Asia Country Risk Ratings
We provide country risk reviews for 14 countries in Asia.
Cambodia
Cambodia’s overall risk level remains medium high. Samdech Hun Sen remains the prime minister of the country and leader of Cambodia’s People Party (CPP) and has been since 1985. Hun Sen won the 2023 election with a 76.85%, winning 120 out of the 125 seats. The leader of the Cambodia National Rescue Party, Kem Sokha, was sentenced to 27 years in jail, for allegedly conspiring with a “foreign power” to tear down the current government. Moreover, the Candlelight Party. CPP’s main opponent was disqualified from participating in the elections for allegedly not having the right paperwork. Political violence remains medium high, political interference remains a high rating and legal & regulatory risk remains very high in this environment. The Cambodian government is also accused of using the legal system to criminalise and restrict human rights activism, independent journalism, trade unions and opposition politicians. For instance, Hun Sen ordered the termination of the last independent news outlet, after reporting a story about his son.Supply chain disruption also remains medium high risk rating. In 2023, Cambodia is projected to see good growth of 5.6% and inflation is under control. The current account deficit is a concern and projected to remain very high at 11% of GDP in 2023.Cambodia’s government debt has also been increasing significantly over the last few years. Sovereign non-payment and exchange transfer thus remain medium, despite the reasonable growth and inflation picture. The risk of doing business remains very high, while the banking sector vulnerability increased from medium to very high. Doing business in Cambodia remains challenging, due to as poor infrastructure, high energy costs, corruption and under-developed human resources. The inability of government to provide fiscal stimulus remains medium high.
China
China’s overall country risk rating remains medium. Though the effects of the residential property crisis will drag on for years, China government has scope for further fiscal stimulus and also has a powerful influence over creditors that are mostly domestic banks and investors.This means that the inability to provide fiscal stimulus remains at medium, despite the prospect that central government will have to officially takeover some local government financing vehicle (LGFV) debt in future years as it did in 2015. The combination of excess debt for LGFVs, plus the overhang of property developer’s debt, also means that banking sector vulnerability remains at medium.Small rural and commercial banks remain most at risk from a pick-up in non-performing loans weakening equity capital and causing solvency problems. However, China’s authorities remain proactive and want to avoid any major or systemic banking sector problems and crisis management will likely be quick.This has so far involved forced takeovers by stronger banks, but China has plenty of experience in bailing out the big 4 banks between 1997-2005.Elsewhere, the risk of doing business remains medium.Though the technology sector crackdown has eased, the focus under president Xi is more towards state socialism replacing the previous era of unrestrained capitalism. The risk of political violence remains medium-high, as the tension with Taiwan remain and could see intermittent tensions – though the risk of invasion is low, as China military is not strong enough. The late 2022 domestic protests over COVID restrictions will also be a concern to the authority of China government.Meanwhile, the U.S. and China want relations to improve but this is to avoid misunderstandings between the two powers rather than a major change of relationships.The cross party view in Washington remains that the U.S. and China are in strategic competition and this requires U.S. measures to control China.
India
The Bharatiya Janata Party (BJP), the incumbent ruling party in India, will successfully complete its full term in office, which is set to conclude in May 2024. This expectation is grounded in the BJP's parliamentary majority in the Lok Sabha (the lower house of India's parliament). However, it's important to note that the BJP-led coalition doesn't possess a straightforward majority in the Rajya Sabha (the upper house), ensuring a system of checks and balances on its legislative powers.
Narendra Modi, who has held the position of Prime Minister since 2014, is anticipated to retain his status as the predominant political figure even after the next general election. His profound influence and high approval ratings serve as mitigating factors against potential risks to political stability. The government's key policies, including the last-mile delivery of public services and subsidy programs, are expected to maintain their popularity. Furthermore, it is likely that the government will continue to enhance its control over institutions like the media, thereby limiting public criticism.
