Our “country risk” measurement tool, the AU G-Grade, has highlighted the following main changes in Q2-2017:
Deteriorating situation in Africa and especially in:
- Senegal (Q1: 6.25 to Q2: 7), Benin (6.5 to 7) and Burkina Faso (7 to 7.5): Similar to other CFA countries, macroeconomic fundamentals have been strongly hit by the fall in commodity prices and regional insecurity. This has led to an increasing risk of devaluation and a potential regional liquidity crisis due to shrinking exchange reserves. Therefore, in the coming month, the CFA Franc devaluation might be a concern in the Central African Economic and Monetary Community (CEMAC).
- Mozambique (9 to 9.5): in the previous quarter the G-Grade for Mozambique was decreasing from 8.5 to 9, a new drop of 0.5 is recorded in Q2. The reason lies in the suspension by the IMF in April of its aid programme which will shorten access to international credit.
Improving situation in:
- Argentina (7 to 6.5): GDP ratio grew in the last quarter of 2016 despite an overall drop of 2% in 2016 full year. There could be a turning point in the economic situation with a forecast of GDP growth of more than 3% in 2017. However, the overall situation remains weak.
- Brazil (6 to 5.50): A return to growth is expected in 2017 after 2 years of recession, and despite a decreasing public consumption and a drop-in investment, optimism seems to be back after an improving current account deficit situation as well as less inflationary pressure.
- Latvia (3.5 to3): a growth rate of 3.4% is expected in 2017. Pillars for growth will be investment, better labour market and greater integration in the Eurozone.