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Country Risk Updates – Q4 2015 Oct-Dec 2015 Risk Rating Changes The risk ratings for Q4 2015 indicate that 3 countries have been upgraded and 4 countries have been downgraded. Country Change Cuba ▲ Czech Republic ▲ Australia ▼ Brazil ▼ Uruguay ▼ Cyprus ▲ Egypt ▼ Extended WW Headline Dun & Bradstreet upgrades Cuba's country risk rating as the re-establishment of ties with the US is set to boost consumption and investment spending. Dun & Bradstreet upgrades the Czech Republic's country risk rating as growth surges in the second quarter, despite the varied negative external effects. Dun & Bradstreet downgrades Australia's country risk rating amid sustained macroeconomic pressures, including a regional slump and currency deterioration. Dun & Bradstreet downgrades Brazil's country risk rating as the recession deepens, investor sentiment drops, and ongoing political turmoil stymies crucial reforms. Dun & Bradstreet downgrades Uruguay's country risk rating in the wake of the recent quarterly economic contraction and amid some contagion from Brazil. Dun & Bradstreet upgrades Cyprus' country risk rating as the economic outlook brightens, with household consumption and gross fixed capital formation the primary growth drivers. Dun & Bradstreet downgrades Egypt’s country risk rating and outlook in the wake of the downing of a Russian airliner. Outlook Trend Changes Country Change Israel ▼ South Korea ▲ Pakistan ▲ Extended WW Headline Dun & Bradstreet downgrades its rating outlook for Israel as violence with the Palestinians leaves many dead on both sides, although a Third Intifada looks unlikely given the circumstances. Dun & Bradstreet upgrades its rating outlook for South Korea as quarterly data portrays a resilient economy supported by a expansionary fiscal stance and diversified industrial sector. Dun & Bradstreet upgrades its rating outlook for Pakistan as the improving inflation environment prompts a rate cut by the central bank. World Watch Country Algeria Ethiopia Morocco Tunisia Cambodia Japan Philippines Thailand Georgia Lithuania Serbia Turkmenistan Egypt UAE El Salvador France Luxembourg United Kingdom Zimbabwe Saudi Arabia Spain Switzerland Slovenia India Extended WW Headline Bouteflika removes a powerful security chief, which could raise political tensions. Essential transport and energy infrastructure investment helps to drive economic growth. Growth rises in the third quarter, driven by stronger agricultural output. Financial weaknesses, particularly in public-owned banks, remain elevated. Economic growth is likely to decelerate in 2016 as external headwinds strengthen. A third-quarter contraction is a possibility as external headwinds weigh on the recovery. Business opportunities abound as demographics and economic structure enable long-term growth. Contractions in non-tourism sectors limit overall market potential. Interest rates are hiked again over fears around accelerating inflation. In the past year, the competitiveness of the business environment has improved. EU accession is frustrated by new conditions for membership alongside plunging support. A feasibility study on the TAPI gas pipeline is completed, although concerns remain. The central bank governor resigns after a currency devaluation. Liquidity tightens as government deposits drop and borrowing rises. The security situation deteriorates amid spiking homicide rates. Payments performance remains below the European average. Economic expansion is being driven by investment. A further cooldown of the economy is defied by the thriving retail sector. The growth outlook is poor given expectations of substandard rainfall. Government continues to liquidate assets and is to tap the international bond markets. Buoyant private consumption and investment boost economic growth. Pressure builds on the franc, which is worrying for the country's export sector. Exports and private consumption to drive growth during the forecast period. Transport connectivity remains the key to higher economic growth. South Korea Canada United States The economy's transition to a lower growth trend leaves it more vulnerable to negative shocks. Central bank and federal budget watchdog anticipate slower growth and larger deficits. High levels of inventories could drag on growth in Q4. Risk Rating Explanations The DB risk indicator is divided into seven bands, ranging from DB1 through DB7. Each band is subdivided into quartiles (a-d), with an ‘a’ designation representing slightly less risk than a ‘b’ designation and so on. Only the DB7 indicator is not divided into quartiles. Indicat or Meaning Explanation DB1 Lowest Risk DB2 Low Risk DB3 Slight Risk DB4 Moderate Risk DB5 High Risk DB6 Very High Risk DB7 Highest Risk Lowest degree of uncertainty associated with expected returns, such as export payments and foreign debt and equity servicing. Low degree of uncertainty associated with expected returns. However, country-wide factors may result in higher volatility of returns at a future date. Enough uncertainty over expected returns to warrant close monitoring of country risk. Customers should actively manage their risk exposures. Significant uncertainty over expected returns. Risk-averse Customers are advised to protect against potential losses. Considerable uncertainty associated with expected returns. Businesses are advised to limit their exposure and/or select highreturn transactions only. Expected returns subject to large degree of volatility. A very high expected return is required to compensate for the additional risk or the cost of hedging such risk. Returns are almost impossible to predict with any accuracy. Business infrastructure has, in effect, broken down. Copyright © 2015 D&B Singapore. All rights reserved