With the declining vote share of the Indian National Congress in both state and national elections, its efficacy as the primary national opposition party has dwindled and is expected to continue doing so. In a move indicative of this trend, a coalition of 28 opposition parties, including Congress, formed the Indian National Developmental Inclusive Alliance (INDIA) in July, with the aim of contesting the 2024 general election. Nevertheless, regional and partisan factors may hinder their ability to devise election-centric policies. The coalition lacks a prominent prime ministerial face that the public can vote for and aligning interests of as many parties ahead of the election will be tight.
In Kashmir, extremist organizations are likely to sustain a heightened threat of terrorist activities, necessitating the presence of robust security measures. Meanwhile, the BJP is expected to intensify its Hindu nationalist agenda in the lead-up to the 2024 general election. While this approach may incite sporadic communal clashes in specific areas, it is not expected to lead to widespread social unrest.
Concerning the impending general election scheduled for April-May 2024, the prognosis suggests that the BJP will secure a historic third term in power. This victory is expected to be underpinned by factors such as the advantages of incumbency, the effective delivery of reforms, and the enduring popularity of Modi. His tenure as Prime Minister is viewed positively, having bolstered India's global reputation, further enhancing his standing among the electorate.
In the electoral arena, the key opponent to Mr. Modi is anticipated to be Rahul Gandhi, the de facto leader of the Indian National Congress. Despite previously experiencing limited popularity among the electorate, Rahul Gandhi's outreach efforts, such as the Unite India March held in early 2023, may contribute to an improvement in his standing, though he is still projected to fall significantly short of Mr. Modi's popularity.
Regarding state elections slated for late 2023, outcomes are expected to be mixed for the BJP, as the Congress party is poised to mount a strong challenge in significant states. A notable victory for Congress occurred in May 2023 when they secured a critical state election in Karnataka, thus modestly bolstering their popularity. Government policy under the BJP though will remain focused on reforms and infrastructure development. Business climate remains extremely healthy, with the government ensuring supply side measures. Overall, the financial and banking sector remain robust with the Reserve Bank of India serving as a strong institution. Globally too, India’s popularity is likely to persist, and India may emerge as a mediator for geopolitical issues. It is noteworthy though that this will be contrary to India’s earlier stance of non-alignment.
Indonesia
President Joko Widodo, commonly known as Jokowi, is expected to maintain stability within the Indonesian government during his second and final term, which concludes in mid-2024. Jokowi has adopted a "big tent" approach, forming a broad parliamentary coalition and cabinet comprising members from various parties, including former military figures and religious leaders. This strategy has helped neutralize prominent critics in the opposition and facilitate the passage of controversial policies. While there have been occasional policy reversals to secure internal support, they have not significantly impacted Jokowi's public approval, ensuring his influence in the next election. We anticipate that Ganjar Pranowo, the governor of Central Java, will succeed Jokowi in 2024, continuing the practice of recruiting politicians from rival parties into the administration to maintain political stability. However, this approach may come at the expense of efficient policymaking.
Jokowi's anti-corruption campaign is expected to see a decreasing number of high-level officials prosecuted during his final year in office. This campaign is unlikely to make significant headway in addressing pervasive corruption in Indonesia. In the next administration, efforts to strengthen the independence of the Anti-Corruption Commission (KPK) are unlikely to be reversed, as none of the current presidential candidates have the political will or strong inter-party influence to do so. Occasional major scandals will impede significant improvements in public trust in law enforcement agencies.
Easing consumer price inflation and steady employment growth are expected to limit the likelihood of major public protests in 2023-24. However, protests could be triggered in 2024, particularly by supporters of the losing candidate in the presidential election, especially if the result is closely contested. Similar unrest followed the 2019 presidential election.
The next parliamentary and presidential elections in Indonesia are scheduled for February 14, 2024. The centre-left Indonesian Democratic Party-Struggle (PDI-P), in our view, will remain the largest single party in the legislature. Easing inflation and resilient economic growth throughout 2023-24 are likely to benefit the incumbent PDI-P and its presidential candidate. The strong patronage networks in Indonesia tend to prevent major swings in party support, although voting preferences for the presidency are less partisan. Therefore, Ganjar Pranowo currently appears a favorite. Prabowo Subianto, the current defense minister and former presidential contender, is expected to be Pranowo's chief rival. Opinion polls suggest a closely contested race between the two candidates, with political dynamics remaining fluid.
