Real
GDP growth is highly likely to slow over the coming years owing to a number of
factors: slowing growth in the working age population; a high share of
government spending relative to GDP; a reversal in the country’s terms of
trade; and the growing risk of deflation. These impediments will result in real
GDP growth averaging 2.3% over the next decade, down from 2.7% over the past
decade. Australia’s Liberal-National coalition formed the government for a
second term, following the July 2 federal elections, but we believe that it
will not be able to significantly improve the country’s business environment
and economic growth prospects over the coming years. The coalition’s expected
lack of majority in the Senate suggests that risks of policies being delayed
and diluted are high. Additionally, the coalition’s narrow margin of victory
against the opposition Australian Labour Party is a significant setback for
Prime Minister Malcolm Turnbull, and there is an increasing possibility that
his leadership position might be challenged, which would create further
uncertainty for businesses.
We
remain bearish on the Australian dollar despite the large fall we have already
seen in the currency. While valuations are no longer a headwind to the
currency, the trend remains very bearish. Weak economic growth owing to falling
investment and correction in the property market amid elevated indebtedness
does not bode well for the AUD. Fiscal reforms in Australia – notably
expenditure cuts – will likely be held back due to political gridlock,
particularly in the Senate, and we believe that the government led by the
Liberal-National coalition will be unable to return the federal budget to a
balance by its target of FY2020/21 (July-June).
While
there is currently no danger of a fiscal crisis, our core view is that this
growing burden of the government will undermine the productivity of the private
sector and take its toll on economic growth over the medium term. Following the
Reserve Bank of Australia (RBA)’s 25 basis point (bps) cut to its cash rate to
a fresh historical low of 1.50% at its August monetary policy meeting, we
expect the central bank to keep its key policy rate steady for the rest of 2016
as it looks to assess the impact of its accommodative monetary policy stance.
That said, we forecast the RBA to cut interest rates further by another 25bps
to 1.25% by H117 as the Australian economy weakens while belowtarget inflation
persists. Major Forecast Changes We upgraded our 2016 real GDP growth forecasts
to 2.4% (from 2.1% previously) as a result of Australia’s
stronger-than-expected Q116 real GDP expansion of 4.3% q-o-q in seasonally
adjusted annualised terms. Nevertheless, we maintain our 2017 real GDP growth
forecast of 2.2% as the strong export performance is unlikely to be sustained
as China’s economy weakens, while the unwinding investment boom in the mining
sector will be further compounded by weakness in the housing market.
We
revised our average 2016 Australian dollar forecast stronger to USD0.7400/AUD
(versus USD0.7300/AUD previously) owing to the AUD’s strength since the start
of 2016. However, the country’s high level of external indebtedness still
leaves the currency exposed to capital outflows amid a slow transition away
from its reliance on the mining sector and a weakening residential property
market.
For
more information Visit at: http://www.marketresearchreports.com/business-monitor-international/australia-country-risk-report-q4-2016
Partisan manoeuvring, ethnic divisions, and complex governing
structures combine to make Bosnia-Herzegovina’s political system largely
dysfunctional. With few signs that radical improvements are forthcoming even
after the country’s agreement over the EU accession process, we expect the
coming years to be tainted by frustrating delays to badly-needed reforms. After
outperforming in 2015, economic growth is set to subside somewhat in the coming
years due to external headwinds and internal impediments to economic activity.
Budget policy will be anchored by the three-year IMF lending agreement,
especially as the entity governments rely on external funding to cover budget
deficits.
This should ensure short-term financial stability and fiscal
discipline, though has so far done little to address structural problems. Major
Forecast Changes We have revised down our forecast for GDP growth in 2016 and
2017 to 2.7% and 2.9%, respectively, due to the anticipated slowdown in export
growth amid weaker demand from many EU states, post-Brexit vote. As price
pressures fail to materialise so far in 2016, we have lowered our target for
full-year average inflation to -0.3%, rising to 1.1% in 2017.
