected in 2016). Corporate investments and the good level of household consumption reflect a positive economic confidence. The G-Grade thus improves by 0.75 to reach 4.00. This good performance cannot hide the public account degradation due to the fiscal policy of the country, and the level of business failures which remains one of the highest in the region.

Download the AU G-Grade here.


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