Country Risk Climates: Trends to Keep an Eye On

Argentina – plans to cut subsidies;
Brazil –– inflation and political trends trouble Ms. Rousseff;
Iran – a big deal underscoring the fading of sanctions;
New Zealand – higher interest rates;
Pakistan – improving international liquidity.

CYPRUS: Top-level talks aiming to reunite the Island are, once again, under way, and this time the chances look better than before. While the economy has proven to be more resilient than expected and companies are returning, though, an end to the recession is not yet in sight.

DOMINICAN REPUBLIC: Dominican and Haitian authorities have yet to resolve fully their differences over migration and trade, while CARICOM is deferring an application for full membership. The DR is struggling to fight a resurgence of drug trafficking. The economy is set for a gradual recovery and the international reserves position has been holding up well.

ITALY: Newly anointed Prime Minister Renzi has been hitting the ground running, eager to get some significant reforms out of the way before his first electoral test. His efforts are pointing in an encouraging direction, but, of course, he has yet to prove his ability to follow through. The EU seems to have its doubts.

ROMANIA: President Basescu has moved swiftly to clear the latest agreement with the IMF, following the collapse of the government and the formation of a new one minus the Liberals. High on the agenda are now efforts to bring the budget under tighter control and sell off assets, as demanded by the Fund. The economy is forging ahead at a quite impressive pace.

SPAIN: The economy is recovering, albeit slowly and with a number of downside risks. Spanish debt has recently met with strong interest from investors. The government is now planning a major overhaul of the tax system, but may run into difficulties as the PP no longer enjoys the unity it once had.

THAILAND: The semblance of calm that has returned following the anti-government protesters’ retreat from rally sites is deceptive. Social and political divisions are as deep as they have ever been. The country is paralyzed by a power vacuum and the adverse effects on business are mounting.

UNITED STATES: The economy will keep bumping along a relatively low growth corridor – too low for this stage of a rebound from recession. There are welcome green shoots, but the downside risks are still too pronounced for comfort. At that, the recovery will persist with very little inflation and a persistently accommodative Fed.

VENEZUELA: The government is about to start operating the new Sicad 2 exchange market, but with the rules still unclear it is questionable whether FX availability will improve a great deal. The economy is going from bad to worse and despite rifts in the ranks of the anti-government forces the socio-political turmoil is not about to end.