Lewes, DE -- (SBWire) -- 08/31/2015 --Real GDP growth is highly likely to slow over the coming years owing to a number of factors: slowing growth in the working age population; an increasing share of government spending relative to GDP; and a reversal in the country's terms of trade; and the growing risk of deflation.
These impediments will result in real GDP growth averaging 2.3% over the next decade, down from 2.9% over the past decade.
The Liberal-National coalition government's popularity continues to slide, and Prime Minister Tony Abbott's leadership continues to look precarious. The prospects of a turnaround look slim at present amid weakening economic growth, and the Labour Party is in prime position ahead of next year's general election.
We remain bearish on the Australian dollar despite the large fall we have already seen in the currency. While valuations are no longer a headwind to the currency, the trend remains very bearish. Weak economic growth owing to an ongoing decline in terms of trade amide levated indebtedness does not bode well for the AUD.
Australia's fiscal accounts are unlikely to return to a surplus any time soon, given downside risks to revenue collection and a lack of expenditure cutbacks. Total revenue collection will remain poor as the economy continues to weaken, which will weigh heavily on tax receipts. Meanwhile, objections to spending cuts from the public, opposition and crossbench senators as well as other state governments indicate that the Australian government will struggle to keep its expenses and borrowing on a sustainable trajectory. While there is currently no danger of a fiscal crisis, our core view is that this growing burden of the government will undermine the productivity of the private sector and take its toll on economic growth over the medium term.
Australia's current account picture is gradually improving in spite of deteriorating terms of trade, thanks to higher export volumes and lower income outflows. Going forward, we maintain that a current account surplus is likely as the Australian dollar depreciates, but this will increasingly be driven by lower imports, to the detriment of the domestic economy.
Despite a sluggish economy amid the terms of trade reversal, we expect the Reserve Bank of Australia to keep its cash rate on hold at a historical low of 2.00% over 2015 and 2016. The central bank's easing bias is waning as various economic releases surprise positively. Therefore, the authorities will likely evaluate the impact of an accommodative monetary policy, particularly with respect to the potential financial instability risks resulting from the booming real estate market.
Major Forecast Changes
We lowered our end-2015 and end-2016 AUD forecast to USD0.7000/ AUD and USD0.6600/AUD, respectively (from USD0.7200/AUD and USD0.6800/AUD previously) given that fundamentals remain poor and that the Aussie remains on a downtrend.
For more information visit: http://www.marketresearchreports.com/business-monitor-international/australia-country-risk-report-q4-2015
Albania will remain attached to a relatively low growth trajectory over the coming years, amid weak private consumption and government fiscal consolidation efforts.
More efforts need to be made to implement structural reforms aimed at tackling corruption and improving labour market flexibility if Albania is to have any hope of converging with historically more developed regional peers.
Albania's large and entrenched trade balance shortfall will ensure that the country's current account remains firmly in deficit over the coming years.
Uncertainty in neighbouring Greece throughout the country's 2015 debt crisis will increase the scope for regional instability. It will also weigh on demand for Albanian exports to Greece and remittances inflows from Albanian workers based in Greece.
For more information visit: http://www.marketresearchreports.com/business-monitor-international/albania-country-risk-report-q4-2015
The slump in oil prices presents a challenge to Bahrain's growth outlook, with the government under pressure to cut spending over the coming years. That said, we expect development funds from the Gulf Cooperation Council (GCC) to support construction activity, while strong consumption in Saudi Arabia will feed into Bahrain's tourism sector. We forecast real economic growth to slow to 2.9% in 2015 and 2016, compared to an average of 4.0% between 2010 and 2014.
Bahrain's reputation as a stable and welcoming location to do business in the Gulf has suffered as a result of the volatile political climate. At the moment, it remains to be seen if Manama will be able to compete with Doha and Dubai in attracting investment into the all-important hospitality and financial services industry.
The economy's medium-term outlook remains contingent upon a lasting solution being found to the current political crisis. Unfortunately, we maintain our relatively guarded outlook on the prospects that the government and opposition can come to some form of agreement in the near term.
Bahrain's weak medium-term fiscal prospects will force the government to make difficult choices. We believe that Manama will have little option but to introduce new taxes over the coming years, while the issue of spending consolidation will loom large on the agenda.
Support from Saudi Arabia could delay these pressures, but would entail a significant loss of sovereignty.
Consumer price inflation in Bahrain will remain stable and primarily driven by the country's tight housing market over the course of 2015.
We expect interest rates to stay unchanged until the second half of 2015, when the Central Bank will be forced to impose a 50 basis point hike to keep up with the US Federal Reserve.
For more information visit: http://www.marketresearchreports.com/business-monitor-international/bahrain-country-risk-report-q4-2015
Bulgaria's debt and deficit will continue to increase over the coming years, having grown considerably in 2014 due to a bank bailout and weak revenue growth. Nevertheless, the country will remain on a sustainable fiscal trajectory due in part to its exceptionally low public load.
Domestic demand will pick up considerably in 2015 as consumer purchasing power is bolstered by low global oil prices.
We are forecasting Bulgaria's current account to continue posting small surpluses over the coming years as relatively strong demand from the eurozone, particularly Germany, increases Bulgarian export growth.
Major Forecast Changes
W e have revised up our 2015 headline real GDP growth forecasts from 1.2% to 1.5% to reflect the increasing external demand from key trade partners. Both a cyclical upswing in the eurozone and resilient demand from non-EU countries will see net exports drive growth over the coming quarters.
W e have notched up our year-end 2015 consumer price inflation forecasts from 0.3% to 0.6% to reflect growing demand side inflationary pressures, supported by the consumer story. With base effects from low oil prices set to wear off in Q415, we think the return to inflation will be pronounced.
For more information visit: http://www.marketresearchreports.com/business-monitor-international/bulgaria-country-risk-report-q4-2015
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Australia, Albania, Bahrain and Bulgaria Country Risk Report Q4 2015 New Report Now Available from MarketResearchReports.com
Market Research Reports, Inc. has announced the addition of “Australia, Albania, Bahrain and Bulgaria Country Risk Report Q4 2015" research report to their website www.MarketResearchReports.com