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Tunisia, Uganda, Vietnam and Zimbabwe Country Risk Report Q4 2016; New Report Launched

Market Research Reports, Inc. has announced the addition of “Tunisia, Uganda, Vietnam and Zimbabwe Country Risk Report Q4 2016” research report to their website


Lewes, DE -- (SBWIRE) -- 08/29/2016 -- Tunisia's new unity government, which will be formed in August, will benefit from a large parliamentary majority and support from the country's main labour unions. Nonetheless, it will still confront daunting socio-economic and political challenges. Popular pressures and opposition from vested interests will continue to slow the pace of reform, particularly in the run-up to local elections scheduled for the end of the year. All three growth drivers of the Tunisian economy – consumption, investment and exports – will remain mired with problems, including the lingering effects of last year's terrorist attacks on the tourism sector, the unresolved weaknesses of the banking system, and low public investment.

We project only a tepid recovery this year, with real growth of 1.7% compared to an estimated 0.8% for 2015. Budgetary inflexibility, weak economic growth, and growing social unrest will limit the ability of the government to narrow the fiscal deficit. While job creation will gradually pick up over the coming years, progress in reducing Tunisia's large unemployment rate will remain slow. The government will struggle to deal with increases in the working age population as well as growing female participation in the workforce.

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Uganda's growth will slow in 2016, with high borrowing costs weighing on consumer spending and a deepening net exports burden. Economic activity is set to rebound in 2017, as lower lending rates and relatively subdued inflation bolster private consumption, while a spate of major planned infrastructure projects bolster fixed investment. Ugandan government debt will rise over the coming years as the authorities engage in an ambitious infrastructure spending programme. Although we believe that the increase in debt will be sustainable given improvements in revenue generation, the emphasis on nonconcessional and foreign currency-denominated debt will test the government's creditworthiness over the coming years.

Uganda's central bank will continue cutting the policy rate in the coming quarters in an attempt to spur sluggish growth. Coupled with more benign inflation, as greater shilling stability tempers imported price pressures, this underpins our view that the Bank of Uganda will cut the policy rate to 11.0% by end-2017. Uganda's current account deficit will widen to 10.1% of GDP in 2016, and 10.3% in 2017, due to a ramp-up in capital imports for government infrastructure projects. Meanwhile, weaker remittance and aid flows will weigh on the income account.

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The Permanent Court of Arbitration's ruling on the Philippine arbitration case on July 12 will have wider implications for other claimant countries in the South China Sea, particularly Vietnam, as the conclusions that were drawn will help to set legal precedent for similar maritime disputes in the region. We believe that Vietnam will likely stand to benefit vis-à-vis China by using the ruling to clinch concessions from Beijing as a counterbalance to nationalist domestic sentiment. We maintain our expectations for the State Bank of Vietnam to lower its benchmark refinancing rate by a relatively shallow 50 basis points to 6.00% by the end-2016 as a disappointing GDP growth figure in Q116, subdued inflationary pressures and a relatively stable currency will provide impetus for the central bank to act. However, concerns over reigniting the housing bubble will likely temper the bank's easing bent. We maintain our expectations for Vietnam's fiscal deficit to remain largely unchanged at 6.1% of GDP in 2016, due to high recurrent expenditure and debt repayment costs, as well as low oil-related revenue. Beyond 2016, we forecast a gradual improvement in the government's fiscal position owing to strong economic growth and reform efforts by the government. However, we note that contingent liabilities and slow reform momentum from the SOE and banking sectors could pose downside risks to fiscal consolidation efforts and public debt sustainability.

Major Forecast Changes
Due to a weaker-than-expected GDP growth performance in H116, we have downgraded Vietnam's growth forecast to 5.9%, from 6.3% previously. However, we expect growth to accelerate over the coming quarters, spurred by a recovery in agricultural output as well as robust growth in the industrial and services sectors. We expect the Vietnamese dong to maintain its long-term depreciatory trajectory against the US dollar as inflation is likely to average higher than the US, and the income account deficit is likely to remain wide, acting as a persistent drag on the currency. However, we believe that dong weakness over the shorter term is likely to be tempered by delays in Fed rate hikes and regional foreign exchange strength. Accordingly, we have upgraded our forecast for the dong to reach VND22,600 by end-2016 and VND23,200 by end-2017, versus our previous forecast of VND23,300/USD and VND24,000/USD, respectively.

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Zimbabwe will record positive, albeit very mild, economic growth over the next two years as an ongoing dollar shortage compounds the impact of adverse weather conditions. The uncertainty surrounding the possibility of regime change will mean prospects for a strong recovery remain slim before President Mugabe's succession. An ongoing currency shortage and slow economic growth will continue to weigh on public finances over the next two years. Some relief will come from the government's efforts to re-establish relations with the IMF, allowing access to much-needed credit from international lenders, but this will nonetheless lead to some widening of the budget deficit. In the event of de-dollarisation in Zimbabwe, high levels of inflation would make a return to the economy, as weak balance of payments dynamics would see the new currency sell off at a rapid rate. The Reserve Bank of Zimbabwe would accompany the process with a series of interest rate hikes in a bid to temper price growth, but with little effect. While Zimbabwe's current account deficit will narrow significantly in 2016, this is a result of the country's chronic shortage of foreign currency and lack of inward investment, rather than any improvement in exports. Dynamics will improve slightly in 2017 as the economy sees some recovery, but the external position will remain vulnerable to volatility in investor sentiment. Increasingly vocal opposition to President Robert Mugabe will add to pre-existing pressures surrounding the prospect of political succession in Zimbabwe. The likelihood of a chaotic transition of power will increase the risk of derailing the country's fragile economic recovery.

Major Forecast Changes
We have revised our expectations for the current account deficit and now anticipate a smaller shortfall than previously, as weak demand and the ongoing shortage of US dollars in the economy will limit imports.

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