This Week's Trending Topics

As Russia’s economic isolation from the West increases, previously friendly neighbouring markets are finding the need to reconsider their relationships and allies. Notably, the Russia-Ukraine war has created new opportunities for markets along Russia’s periphery, due to shifting trade routes and outmigration from Russia. Looking ahead, we expect some markets in Western Eurasia to find more success than others in distancing themselves from #Russia and moving closer to the West, whilst others will look to operate a multi-vector foreign policy. We previously expected that growth in Mainland China would slow from 4.8% to 4.3% over the coming decade, but we now think that trend growth will slip to 3.0%. Demographic and productivity trends have proved weaker than we thought, and now the economy must grapple with a multi-year correction in the housing market. If we are right, Mainland China will not – as had long seemed inevitable – overtake the US as the world’s largest economy in the coming decade. Inflation in Argentina is forecast to average 300.0% in 2024, as the removal of price caps and the end of subsidy schemes acts to accentuate inflationary pressures. Fiscal consolidation measures that remove subsidies will see price pressures peak around the middle of year, while those terminating public employment, pensions, and social assistance will cause domestic demand to fall precipitously, leading inflation to weaken to 184.8% by end-2024. Risks are fairly balanced and are highly dependent on exchange rate volatility and continued progress in cutting deficit spending. The realistic prospect of the return of Donald Trump to the US presidency is raising concerns in NATO member states that he could withdraw the US from the alliance. A US withdrawal remains unlikely, although any weakening of US commitments to NATO would be a change to global security, weakening the 'West' as a geopolitical concept and potentially pushing the EU to reconfigure Europe's security, with highly unpredictable consequences. Ultimately, demographic and other challenges would prevent Europe from remilitarising to the extent needed to deter Russia, but Russia faces its own demographic challenges, potentially limiting the threat it poses. NATO NATO Support and Procurement Agency (NSPA) NATO International Summer School (NISS)

Chart of the Week

The consumer electronics market in Turkiye is forecast to contract in US dollar terms in 2024 when economic challenges intensify - including recession, inflation and lira depreciation - all of which will squeeze consumer purchasing power and weaken sentiment. There will continue to be downside economic risks over the medium-term because of #Turkiye's exposure to global headwinds, as well as regional security risks, but the core scenario is for consumer electronics spending growth to return in 2025 and continue through to 2028 as purchasing power growth resumes, which will unlock opportunities for electronics vendors as device affordability improves and sentiment strengthens. Türkiye Finans Kat?l?m Bankas? GPC Türkiye

Demand Trend To Improve From 2025 Consumer Electronics Spending Forecast (Turkiye 2020-2028)

e/f = estimate/forecast. Source: BMI

Themes To Watch

The removal of EV subsidies at the end of 2023, instead of 2025 as initially scheduled, due to the German government's constrained ability to spend on supporting the green transition, will weigh heavily on passenger EV sales in 2024. and support a shake-up in the passenger vehicle segment. A reduction in government support for passenger #EV sales over the short term will see consumers turn to ICE and mild-hybrid vehicles. We forecast passenger EV sales in Germany will remain relatively flat in 2024, growing by 4.0% y-o-y to reach an annual sales volume of just shy of 730,000 units – a passenger EV penetration rate of 26.0% in 2024, up from 24.6% in 2023. Over the next 10 years coal-fired power is expected to be the primary source of electricity in South Africa, providing an average of over 80% of the country's power. However, non-#hydropower #renewables are predicted to grow at the fastest rate, increasing by over 14.6GW during the same period. Additional funding will likely result in more investment in renewable energy. However, ongoing power outages, policy disagreements, internal party conflicts and political risks continue to pose significant challenges to the market. The Iranian economy is significantly impacted by stringent US sanctions, compounded by numerous domestic economic challenges which continue to hinder its performance. As a result it remains largely inaccessible to foreign investment and trade, particularly from Western companies, pending a reassessment of the #Iran Nuclear Deal. The recent normalisation of relations between Iran and Saudi Arabia, and Iran's entry into the BRICS alliance on January 1 2024, are positive developments but Iranian backing for various armed factions in the Israel-Hamas conflict is exacerbating regional geopolitical tensions. Local factors such as widespread corruption, a weak rule of law and the prevalence of state-owned enterprises, have combined to limit private sector participation. Overall, Iran is ranked 14th out of 18 MENA countries for Trade & Investment Risk and ranks a low 143 out of 202 global markets. BRiCS BRICS Business Council BRICS Chamber of Commerce & Industry Brics Securities Evercore Renewable Energy Seriti Green Seriti Resources

AfCFTA: Harnessing the Power of Intra-Africa Trade

The African Continental Free Trade Area (AfCFTA) represents a monumental milestone in the journey towards realising Africa’s full economic potential, fostering intra-African trade and investment, and driving sustainable development across the continent. The impact of the AfCFTA deal will vary between different economies and industries.?A new report, developed by the Casablanca Finance City Authority (CFCA) in collaboration with BMI Advisory,?provides key information for companies willing to operate in Africa and highlights four of the sectors that have the most potential, and sets out case studies in the automotive, agro-processing, clothing & apparel and energy transition markets. IPATC Institute for Pan-African Thought And Conversation AFC Energy African Continental Free Trade Area (AfCFTA) Secretariat AFCFTA Policy Network AfCFTA Dialogues

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THIS COMMENTARY IS PUBLISHED BY BMI, a Fitch Solutions Company and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data are solely derived from BMI and independent sources. Fitch Ratings analysts do not share data or information with BMI Country Risk & Industry Analysis .