Indonesia’s political landscape overall though remain favorable. Political violence is limited and business as usual is expected in 2024, despite presidential elections. Any disruptions to businesses and supply chains will be low. Meanwhile, Indonesia’s favorable fiscal trajectory ensures that there is no risk of sovereign debt default. Furthermore, irrespective of the who secures the presidency in 2024, Indonesian government policy is unlikely to alter significantly in the near term.
Myanmar
Myanmar’s overall risk remains high. More than two years have passed since Myanmar military seized power in February 2021. Following the coup, the subsequent period has been characterized by consistent transgressions of human rights. This has manifested through acts of violence against the populace and assaults on the rights and liberties of the nation’s citizens. In a recent development, the military junta, amidst a surge in violence, opted to indefinitely postpone the elections scheduled for August 2023. The decision has amplified the prevailing sense of uncertainty and escalated the potential for political violence, making it a high risk. Partly explained by such instability, significant institutional risks prevail. Notably, the rule of law is virtually non-existent, corruption is spread across the system, and the quality of governance is low. Consequently, the legal and regulatory risk is very high. Likewise, under the military government, the country has stepped away from a market-friendly environment. Instead, the state has grown its control and imposed more restrictions; hence, nationalization and expropriation have emerged as increasingly valid threats, making political interference a high risk. In a similar vein, the risks associated with the supply chain are very high. Business owners have been affected by suspensions of internet and telecommunication services, these challenges have been aggravated by numerous natural disasters and power outages. Apart from the various factors presented above, a poor infrastructure network, the potential for reputational risk associated with investing in the country, and FX conversion rules all contribute to a high risk in doing business in Myanmar. From an economic perspective, the IMF expects the nation to grow 2.6% in both 2023 and 2024. These growth rates fall below pre-pandemic levels, when the country was benefiting from policies such as the unification of exchange rates and liberalization of products, highlighting the economic impact of the coup d'état. Both the sovereign non-payment and the government’s inability to provide stimulus are medium high risks. The Fund projects public debt to stand at 57.5% of GDP in 2023 and 59.3% in 2024. Consistently, the World Bank expects a sharper decline in the government’s revenue than in its spending. Finally, exchange transfer is considered a medium high risk. The Central Bank, in its efforts to manage price pressures, intervenes in the FX market. Additionally, Myanmar junta threatens to pursue legal action against those to be in foreign currency without authorization. These measures aim to combat the black market and prevent the further depreciation of the kyat.
Nepal
Nepal’s overall risk level remains medium high. Ram Chandra Poudel, the leader of the Nepali Congress party, was elected president in the 2023 elections. Political violence remains medium high, as corruption and gender-based violence remain two big issues in the country. For instance, former minister Ram Kumar Shrestha was convicted guilty in a corruption case, where the Nepal CIAA could not identify most of his assets. Some high priority crimes in Nepal, according to Interpol are drug trafficking, human trafficking, cybercrime and financial crime. The constant political unrest and the economic challenges the country faces have led to about half a million Nepal citizens migrating into other countries. Supply chain distribution remain medium high, with a bad monsoon seen between June and September. Nepal is forecasted to experience a lower economic growth equal to 0.8% in 2023 due to the global slowdown and domestic tightening and rebound to 5.0% in 2024, according to the IMF. CPI is also experienced to see an increase in 2023, to 7.8%, but monetary tightening is projected to slow this to 6.7% in 2024.Sovereign non-payment remains a medium risk rating, while exchange transfer decreases from high to medium high. The current account deficit to GDP in Nepal is projected to decrease to -1.5% in 2023 due to the domestic slowdown, but then rebound to a 4.6% deficit in 2024.The risk of doing business remains medium high, but banking sector vulnerability declined from medium high to medium. The banking system, the decision making process of the government and labour issues consist of challenges a business will have to face in Nepal. Lastly, the inability of the government to provide stimulus has decreased from medium high to medium.
