JAMAICA HAS been ranked amongst the most risky of the emerging markets in which to invest, according to the latest issue of the Economic Intelligence Unit's (EIU) annual country risk forecast report.
Although Jamaica earned a two point improvement on its 1999/2000 score of 66, the report, entitled "Country Risk: global prospects to 2001", ranked the island 78th among 93 emerging countries assessed.
Jamaica was identified among 12 countries listed for their vulnerability in fiscal policy, the others being Brazil, Costa Rica, Croatia, Hungary, India, Lebanon, Oman, Panama, Papua New Guinea, Trinidad & Tobago, and Turkey.
Singapore, Taiwan and South Korea were listed among the least risky emerging markets, while Myanmar, Uzbekistan and Zimbabwe carry the most risk.
Among the countries which came out ahead of Jamaica were Cuba, Nicaragua, Brazil, Peru, Colombia, Panama, Honduras, Argentina, Venezuela, Mexico, Bolivia, the Dominican Republic, Costa Rica, El Salvador and Trinidad & Tobago.
The report said: "The overall risk of the 93 emerging countries assessed in the report has improved over last year ... indeed only 16 countries suffered increased risk."
It said "the improving risk trend reflects the increase in oil prices which has drastically cut domestic and external deficits of oil producers, more robust growth in the US, EU and Japan, and rebounding, although still volatile, inflows of capital to these markets."
As a result, said the report, the key vulnerability of emerging markets has shifted from concerns over current-account stability a year ago to political stability and political efficacy now.
The EIU report was based on examination of 13 key areas of risk of the emerging markets: political stability, political efficacy, fiscal policy, growth/savings, current-account stability, debt structure, financial structure, global climate, liquidity, as well as regulatory, trade, exchange-rate and monetary policies.
"The increasing potential for serious political instability," the report said, "is more a reflection of regional rather than global trends." Political instability was identified as the key underlying vulnerability for 21 countries, compared with 16 a year ago.
While it is not a major concern in Eastern Europe, and of moderate concern in Latin Amer-ica, in Asia it was the most frequently identified underlying vulnerability.
In seven Asian countries, including China and Indonesia, respectively the first and third most populous emerging markets, political instability was identified as the fundamental risk. "Although the region's economies have rebounded since the economic and financial crisis of 1997-1998, the political issues surrounding the crisis remain largely unresolved," the report said.
Political efficacy, which assess issues surrounding reform and transparency, was identified as the key underlying vulnerability, also for 21 countries, compared with only nine a year ago.
While those countries were spread more evenly among the six regions, Latin America and Africa were most at risk in this category.
