New trends in country risks: AU G-Grade Q1 2020

As we enter a new decade, let’s look back on the last quarter of 2019 to understand what were the major political and economic changes. Our country risk measurement tool “G-Grade” has especially highlighted on the quarter, an overall worsening situation in Latin America.

Main downgrades

  • 7.75: Bolivia has seen its G-Grade falling by 1 point. Since the presidential elections of October, the country is diving into political instability. Rumours of fraud have led to the resignation of the new elected president and recovering stability is not an easy task where urgent measures, especially toward FX reserves, need to be taken. New elections are planned for May 2020.
  • 3.75: Chile has been downgraded by two insurers. Social unrest in Q4-2019 are mirroring the lack of confidence in the government. The overall economic activity has decelerated in 2019; GDP growth has reached 2.5% in 2019 (vs 4.0% in 2018) and household consumption is unlikely to increase in the medium term.
  • 8.75: Argentina’s situation worsens; according to the IMF, GDP was -3.5% in 2019 and recession will persist next year. Under Macri’s presidency the level of public debt has doubled (93.3% of GDP in 2019). Unemployment hit a high point of 10.6% in Q4 2019
  • 4.50: Colombia’s G-Grade is decreasing by 0.5 points. Like in the other parts of Latin America, social unrest in Q4 2019 showed public dissatisfaction toward the government. The current account balance has reached -4.2% of GDP in 2019 according to the IMF.

Main upgrades

  • 6.75: Madagascar’s situation is improving. Two insurers have upgraded their country risk assessment last quarter, reflecting the good results of the presidential (2018) and legislative (2019) elections which has given the government room to implement reforms. Despite the fragility of the country (high poverty, dependence on the tourism industry), the GDP growth remains up to 5% in 2019 and the IMF expects the same trend for 2020 and 2021.
  • 7.00: Nepal GDP has reached 7.1% in 2019. This dynamism is coming from a strong domestic demand, Indian and Chinese investments and a developing tourism industry.
  • 6.25: Turkey economic fundamentals look better. GDP growth was 0.2% in 2019 and expected to climb at 3% in 2020. Public debt is stabilised around 30% of GDP and current account balance (which was -5.6% in 2017 and -3.5% in 2018) is close to 0% in 2019 (-0.6% according to the IMF).

Download the G-Grade Q1 2020 here