Allianz Trade, which operates through the Allianz Commercial license in South Africa, released its first Country Risk Atlas, a new flagship publication focused on country risk, an expertise the world leader in trade credit insurance has built up over decades. The Country Risk Atlas is based on a proprietary risk ratings model that is updated every quarter with the latest economic developments and Allianz Trade’s proprietary data on global insolvencies and the business environment.
“In 2022, our country’s risk ratings were largely influenced by the repercussions of the war in Ukraine. But in 2023, the global economy has shown a certain resilience against one of the most aggressive global monetary policy tightening cycles and in the face of some major global shocks. As such, we have upgraded 21 economies’ risk ratings, equivalent to around 19% of the global GDP. Africa has seen the most upgrades (10), followed by Europe (6), while only China and Uruguay have seen their country risk trajectories improve in Asia and the Americas, respectively. However, Africa remains the continent with the greatest difficulties in terms of liquidity and access to international markets at a time when liquidity risk is increasing almost everywhere. Against this backdrop, the current cycle and enduring fiscal and monetary policy efforts may trigger further upgrades in the Americas, with Africa and the Middle East most likely to fall behind,” adds Ana Boata.
Kenya has emerged as a standout performer in Sub-Saharan Africa, boasting an impressive average GDP growth rate of over 5% in the past decade due to a stable macroeconomic environment, sustained investor confidence, and a thriving services sector, particularly in telecommunications and financial services.
Kenya’s real GDP is expected to continue growing slightly above 5% in 2024 in line with the performance of 2023, which saw a stronger growth end of the year driven by agriculture, tourism (tourist arrivals increased by +31%), and services as a whole. However, some risks need to be addressed, as persistent inflation, standing at 6.6% in December 2023, keeps widening the gaps among the population, while public debt sustainability remains the main risk on the horizon.
Businesses ranked macroeconomic developments as the fourth business risk in Kenya in the latest Allianz Risk Barometer raising concerns about inflation, which is driven by rising global food and energy prices, as well as regional peculiarities such as limited infrastructure, limited purchasing power, and supply dependencies. This cycle is expected to continue into 2024, although inflation is predicted to gradually moderate.
Kenya’s systemic political risk is elevated, with political risks and violence ranking as a new entrant at seventh in the Allianz Risk Barometer. Social inequality, corruption, and security risks, including cross-border spillovers from conflicts in Sudan, Ethiopia, and Somalia, contribute to these tensions.
Watch out for potential downgrades in 2024
Looking ahead, several factors could challenge the country’s risk landscape, leading to more downgrades in 2024.
Among the major risk factors identified by Allianz Trade for 2024 are:
- Liquidity constraints in an environment of high public and private debt and high-interest rates.
- Below-potential growth in most regions and lower pricing power for corporates, which will drive revenue growth downwards.
- Rising business insolvencies (+8% globally in 2024), with Europe and the US leading the acceleration.
- Changes in global supply chains, which could take a toll on countries with twin deficits, mainly on current account balances.
- Increasingly polarized geopolitics in a packed election year, with economies accounting for 60% of global GDP heading to polls.
More information and analysis on all the country risk profiles and ratings can be found in the  Country Risk Atlas!
