Rising political risks cloud outlook for Asian economies

Rising political risks cloud outlook for Asian economies

Political risks in Asia have increased, according to Coface’s Political Risk Model. Asia currently ranks above the world average in terms of political risk, behind the Middle East and North Africa (MENA), Sub-Saharan Africa and Latin America. Although political risks in Asia have remained broadly stable relative to other parts of the world, some exceptions are notable. These risks could cloud the outlook for some economies going forward. Much of the systemic sources of political risk are related to the continent’s dynamic growth and existing social fragilities. It appears that most of the increases in recent years have been due to rising political fragilities, associated with a proliferation of less democratic styles of governance. In terms of geographic differences1, South Asia features the highest political risk score, followed by Southeast Asia. East Asia featured the fastest pace of political risk increases since 2007, led by increases in China. Our model also attaches a terrorism “penalty”, in countries where there is a high number of conflicts and terrorist attacks. South and Southeast Asia feature high levels of ethnic, religious, and linguistic fractionalisation, resulting in tensions between the different groups. Noteworthy examples of this can be seen in India, Pakistan, Myanmar and the Philippines.

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