Top developing economies susceptible to global risks

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According to a study published on Monday, leading economies like Brazil, Russia, India and China also face high levels of vulnerability to global shocks despite their strong economic growth over the past four years.

Maplecroft, a global risk consultancy firm, highlighted in its Global Risk Atlas that BRIC economies are well exposed to potential security and economic shocks compared to levels in previous years.

Investors and business, seeking new high-growth and high-risk markets, need to be aware of their limited resilience to global risks, Maplecroft said in its Global Risks Atlas 2012.

“With hopes for a global economic recovery resting with the BRICs, investors and business seeking new high-growth, high-risk markets need to be aware of their limited resilience to global risks,” Alyson Warhurst, Maplecroft CEO, wrote in the report.

He added: “A country’s resilience to external and internal shocks is built up over time, so as the BRICs political risk environment improves we might see resilience strengthen, but our results reveal this is yet to happen.”

The survey revealed that bad governance and lax reform policies are hurting some of the top developing economies, leaving them vulnerable to potential risks such as terrorism or climate change and hurting economic growth.

According to the report, India and Russia are among 41 countries classified as ‘high risk’, due to poor governance, systemic corruption and terrorism.

“Terrorism and political violence (in Russia) … threaten human security and business continuity, while diverting valuable government resources and money,” the report said about the former superpower.

The Global Risk Atlas classified China as ‘medium risk’ due to the unlikelihood of social or political upheaval on a national scale,  but noted the nation faces serious security issues.

Brazil, also ranked ‘medium risk’, is considered the least susceptible to global risks of the four BRICs, thanks to the stability of its political structure and record of strong governance.

The Global Risks Atlas highlights potentially destabilising factors in the world’s key growth economies. Maplecroft classifies global risks as those that cut across borders, affecting multiple areas of the world with major impacts on countries and business alike. The Atlas covers 178 countries and includes 33 indices within five global risk areas.

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