For
more information Visit at: http://www.marketresearchreports.com/business-monitor-international/bosnia-herzegovina-country-risk-report-q4-2016
Botswana will see a gradual recovery in real GDP
growth over the next five years, supported by private consumption and fixed
investment. However, a combination of sluggish mining sector exports and rising
capital goods imports will widen the trade deficit, tempering the extent of the
growth. Low diamond prices will sustain pressure on Botswana's external
accounts over the next year, as export revenues and inward investment remain
sluggish. However, a relatively strong reserve position and an
investor-friendly business environment will ensure these dynamics do not become
a lasting drag on the overall health of the economy.
A benign outlook for inflation and a change to our
monetary policy forecast for South Africa have led us to adjust downwards our
forecast for the key policy rate in Botswana in 2016. With inflation stable but
credit growth and confidence surveys low, the Bank of Botswana will focus on
supporting economic growth. Botswana's budget deficit will widen to the largest
level in six years in 2016 as the government seeks to implement fiscal
stimulus. We forecast a smaller deficit than the government, as project
realisation will be low. The ruling Botswana Democratic Party will continue to
dominate policymaking in the coming quarters, aided by forthcoming changes to
the composition of the legislature and underpinning our view for policy
continuity in the coming quarters.
These changes to the legislature will not be
sufficient to head off fragmentation within the ruling party during the 2018
handover of power from the current president to an interim successor. The
Botswanan pula will resume its depreciatory course before year-end 2016, in
line with our view for the South African rand to bounce off resistance. A
sell-off in the rand, one of the currencies the pula is pegged to with a
crawling exchange rate, will see this trend continue through 2017, entailing
some modest depreciation.
For
more information Visit at: http://www.marketresearchreports.com/business-monitor-international/botswana-country-risk-report-q4-2016
Bulgaria's GDP growth in the coming years will
recover but stay modest by emerging market standards. We forecast the economy
to grow by 2.4% in 2016 and 2.6% in 2017. Private consumption will continue to
be the main economic growth driver, as Bulgaria remains unable to attract
foreign investment, which has bolstered GDP-growth in the past. We are
forecasting Bulgaria's budget deficit to remain under 3.0% of GDP in the years
ahead and although the overall debt level will rise, it will stay at a low
level compared to regional peers. Bulgarian goods export will slow in the
coming years as demand from key trading partners will weaken as a consequence
of the Brexit referendum. Nevertheless, we expect services exports to perform
strongly, as the county's tourism sector stands to benefit from political
instability and security threats in rival tourist destinations. By the end of
2016, Bulgaria's price levels will start growing again, after experiencing the
deepest deflationary period (after Greece and Cyprus) in the European Union.
Major Forecast Changes
We have revised down our GDP growth forecast, as the
Brexit referendum will entail weaker European demand for Bulgarian goods
exports. We now forecast the Bulgaria's economy to grow by 2.4% in 2016 and 2.6%
in 2017. By virtue of weakening goods exports we changed our current account
forecast from 1.9% of GDP to 1.8% and from 1.9% to 1.6% in 2016 and 2017,
respectively.
For
more information Visit at: http://www.marketresearchreports.com/business-monitor-international/bulgaria-country-risk-report-q4-2016
We believe that the English-speaking Caribbean will
continue to see a modest economic recovery in the coming quarters as US growth
continues. A strengthening US consumer will boost tourism to the region,
driving growth in tourism-dependent economies. Financial services will continue
to struggle due to tightening financial regulation in developed economies,
while lower precious metals prices will weaken the macroeconomic outlook for
the region's miners.
That said, growth will remain stronger in the
region's mining-driven economies than in its predominantly tourism-driven
countries. Caribbean economies will continue to face economic headwinds in the
coming years in light of rising debt burdens, fixed exchange rate regimes, and
modest growth prospects. These factors, combined with our view that financial
services sectors will see a significant recovery in the next few years, mean
that we do not rule out additional credit events or major balance of payments
corrections in some of the small island economies.
Major
Forecast Change
We now forecast Guyana's fiscal deficit to equal
5.2% of GDP in 2016, and downward revision from our previous 5.0% forecast, as
the 2016 budget includes new capital expenditure.
For
more information Visit at: http://www.marketresearchreports.com/business-monitor-international/barbados-guyana-and-jamaica-country-risk-report-q4-2016
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