2013-09-17 08:55:10 - New Country Reports research report from Business Monitor International is now available from Fast Market Research
BMI Ratings - Brief Methodology
The composite rating is an unweighted geometric mean of the short-term political and short-term economy ratings, allowing a ranking of all countries in BMI's emerging markets universe.
The political ratings are an indicator of political stability, seen as a pre-requisite for a stable economy and business environment. The long-term political rating considers more structural elements such as: Is there a functioning democracy? Are there free and fair elections? Is there separation between party and state? Have recent governments pursued similar, enlightened policies amid a stable political environment? The short-term political rating considers more transient influences such as: Have there been recent large-scale demonstrations or strikes? To what extent have these threatened the political status quo?
Is unemployment currently a potential source of political instability? What is the current position in the political cycle - to what extent is this contributing to political risk? Is the government having trouble passing legislation?
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The economy ratings assess the degree to which the country approximates the ideal of non-inflationary growth with contained fiscal and external deficits and manageable debt ratios. The ratings use as raw material historical data and forecasts fed in from BMI's country databases: as historical data are revised and forecasts change, so the ratings change. Factors in the long-term rating include GDP growth, unemployment, inflation, real interest rates, exchange rates, the fiscal balance, the current account balance and external debt. A number of other structural factors are also thrown into the equation, including dependence on the primary sector, reliance on commodity imports, reliance on a single export sector and central bank independence. The factors included in the short-term rating are a subset of those in the long-term rating.
Business Environment Rating
The business environment rating is a broad indicator of the investment climate, for both domestic and foreign players. While areas such as competitiveness, finance, openness and environment comprise the bulk of the rating, there is also an important feed from the political and economy ratings. The factors considered include: the state of the national infrastructure, the education system, cronyism/ corruption, red tape, the legal framework, property rights, market access and the corporate tax regime.
Partial Table of Contents:
Major Forecast Changes
Key Risks To Outlook
Chapter 1.1: Political Outlook - Armenia
Government Under Pressure On All Fronts
- Armenia's government will have to confront a number of obstacles in the coming months, with an 18% hike in consumer gas prices likely to increase political tensions as well as rile the impoverished Armenian public. In addition, deeper integration with the EU may progress at a slower pace, with Russo-Armenian military ties remaining strong in light of increasingly belligerent Azeri rhetoric.
Long-Term Political Outlook
Mitigation Of Regional Tensions Key To Stability
- Armenia will continue to have difficult relations with neighbours Turkey and Azerbaijan through the medium term, as a result of sensitive historical grievances and strong domestic pressure groups on both sides. Nagorno-Karabakh will remain a particular potential flashpoint given the high profile of the region and ongoing talks, which are set to test commitment to peace in both Yerevan and Baku. The heavy troop presence on both sides of the border will remain a key risk. That said, the willingness of regional heavyweights Russia and Turkey to support the ongoing peace process means that a 'hot war' is not inevitable.
Chapter 1.2: Economic Outlook - Armenia
Rising GDP Poses Inflationary Risk
- Armenia's economy is set to post moderate real GDP growth of 4.5% in 2013, revised upward from 4.0% previously, on the back of resilient private consumption figures and an increase in government expenditure as a result of increasing revenues from VAT and import duties. However, given the 18% hike in gas prices implemented by Gazprom, we expect consumption to slow in 2014, impacting real GDP growth, and we are forecasting a 3.9% expansion.
TABLE: ARMENIA - ECONOMIC ACTIVITY
Chapter 1.3: 10-Year Forecast - Armenia
The Armenian Economy To 2022
Convergence To Continue
- Our relatively positive medium-term view on the Armenian economy continues through our long-term forecast to 2022. We believe the government's desire to push ahead with economic and business reforms will leave the ground well prepared for economic growth to average 5.0% between 2017 and 2022. Nevertheless, we caution that political tensions with neighbouring Azerbaijan and Turkey are expected to remain a key risk to the country's economic outlook over the next 10 years. 23
TABLE: ARMENIA LONG-TERM MACROECONOMIC FORECASTS
Chapter 2.1: Political Outlook - Azerbaijan
Opposition Unites In Effort To Challenge President
- Azerbaijan's various opposition parties have united in support of National Council of Democratic Forces chairman Rustam Ibragimbekov, nominating him as their candidate for the October presidential election. However, we still expect incumbent President Ilham Aliyev to claim an overwhelming victory, in an electoral system which is often criticised for its lack of competition and opaque nature.
TABLE: AZERBAIJAN: POLITICAL OVERVIEW
Long-Term Political Outlook
Everything Hinges On Nagorno-Karabakh
Full Table of Contents is available at:
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