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Asia Political Risk Index: Political Turmoil Limits Asia's Growth Finds New Report

New report discusses how social tensions reveal institutional weakness in key markets in Asia.


Lewes, DE -- (SBWIRE) -- 03/11/2014 -- Underlying political and social tensions in some of Asia’s key markets are on the rise with high levels of youth unemployment, government corruption, rising sensitivity to food and fuel prices and low levels of domestic investment impacting economic growth.

These are the key findings fromnew research released by Political Monitor, a political risk research and advisory firm. The researchprovides a political risk assessment for 15 key countries in the Asia region and ranks them on the Political Monitor AsiaPolitical Risk Index.

The research reveals those economies that offer the greatest opportunities for Australian business are also those that represent the greatest risk. China and the Philippines in particular offer large and growing markets but have underlying social currents that threaten stability and make the investment outlook uncertain. Perhaps surprisingly, Thailand rates as a relatively low risk despite recent political turmoil reflecting a number of key underlying strengths such as a low youth unemployment rate.

The index is compiled from economic, political and social variables that are often excluded in most macro-economic analysis but are clear precursors to emerging political tensions and dislocation.The index measures relative risk with a focus on the next 12 – 24 months, providing a country-by-country comparison of political and social turmoil that is likely to disrupt normal business conditions and potentially lead to severe national dislocation and even regime change.

The impact of these political and social tensions is revealed in the gap between potential GDP (which measures a country’s potential output) and real GDP. In a number of critical countries, such as China and India, a clear gap is emerging threatening the basis of social stability while in other countries fast but unsustainable growth is putting pressure on physical and social infrastructure and drawing attention to growing inequality.

Analyst believes that while the macro environment can look positive for many countries underlying political and social issues pose real risks over the coming decade and could dramatically alter each and any county’s economic trajectory.

“For many countries the macro environment looks very positive. Growing economies with emerging middle classes present exciting new opportunities for investors”, said analyst.

“However, the best opportunities each have significant risks. For some high levels of youth unemployment, entrenched government corruption, growing inequality, exposure to volatile food prices or rising levels of external debt threaten political and social stability over coming years.”

“Of real concern is that a number of countries critical to Australia’s economic outlook are exposed to a number of these risks.”

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