Pakistan
As seen from history, governments in Pakistan rarely complete a full term, and even then the political environment in the country will remain turbulent even after the general election. This election was initially scheduled for November 2023 but is now anticipated to take place in early 2024. The ruling coalition, led by the Pakistan Muslim League (Nawaz) or PML (N), assumed office in April 2022 following a successful no-confidence vote against the previous government. However, the PML (N) has faced a decline in popularity due to persistent high inflation. Mass protests against the government are likely to continue as people express their grievances over the implementation of stringent reforms, as recommended by the IMF. However, there is a high chance that the PML (N) government will return to power after the national election with the military's support. This will stoke public unrest and may take strong measures to quell protests.
The primary opposition force is the Pakistan Tehreek-e-Insaf (PTI), led by former Prime Minister Imran Khan. In August, Khan was arrested and sentenced to a three-year jail term for illegally selling state gifts while in office. Despite Khan's incarceration and eligibility to contest the elections, the military is expected to manipulate the vote to ensure the PTI's defeat. The PTI has witnessed significant attrition among its members since May due to harassment by the military, weakening the party's position. However, Imran Khan retains substantial popularity.
Although political instability is common in Pakistan, the weak position of the opposition is likely to mitigate these risks following the election. The next administration will depend heavily on the military's continued support to govern. Despite the cordial relations between the PML (N)-led government and the armed forces, military interference in decision-making affecting the economy, defense, and domestic security will continue.
Regardless of electoral outcomes, Pakistan is expected to experience intermittent bouts of political instability and mass protests, given its dire economic situation. The fragile balance-of-payments position means that the new government will need external financing. Meeting the conditions attached to such loans, which often involve stringent fiscal policies, will be politically challenging.
Political stability will also face security challenges from Islamist groups such as the Tehrik-i-Taliban Pakistan (Pakistani Taliban) and a separatist movement in Balochistan. Terrorist attacks in Pakistan have increased in 2023 in the lead-up to the election. Elevated attacks on non-nationals and demonstrations on religious issues are expected to recur throughout 2024.
Philippines
Philippines’s overall risk level remains medium high. Bongbong Marcos was elected president of the country in May 9 2022 and will have a term of 6 years (in the Philippines someone who has served more than 4 years as the president is prohibited to participate in the next presidential elections). Political violence remains very high, as political interference and legal & regulatory risk remains medium high. Drugs remain an important issue in the country, with the current president, allegedly following a different approach to his predecessor to combat this problem. Many citizens have protested against Marcos over the past year, due to the increased number of extrajudicial killings or injustices under his administration and demanded for levels of corruption to decrease. Many police officials, as well as politicians have been accused of unlawful activities, with anticorruption institutions struggling to hold them accountable, such as the former chief of police, who was convicted for involvement in kidnapping and murder. Supply chain disruption also remains high. Philippines recovery from COVID continues to provide a tailwind for the economy and GDP growth is projected to be at 5.3% in 2023, according to the IMF. Electronic products continue to account for most of the exports of the country, while the country is also the largest global producer of certain agricultural products, such as coconut and pineapple. Inflation continues to increase at a moderate pace in the country and is forecasted to stay at 5.8% in 2023. This has been largely impacted by the increase in food prices especially rice. The central bank decided to imply a contractionary monetary policy to fight inflation, by constantly increasing the interest rates this year.The current account deficit is expected to be -3.0% of GDP in 2023, according to the IMF and is coming back under control. Sovereign non-payment as well as exchange transfer remain medium low, helped by the broad macro stability and as government debt/GDP is manageable at 57% in 2023 (the inability of the government to provide fiscal stimulus remains medium helped by this debt metric).
