The Americas has been identified as the region that offers the second highest risk for investors due to soaring inflation, according to GlobalData, a leading data and analytics company.
The research was conducted as part of GlobalData’s ‘Global Risk Report Quarterly Update – Q3 2022’ report, which outlines its Country Risk Index (GCRI). This model analyses a number of economic factors and calculates the amount of risk an investor accepts when doing business in each country and region worldwide. This is then represented by an overall ‘score’. The Americas region’s risk score was 47.7 out of 100 in Q3 2022, compared to a score of 33.4 in Europe and 41 in the APAC region. The only region with higher risk was the Middle East and Africa (MEA) region, with a score of 54.
Puja Tiwari, Economic Research Analyst at GlobalData, comments: “All major economies in the Americas region are experiencing high rates of interest due to soaring inflation. In November 2022, the Federal Reserve increased the interest rate by 75 basis points to 3.75-4%, the highest level since 2008. All other economies, including Canada, Argentina, Brazil, Chile and Colombia, have hiked their policy rates between January and November 2022.
“Further, Venezuela, Peru, and Haiti are suffering from high polarization. Many of these countries are in need of humanitarian assistance, which is a big area of concern.”
On the plus side, GlobalData highlights that US and Venezuela are on the list of the top 15 lowest-risk countries worldwide. Meanwhile, no Americas countries feature on the top 15 highest-risk countries.
Tiwari continues: “The unfavourable relationship between the US and Russia, and the US and China, is making matters complicated in the Americas region. Further, war-induced rising energy prices and supply constraints have led to rising price pressures. Economic growth is slowing down in most economies in the region”
Looking more broadly, GlobalData’s report highlights that global risk increased from 44 out of 100 in Q2 2022 to 44.9 in Q3 2022.
Tiwari adds: “The major causes of risk worldwide include the price rises as a result of the Russia-Ukraine war and sanctions on Russia, the energy crisis in Europe, a slowdown in China’s growth, aggressive interest rate hikes by central banks, depreciating currencies, and a crashing stock market.
“While governments of major economies are undertaking various fiscal measures to deal with the rising prices, this will weigh on already strained government finances. Moreover, with several economies tightening monetary policy, the increasing borrowing costs will remain another challenge moving into Q4 and beyond.”
