Australia, Canada, Germany, Norway, Sweden and Switzerland are the safest trade and foreign investment destinations globally, according to an analysis of 131 countries on Dun & Bradstreet’s Global Risk Indicator (GRI).
The GRI, which provides a comparative, cross-border assessment of the political, commercial, economic and external risk of doing business, places all these countries in the low-risk category with a rating of DB1d.
Although this is the fourth-highest possible rating on the GRI, no country currently has a higher rating. Australia’s makes it the best-ranked country in the Asia-Pacific region, ahead of Hong Kong (DB2a), Singapore (DB2a) and New Zealand (DB2c).
“Australia’s relative economic strength, which is supported by the country’s mining boom, and its comparatively limited exposure to European markets are key reasons for the nation’s ranking,” said Dun & Bradstreet general manager corporate affairs, Danielle Woods.
“However, this result is not an indication that Australia is on a smooth path to continued growth. Its economy is not immune to global market conditions and news from overseas is fuelling uncertainty.”
Australia’s main trading partners are also facing challenges, which have the potential to create detrimental knock-on effects for the local market. For example, high inflation and subdued consumer spending in Singapore and the winding down of post-tsunami subsidies in Japan have increased the trade risk associated with these economies. Likewise, in Britain fiscal austerity and high unemployment are dampening the country’s growth prospects and causing businesses and consumers to keep a tight rein on spending.
The outlook for China, the world’s second-largest economy and Australia’s key trading partner, is of special significance. China is rated DB3d, the 12th-highest risk ranking on the GRI out of a possible 25, and its risk trend is classified as deteriorating. The Chinese economy is being affected by a sluggish property market and softening demand. Last year Australia exported A$71 billion of goods and services to China, indicating that a continued slowing in demand could have a substantial impact on Australia’s GDP growth.
Other key trading partners, South Korea and the US, are rated DB2d and DB2b respectively, with South Korea’s rating classified as deteriorating. High delinquency rates in the US and South Korea are heightening the risk of trade with these countries and companies trading with them must be vigilant with payment terms.
The uncertainty permeating the global economy was echoed in Dun & Bradstreet’s latest Business Expectations Survey, which revealed that Australian business sentiment has plummeted. Manufacturing and retail firms are particularly pessimistic.
“Volatile trade and investment markets globally are creating heightened levels of uncertainty,” Woods said. “In this environment, executives need to focus on the fundamentals of risk and cash flow management. This is particularly the case for business involved in cross-border trade and for firms trading with countries where the level of risk is elevated or deteriorating.”
Top-performing countries and their risk ratings
Hong Kong: DB2a
Source: Dun & Bradstreet