Singapore
Singapore’s political landscape will maintain its stability over the next five years, underpinned by the technocratic governance of the People's Action Party (PAP), which currently enjoys a parliamentary supermajority. While the PAP's electoral dominance declined somewhat following the 2020 election, marked by an increased vote share for the main opposition Workers' Party (WP), the political transition within PAP has been delayed due to pandemic related challenges. The PAP is expected to work on enhancing the popularity of the up-coming party leadership by addressing concerns related to social inequality, immigration, job-skill mismatches, and the social safety net. This shift will lend a slightly more populist direction to the party's policies, in our view. Additionally, the PAP is likely to explore gradual liberal social reforms to attract progressive young voters.
Singapore's ethnic diversity represents a minor risk to political stability. The government has taken measures to enhance the political representation of ethnic minorities, such as Indians and Malays. Nevertheless, the ethnic Chinese majority is expected to continue dominating the country's political landscape in the foreseeable future, making it unlikely for a non-Chinese prime minister to emerge. Racial tensions are not anticipated to lead to significant unrest, primarily due to stringent local censorship laws and restrictions on public demonstrations. Meanwhile, risk of doing business in Singapore remains low and the business climate is favorable.
Taiwan
Taiwan has a medium-low level of country risk. Economic risk measures remain solid, given Taiwan natural current account surplus and fiscal latitude. The inability of the government to provide fiscal stimulus remains low, given the small budget deficit and low government debt/GDP ratio. The current account surplus also means that sovereign payment risk is medium-low and exchange transfer risk is low. The risk of political violence remains at medium-low. Though China policy is one of eventual reunification, it remains difficult for China to successfully achieve this by military means currently with one large and two mid-sized aircraft carriers. It could be into the 2030s before China has sufficient naval capabilities.Nevertheless, China wants to sustain pressure on Taiwan as shown by the three-day military exercise in April after the visit of Taiwan president Tsai Ing-wen to the U.S. and the meeting with the U.S. house speaker.However, for the coming year President Xi in China will likely be focused on domestic issues and this will likely mean only intermittent flare ups for Taiwan. The level of political interference will also likely remain at medium-low, though the risk of supply chain disruption (currently low) may worsen if China is effective in limiting the amount of trade Taiwan can conduct.
Thailand
Thailand’s domestic political sphere will remain volatile over the medium term. The government led by Srettha Thavisin of the Pheu Thai Party (PTP) leads with a majority (314 out of 500 seats), however, aligning the interests of party members will be challenging. The party will encounter significant challenges stemming from internal coalition politics throughout its four-year term. The current ruling coalition has brought together previous political rivals. Notably, the military-aligned Phalang Pracharat (PP) and United Thai Nation (UTN) parties were once political rivals of the PTP. Therefore, these parties are likely to prioritize preserving a status quo that aligns with the military and established power structures. Meanwhile, the PTP gained votes by campaigning for greater democracy during the previous general election in May, setting the stage for complex dynamics within the coalition. Additionally, the unlikely alliance between the PTP and the military-linked parties has raised concerns among both reformists and conservatives. Therefore, some push-back is expected from that end as well, which could result in policy paralysis or delayed policy implementation.
On the other hand, the opposition, led by the Move Forward Party (MFP), faces accusations that its campaign to amend the lèse-majesté law amounts to an attempt to undermine the constitutional monarchy. This could potentially lead to the party's dissolution and the disqualification of its leaders from political participation. The case is currently before the Constitutional Court and may take several more months to reach a conclusion. However, should the MFP be dissolved, protests by its supporters are likely to ensue, potentially disrupting business operations. These events are likely to stoke political upheaval time to time in Thailand. However, security forces will employ stringent measures to manage these protests, and they are not expected to result in political instability.
Our view is that under the PTP-led government, policy direction is likely to shift towards a more populist and democratic stance. The government is expected to conduct a referendum on constitutional changes, which are projected to lead to certain democratic reforms without directly challenging the royal-military establishment. These reforms may include amendments to have the Senate (the upper house) elected rather than appointed, with the aim of reducing the military's role in politics. PTP will adopt a more cautious approach in seeking a cooperative relationship with the military, which is expected to maintain some degree of influence within the coalition. The risk of a return to the coups that have characterized Thailand's recent political history remains low, but it cannot be entirely discounted, especially if significant conflicts arise between the PTP and the military.
