15 April, 2009

Risk assessment

From the Economist Intelligence Unit, a well-regarded resource for business intelligence an risk assessment, a free report.

Manning the barricades - A special report
The Economist Intelligence Unit's Chief Economist, Robin Bew, discusses the 'Manning the barricades' special report with Cantos, against the backdrop of the London G20 summit [.WMV 23MB] Videocast: The G20, the economic downturn and social unrest

The map is interesting, but I’m particularly interested in punch line—the EIU’s estimate of the global financial system:

Scenario 1: Our central forecast (60% probability)

Government stimulus stabilises the global financial system and restores economic growth in leading developed markets during 2010, albeit at lower levels than in recent years. This scenario underpins our regular analysis and is not the subject of this report.

Scenario 2: The main risk scenario (30% probability)

Stimulus fails, leading to continued asset price deflation and sustained contraction in the leading economies—a depression persisting for some years. The stubborn decline in global economic activity is punctuated by occasional rallies that are taken as signs of recovery, but these quickly fade as the underlying downward trend reasserts itself. The prominent role of governments in propping up banks and reviving domestic demand leads to strong political pressure for protectionism, effectively putting the process of globalisation into reverse.

Scenario 3: The alternative risk scenario (10% probability)

Failing confidence in the dollar leads to its collapse, and the search for alternative safe-havens proves fruitless.

Economic upheaval sharply raises the risk of social unrest and violent protest. A Political Instability Index covering 165 countries, developed for this report, highlights the countries particularly vulnerable to political instability as a result of economic distress.

And who is on the bubble?  Included in the “very high” risk category are Ukraine, Pakistan, Afghanistan, Iraq, Ecuador, Bolivia, Bosnia, Bangladesh, North Korea, and most of West and Central Africa.  The “high” risk countries include Russia, Mexico, Saudi Arabia, Iran, Hungary, Turkey and South Africa.

You may be pleased to know the US is in the “moderate” group, on par with China, India, Belarus, and France.  If you are looking for someplace more stable than any of those, try Canada, Germany, Australia, the Czech Republic, or the Scandinavian countries.


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