Domestic Unrest and Operating Volatility

Severe inflation, war damage and economic mismanagement are increasing the probability of renewed protests and tighter state controls. For businesses, this raises labor disruption, enforcement unpredictability, reputational exposure and sudden policy intervention risks across retail, manufacturing and distribution networks.

Power Tariffs and Circular Debt

Energy-sector stress remains acute as circular debt sits near Rs1.8 trillion, Chinese IPPs are owed over Rs560 billion and subsidy reforms continue. Businesses face risks of higher electricity tariffs, payment disputes, and unreliable power economics that erode manufacturing competitiveness.

Governance and Judicial Certainty Concerns

Investors continue to flag corruption, procurement irregularities, and judicial reform uncertainty as constraints on capital deployment. Recent sanctions on 32 suppliers show enforcement activity, but businesses still see weak institutional predictability, complicating infrastructure investment, dispute resolution, and confidence in long-term operating conditions.

Digital Sovereignty Tightens

Vietnam is allowing foreign digital infrastructure, but under stricter sovereign controls. Starlink’s five-year pilot is capped at 600,000 subscribers and requires four domestic gateway stations, signaling firmer cybersecurity, data oversight and licensing conditions for telecom, cloud and digital-service investors.

Policy Centralization Under Prabowo

Prabowo’s administration is taking a more interventionist approach across exports, foreign exchange and strategic resources, while promising deregulation to curb bureaucratic rent-seeking. For multinationals, the result is a mixed operating environment combining stronger state direction with potential reforms to licensing and compliance.

Acceleration of Foreign Investment

Saudi Arabia continues to liberalize market entry, allowing 100% foreign ownership in most sectors and faster digital licensing. Active investment licenses rose from 6,000 in 2019 to 62,000 by end-2025, improving opportunities for international entrants despite execution complexity.

Persistent Inflation, Costly Capital

Brazil’s inflation outlook remains above target, with 2026 IPCA at 4.91% and April 12-month inflation at 4.39%, while Selic is expected around 13.0%. Elevated borrowing costs constrain investment, pressure working capital, and complicate pricing, hedging, and expansion decisions.

Samsung strike threatens chip supply

An 18-day Samsung walkout involving about 48,000 workers could disrupt 3-4% of global DRAM and 2-3% of NAND supply, raise prices, delay customer deliveries, and shave up to 0.5 percentage points from South Korea’s 2026 GDP growth.

Electronics Export and Rewiring

Exports remain a bright spot, with March shipments up 18.7% year on year to $35.16 billion, led by electronics, AI-related products and data-centre equipment. Thailand is benefiting from supply-chain diversification, strengthening its role in regional electronics, PCB and component manufacturing.

Tariff And Transshipment Pressure

Vietnam remains under intense US scrutiny over alleged transshipment of Chinese goods, market access barriers, and its widening trade surplus. Even after earlier tariffs were reduced from 46% to 10-20%, uncertainty is complicating sourcing decisions, pricing, and long-term manufacturing commitments.

Semiconductor Boom Drives Economy

AI-led chip demand is powering Korea’s export and investment cycle, with semiconductor shipments up 149.8% in early May and comprising 46.3% of exports. This strengthens capital spending and trade balances, but deepens dependence on one sector.

High rates and inflation pressure

Inflation remains near 5.2% to 6%, while policy rates around 14.5% keep financing expensive. Tight credit conditions are suppressing investment, eroding consumer demand and increasing refinancing risk for businesses operating in or exposed to Russia-linked markets.

Inflation and Currency Collapse

Iran’s annual inflation reached 53.7%, food inflation exceeded 115%, and the rial fell to about 1.9 million per dollar after losing over half its value. This sharply raises pricing volatility, import costs, wage pressures and contract execution risks.

Energy Shock and External Vulnerability

The West Asia conflict is pressuring India’s balance of payments, inflation and currency through energy dependence. With 87% of crude imported, around 60% of LPG sourced from the Gulf and 38% of remittances originating there, import costs and operating volatility remain elevated.

Taiwan Strait Escalation Risk

Taiwan remains the biggest geopolitical flashpoint in US-China relations, with arms sales, military exercises and strategic ambiguity sustaining uncertainty. Any escalation would threaten semiconductor production, maritime shipping lanes, insurance costs and board-level contingency planning across Asia-facing businesses.

Regional Security Shapes Operations

Business conditions remain sensitive to conflicts spanning Iran, Syria, Iraq, and the eastern Mediterranean. Turkish officials linked recent attacks to energy price spikes of up to 50%, highlighting persistent risks to shipping, aviation, tourism, insurance costs, and cross-border supply continuity.

Tax Changes Pressure Business

Pending reforms include VAT on low-value imports, digital platform taxation, customs code updates, and possible broader SME tax changes. These measures aim to shrink an informal economy estimated at 45% of GDP, but raise compliance and pricing implications.

Gaza War Spillover Risk

Israel’s expanding military control in Gaza, now reported at about 60% with directives to reach 70%, raises escalation risk, humanitarian disruption, and compliance concerns. For businesses, this heightens operational volatility, reputational exposure, insurance costs, and logistics uncertainty tied to regional instability.