The localized insurgency in Thailand's three Muslim-majority southern provinces is anticipated to persist, manifesting as small-scale attacks on security forces. Nevertheless, this insurgency poses minimal risk to national sovereignty and represents a limited threat to overall political stability.
Uzbekistan
Uzbekistan’s overall risk score remains at medium-high. The high risk rating comes from a medium-high risk rating in political violence and political interference, in addition to very high risk rating in legal & regulatory risk. Despite promising 7.4% in 2021 to 5.7% in 2022 economic growth, the economy continues to be strained by corruption, structural deficiencies, and high state involvement in the economy and on the business environment. Securing a renewed seven-year term in a snap July 2023 presidential election, Shavkat Mirziyoyev, is criticized of not being able to initiate any serious political liberalisation and recent pressures on the media and bloggers.Despite this the country is aiming to attract more FDI, but the risk of doing business and exchange transfers ratings remain at medium-high. Struggling against insufficient exports lately, the country recorded a current account deficit of $1,897 Million in the second quarter of 2023, and inflation started to surge again after July hitting 9.2% as of September 2023. Despite some negative headwinds, the country has been strengthening relations with Azerbaijan and Turkiye since the Russia-Ukraine war started, and the acceleration pace of the relationships seem promising.The banks’ vulnerability risk remains medium-low as the stress on the banks liabilities and liquidity conditions are stable.
Vietnam
Vietnam has a medium high overall risk. During the first quarter of 2023, the country experienced political upheaval, making political violence a medium risk. In January, former president Nguyen Xuan Phuc tendered his resignation, following allegations of various improprieties attributed to lower-ranked officials, as part of an anti-corruption initiative undertaken by the Communist Party of Vietnam. Subsequently, in a session held two months post-resignation, Vietnam's National Assembly elected Vo Van Thuong as the new president to govern the single-party state. Corruption is not the only challenge faced by companies in the Southeast Asian country. Issues such as irregular enforcement of laws, inconsistent regulatory interpretation, and frequent changes in tax rates are also prevalent, contributing to a medium high risk within the legal and regulatory rating. In addition to institutional risks, supply chain disruptions can affect the business landscape, categorizing them as medium risks. These disruptions can arise from various factors, including natural disasters and power outages resulting from surges in power demand during heatwaves. Despite these challenges, the risk of doing business in Vietnam is medium. The country, often recognized as a global manufacturing hub, benefits from robust economic growth and competitive labor costs. A recent example, highlighting the country’s attractiveness, is the series of reported deals and partnerships between the US and Vietnam in semiconductor and AI sectors. Key players in this endeavor include prominent companies such as Nvidia, Boeing, and Microsoft. On the economic front, Vietnam adopted a countercyclical fiscal policy during 2022, resulting in a primary surplus of 0.3%. For 2023, a shift towards an expansionary policy will lead to a fiscal deficit of 1.3% according to the IMF. This policy shift, coupled with a rebound in exports, would lead the country to grow 4.7% and 5.8% in 2023 and 2024, respectively. Consequently, the inability of the government to provide stimulus is a medium low risk. The Fund also estimates the nation’s public debt to be 34.0% of GDP in 2023, reflecting a decrease of 1.3% compared to 2022. This improvement is attributed in part to a stronger nominal GDP and an enhanced primary fiscal balance. Thus, sovereign non-payment is a medium risk. Both the exchange transfer and the banking vulnerability sector are medium risks. The exchange rate has remained stable throughout 2023, with reserves slowly recovering after a decline in 2022 due to the Central Bank’s intervention to stabilize the FX market. The banking sector has remained strong, although increasing non-performing loans high loan-deposits, are key indicators to follow. In contrast, the property sector experienced a turmoil during 2022, initiated by a government crackdown on questionable property deals. This movement also involved tighter regulation on bond issuance and led to the arrest of property developers. Throughout 2023, the government has reduced interest rates, aiming to increase the attractiveness in the stock and real estate sectors of the country.