Pre-GFC levels of global growth not expected to resume
until 2017

Two in five countries riskier than in late 2009

The global economic recovery remains stalled five years after the GFC, with long-term growth unlikely to be achieved until 2017, according to new data from business intelligence company Dun & Bradstreet (D&B). Increased country risk over the past year saw more than 40 per cent of countries rated a higher risk than when the global economic recovery began in late 2009.

D&B's Global Risk Indicator (GRI), which provides a comparative, cross-border assessment of the political, commercial, economic and external risk of doing business in 132 countries, reveals that 56 countries have had their risk rating downgraded over the past three years. Twenty-three countries had their risk rating upgraded during this time.

Additionally, the risk outlook for 32 countries was downgraded in 2012 alone, equating it to the third-largest number of downgrades in a calendar year since 1994 and only lower than the number of downgrades that occurred in 2009 and 2011. Only seven countries had their risk rating upgraded over the past year.

2012 downgrades by region

2012 downgrades by region - D&B

According to D&B's Economic Advisor Stephen Koukoulas, recovery from the GFC is proving to be challenging for many countries.

"Normally this far into the recovery we would expect the figures to be reversed, with a large number of upgrades and only a few downgrades. Given the current track record, particularly in the Euro-zone, it's improbable that the world economy will resume pre-GFC growth levels until at least 2017."

Indeed, the Euro-zone has suffered from the highest number of downgrades at 47 per cent of total global risk downgrades in 2012. Half of the countries in the Euro-zone experienced at least one downgrade during the year, notably Germany, France, Switzerland, Spain and Greece; no country experienced any upgrades. D&B data indicates the Euro-zone economy shrank by 0.8 per cent in 2012, compared to global growth of two percent, and is expected to stagnate over the next year. 

Weak conditions, largely stemming from the unresolved European debt crisis, have already impacted the risk outlook in Asia and the Middle East. Reduced European demand for Chinese exports lowered Asia-Pacific's GDP 2012 forecast by four percentage points to four per cent; while a number of Arab nations were affected by their trade and investment exposure to Europe. Additionally, political instability in the Middle East and North Africa triggered a downgrade in a quarter of the region's countries.

"The hangover of the GFC means that in macroeconomic terms, sustained strong growth in the global economy is still some time off. A period of fiscal consolidation will dampen the growth prospects in many countries in 2013. Add to that the fragile position of global banking, the destruction of wealth from the collapse in house prices and chronically high levels of unemployment, and you get a problematic path to sustained economic expansion.

"The current signs of a tentative upswing in economic activity need to be built upon for there to be confidence that global growth will return to normal. With the Euro-zone still in recession, a coordinated global upswing remains unlikely in the near term," Mr Koukoulas says.

About D&B's Global Risk Indicator

D&B's risk indicator provides a comparative, cross- border assessment of the risk of doing business in a country, seeking to encapsulate the risk that country-wide factors pose to the predictability of export payments and investment returns over a time horizon of two years. D&B's risk indicator comprises a composite index of four overarching country risk categories: political, commercial, macroeconomic and external risk.

The DB risk indicator is divided into seven bands ranging from DB1 (lowest risk) to DB7 (highest risk). 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.

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