With dynamic political changes in the world, nations are facing ever increasing political risks. Their economies and global output are being impacted due to their internal conflicts, political violence and government interference. Every nation seems to be affected in its own way. Due to the volatility in Ukraine, BRICS countries are facing increasing political risk. According to recent analysis, an increased risk rating has been found for all five emerging BRICS countries. These countries are responsible for a large share of global output but they are now experiencing a broad-based increase in political risk.
The political risk of each of the emerging BRICS countries is defined briefly:
The rating for Brazil has been downgraded. Due to the increasing weakness of the economy, the role of the government has increased and political risk have been increasing from moderate levels. This is a cause of concern for the country.
The recent developments in Ukraine and the annexation of Crimea has largely downgraded the ratings of Russia. Russia has a weak operation environment for business. Their focus on geopolitical issues is putting a strain on the already weak environment. The risks of new capital controls is further exacerbating the situation. As there is strong government interference in the economy, there lack of policy making has brought the growth to stagnation. This in turn is increasing the risk of political violence.
The rating for India is downgraded due to high level of political inference in the economy. The ongoing corruption on governmental level intervenes with the legal and regulatory risks. Other factors causing high political risk in the country include territorial conflicts, internal disputes including ethnic disputes, regional conflicts and terrorism.
China’s rating is downgraded because of the increased political violence. The deadlock between economic policy making and the government is responsible for the sowing down of the economy.
The rating of South Africa is downgraded because it experiences recurrent strikes. Although it has strong political institutions but theses strikes are becoming a means of wage setting. It weakens the environment for business and it raises the financing costs.