Sanctions Evasion Compliance Exposure

Turkey remains a prominent transit jurisdiction in Russia- and Iran-related sanctions cases, increasing compliance scrutiny for banks, shippers and industrial traders. Firms face elevated dual-use, beneficial-ownership and payments risk, especially where intermediaries obscure Russian or Iranian end-users.

Sanctions and Nuclear Deadlock

Negotiations remain stuck over sanctions relief, uranium stockpiles and verification, leaving Iran exposed to abrupt policy shifts. With roughly 440.9 kg of uranium enriched to 60% and sanctions sequencing unresolved, investors face persistent legal, compliance, payment and market-access uncertainty.

Sanctions Enforcement Reshapes Flows

US sanctions policy toward Russian oil and Iran-linked trade remains a major variable for commodity flows, insurers, shippers, and refiners. Frequent waiver changes and tougher enforcement create compliance burdens, alter trade routes, and increase counterparty risk across energy, finance, and maritime sectors.

China Dependence Becomes Critical

China remains Iran’s main oil buyer and a crucial trade lifeline, with rail traffic from Xi’an to Tehran rising from roughly weekly service to every three to four days. This concentration increases Iran’s exposure to Chinese demand, pricing leverage, and diplomatic positioning.

Dependencia exportadora de Estados Unidos

México sigue siendo una plataforma manufacturera difícil de sustituir para Estados Unidos, pero su alta dependencia del mercado vecino amplifica vulnerabilidades. Cerca de 85% de las exportaciones van a EU y alrededor de 40% del PIB mexicano está ligado al sector exportador.

Cross-Border Capital Controls Intensify

Chinese regulators have launched a broad crackdown on illegal offshore investing and foreign brokerage access, imposing heavy fines and stricter account controls. This raises funding, liquidity and wealth-management constraints for firms reliant on mainland capital, Hong Kong channels or overseas portfolio diversification.

Digital compliance rules tighten

New decrees expanded obligations for digital platforms operating in Brazil, requiring faster removal of criminal content and stronger advertising traceability, under ANPD oversight. The changes increase compliance demands, legal exposure and operational adaptation costs for foreign technology, media and online marketplace firms.

Economic Contraction and Demand Weakness

The IMF expects Iran’s economy to shrink by about six percentage points next year, reflecting sanctions, conflict damage and trade restrictions. Businesses face weakening consumer demand, lower insurance and discretionary spending, and heightened uncertainty around revenue forecasts and capital allocation.

Agricultural protectionism and input stress

Emergency farm legislation and union pressure reflect severe strain from fuel, energy and regulatory costs, weak farm incomes and import competition. Proposed restrictions on products made with banned pesticides signal rising trade frictions and volatility for food supply chains, sourcing and compliance.

Weak Growth, Export Dependence

Thailand’s economy remains fragile, with first-quarter 2026 growth estimated at 2.2% year on year and the central bank cutting its 2026 forecast to 1.5%. Strong electronics exports are offsetting weak consumption and tourism, increasing exposure to external demand shocks.

South China Sea Geopolitical Risk

Vietnam continues balancing the US and China while defending maritime claims under UNCLOS and rejecting military alignment. Although this supports strategic autonomy, any escalation in the South China Sea or wider US-China rivalry could disrupt shipping security, energy markets, and investor sentiment toward Vietnam.

ASEAN Nickel Corridor Integration

The new Indonesia-Philippines nickel corridor deepens regional supply-chain integration by linking Philippine ore with Indonesian smelting and downstream processing. This improves feedstock security for EV battery and stainless-steel projects, while potentially strengthening Southeast Asia’s pricing influence in global nickel markets.

Hormuz Disruption Rewires Trade

Closures and threats around Hormuz are redirecting regional trade through Saudi Arabia’s east-west pipeline and Red Sea ports. The shift boosts the kingdom’s logistics relevance but raises freight, insurance, and contingency-planning costs for importers, exporters, shippers, and manufacturers.

Riyadh Regional HQ Magnet

More than 700 multinationals had relocated regional headquarters to Riyadh by early 2026, surpassing the 2030 target of 500. This deepens Saudi Arabia’s role as a regional command center, influencing where firms place decision-making, talent and procurement functions.

External Shocks Weaken Demand

Middle East conflict disruptions, higher energy prices and shipping strain are softening the UK outlook. Forecasts suggest GDP growth could slow to 0.8%, inflation exceed 4%, and unemployment rise, reducing discretionary demand and complicating market-entry, pricing and inventory decisions.

Logistics Hub Ambitions Accelerate

Riyadh is using the crisis to strengthen its role as a trade and transport hub linking Asia, Europe, and Africa. New shipping lines, port expansion, and possible consolidation of supply-chain assets create opportunities in warehousing, transit, customs, and industrial investment.

Tech Regulation And Data Access

Canada’s proposed Bill C-22 is raising concern among major U.S. technology firms over encryption, metadata retention and cross-border data obligations. The bill could increase compliance burdens, create legal uncertainty for digital operators, and introduce a new bilateral irritant in Canada-U.S. commercial relations.

Nickel Downstreaming and EV Push

Indonesia remains a major investment destination, attracting about US$24 billion in FDI in 2024, supported by nickel processing, EV batteries and digital growth. Supply-chain diversification from China creates opportunity, but policy intervention, permitting and local-content expectations remain material risks.