INTERNATIONAL BANKING AND

FINANCE PRESENTATION ON

COUNTRY RISK ANALYSIS OF SPAIN and AUSTRIA

Team Members

NAME Roll no.

Khyati Bharucha 63 Shraddha Yadav 75 Nilay Joglekar 80 Sheetal Kasture 86 Ankit Pandey 97 Pratima Pasi 102 Fatima Shaikh 108 Maruti Yedge 119

What is Country RISK ?

Country risk refers to the risk of investing

or lending in a country, arising from possible changes in the business environment that may adversely affect operating profits or the value of assets in the country.

For example, financial factors such as currency controls, devaluation or regulatory changes, or stability factors such as mass riots, civil war and other potential events contribute to companies' operational risks. 

Types Of Country Risk

SPAIN : An overview•The 13th largest Economy in the world with the capital city Madrid.

•The Capitalist Mixed Economy is the fifth largest in the European Union as well as the Eurozone’s 4th largest.

•In WHERE-TO-BE-NEXT-BORN-INDEX , Spain stands 28.

•Persistent High rates of Unemployment(excessively cyclical) ,currently being 23.3%.

•Tourism constitutes 5% of the GDP (approximately 40 billion Euros).

•Awaiting next General Elections later this year.

Spain : Strengths

• Clear reform agenda • Modern infrastructure network • Large companies with international presence. • Good performance in some industrial and innovative sectors. • Tourism potential. • Efficient system for R&D, relatively high-skilled labor.• Banking Sector and labor Market Reforms of 2012.

High Degree of Spain Tourism

SPAIN : WEAKNESSES

•High fiscal deficit and public debt.•High private sector debt.•Weak Banking System.•Downside pressure on prices.•Very elevated Unemployment.•Decreasing Long term per capita Income.•Adjustment ongoing in the housing market following the 2006-07 real estate bubble.

Unemployment Graph Of Spain

TRADE STRUCTURE OF SPAIN

By Destination and Origin (% of total figures).

SPAIN : ANALYSING THE ECONOMIC RISK

SPAIN : THE SOCIO-POLITICAL Risk ANAYSIS

•The Transition from Dictatorship to Democracy in 1975,following The Spanish Constitution in 1978.

•Has structural impediments such as limited labor flexibility.

•Corruption allegations have become a major challenge for the ruling party in the past year.

•Rising political Uncertainty.

•Put in place fiscal austerity measures to counter the large fiscal deficit.

• Anti-austerity strikes have continued in response to national and regional cost cutting plans.

SPAIN : THE financial Risk ANAYSIS

• Spain is largely compliant with international banking and accounting reporting standards.• The banking sector reform program that began in 2012 to restructure andrecapitalize Spanish banks in response to the global financial crisis has beenvery successful in stabilizing the financial sector and boosting economic growth.The sector, however still faces liquidity constraints due to weak asset quality.

SPAIN : THE eco-commercial Risk ANAYSIS

• Spain’s GDP growth severely declined during the global economic slowdown, however, sovereign funding has been restored through low interest rates andincreased investor confidence.• High levels of private and public debt,struggling local industries and a sluggishlabor market.•Spain remains susceptible to further disruption in the Eurozone - potentially driving up bond yields and borrowing costs.

SPAIN : THE FINAL VERDICT• Spain benefits from a low level of economic, political and financial system risk.

•The economy has experienced contraction in recent years due to the unwinding of bad loans from the extended housing boom, further fiscal constraints, high unemployment and a sluggish global economy. A return to growth of 0.9% is expected in 2014.

•The current account balance surplus is expected to consolidate in 2015-2016.

AUSTRIA : An

overview• 12th richest country in the world in terms of GDP per capita.

• Well-developed social market economy and a high standard of living.

• Austria became a member state of the EU, it has gained closer ties to other EU economies, reducing its economic dependence on Germany.

• Austria is a CRT-1 country with low levels of economic risk andvery low levels of political and financial system risk.

Austria- A part of Eurozone

AUSTRIA : Strengths

• Low systemic political risk .• Strong business environment.• Low inflation but no deflation risk anticipated. • Consistent current account surpluses since 2002.• Good regional and international relations, EU membership . • Eurozone membership provides low transfer and convertibility risk.

Inflation rate of Austria

AUSTRIA : WEAKNESSES

• Muted domestic demand since 2012.• High trade dependency on Germany.• Weak economic confidence since 2013. • Banking sector vulnerabilities due to large exposure Central and Eastern Europe, including Russia.

TRADE STRUCTURE OF

AUSTRIA

By Destination and Origin (% of total figures).

AUSTRIA : ANALYSING THE ECONOMIC RISK

AUSTRIA : THE SOCIO-POLITICAL Risk ANAYSIS

•Member of the EU and adopted euro as its currency in 1999. •Strong and transparent legal system with very little corruption.•Austria lifted its labor market restrictions on citizens from Central and Eastern EuropeanEU member states on May 1, 2011.•In 2012 the government tightened fiscal policy in an attempt to lower the budget deficit to zero in 2016 through combination of spending cuts (70% of the proposed savings) and tax hikes.•On track to reach a balanced budget; the deficit is projected to be 1.5% of GDP in 2014, down from 2.6% in 2013.

AUSTRIA : THE financial Risk ANAYSIS

• The insurance market in Austria is overseen by the Financial Market Authority.• A substantial part of Austria’s insurance industry is in German and Italian ownership.• The Austrian government provided the banking sector with a deposit guarantee and capital injections .• Monetary policy throughout the Eurozone will remain accommodativein the near to medium term as concerns over deflation and the weak economic recovery of the Eurozone remain a concern.

AUSTRIA : THE eco-commercial Risk ANAYSIS

•The service-oriented economy is supplemented by a solid industrial and agricultural sector.• With muted global demand from Austria’s main trading partners of Germany and Eastern Europe, the country experienced a further slowdown for their goods and services in 2012 and 2013.•Supported by very low interest rates, solid fundamentals and low inflation, Austria is expected to continue sustainable growth in 2014.

AUSTRIA : THE FINAL VERDICT•Economic Risk is Low ,while , the financial and political risk is very low.

•Loans to NFCs have declined since December 2014, suggesting that investment is likely to contract in 2015.

• Real GDP is forecast to expand by +0.7% in 2015 as a whole.

Following a period of economic challenges and growth below 1%, a modest recovery of 1.6% is expected through 2016.