New trends in country risks: AU G-Grade Q2 2021

Whilst for some countries (China, United States, UAE, United Kingdom) there is light at the end of the tunnel, others are struggling due to the pandemic. But overall, the trend is gradually improving as vaccines are deployed around the world.

During the first quarter (01/01 to 31/03/201), the G-Grade noted 4 significant changes in country risk.

• Improvement in Azerbaijan (the G-Grade goes from 7.50 to 6.75): The tense political situation of late 2020 due to the armed conflict in the Nagorno-Karabakh region, seems to have improved since the ceasefire last November.
• Improvement in the UK (G-Grade goes from 2.50 to 2.00): After a -9.9% recession in 2020 (according to the IMF), a rebound in growth is expected for 2021 (+5.3%) and 2022 (+5.1%), as the health situation gradually improves. Household consumption will be the driving force behind this recovery, as the purchasing power of the British public has not been badly affected by the pandemic thanks to the measures taken to support the economy. However, all these measures have a cost, and the country will have to face the significant increase in its public debt, which has risen from 85.2% of GDP in 2019 to 107.1% in 2021 (IMF estimate).
• Improvement in the United Arab Emirates (G-Grade moves from 3.75 to 3.25): The collapse of oil prices during 2020 has badly impacted the country’s economy. In 2021, the combined effect of the rise in barrel prices and the recovery in volumes promises better prospects (+3.1% in 2021 and +2.6 in 2020). Even if the pandemic will reduce the scope of the Dubai World Expo, (October 2021), such an event will still have a positive impact on the region (employment, consumer spending).
• Downgrade in Laos (G-Grade changes from 8.50 to 9.00): foreign exchange reserves are relatively low and the country’s debt situation is worsening. As of today, there is no IMF support policy in place and the possible risk of sovereign default rises.