Capital Spending Supports Growth

Public capital expenditure has risen roughly six-fold over the past decade to about $125 billion this year, reinforcing transport, industrial, and energy ecosystems. For foreign investors, this improves medium-term project pipelines, industrial land connectivity, and demand visibility across infrastructure-linked sectors.

Labor Shortages and Wage Pressure

Ukraine faces acute wartime labor shortages despite high unemployment, with reports that up to 70% of vacancies go unfilled and ILO-based unemployment estimates near 11-12%. Construction, logistics, agriculture, and industry are seeing wage inflation, skills mismatches, and growing reliance on foreign labor.

Talent And Labor Bottlenecks

Taiwan’s semiconductor expansion is increasingly constrained by skilled labor shortages. TSMC identified talent as its biggest gap, even as it employed more than 90,000 people globally in 2025, implying continued competition for engineers, higher labor costs, and execution risk for capacity expansion.

Manufacturing Layoffs and Supply-Chain Shifts

Over 6,500 workers at PT Pakerin and Nike-supplier PT Feng Tay face layoffs, while Japanese auto-parts firms weigh shifting up to 7,000 jobs to Vietnam. Weak rupiah, costly imports, China import flooding and the Iran war pressure export-oriented and import-dependent industries.

Agricultural Disease and Export Losses

The foot-and-mouth outbreak has become a material agribusiness risk. Reports indicate a 26% drop in total beef exports, a 69% fall in shipments to China and roughly R5.6 billion in export revenue losses, damaging farming, food processing and rural logistics.

Market volatility and currency swings

Israeli assets have turned sharply more volatile. The TA-35 fell more than 12% in dollar terms in June, the broader exchange roughly 20% over the past month, and the shekel about 3.1%, complicating hedging, valuation, import costs, and capital-allocation decisions.

Labor Compliance Tightens Further

Saudi authorities are sharpening labor and migration enforcement through Qiwa rules, deportation campaigns, and seasonal workplace restrictions. Recent inspections detained 10,725 violators and deported 7,989 in one week, increasing compliance demands, workforce management complexity, and operational risk for labor-intensive businesses.

Semiconductor Cycle Drives Economy

Semiconductors remain South Korea’s dominant business variable, with AI-memory demand lifting exports, earnings and equities. Citi expects FY26 net profit growth of 231% year on year, but heavy dependence on Samsung and SK Hynix increases volatility for suppliers and investors.

Papua Conflict Threatens Stability

Continuing conflict and militarisation in Papua pose security, human-rights and operational risks around mining, infrastructure and strategic projects. Displacement reportedly exceeds 107,000 people since 2018, increasing scrutiny, reputational exposure and possible disruption to transport, labour and site access.

Ports Gain Strategic Relevance

Karachi and related ports gained importance during Hormuz disruption, with Karachi handling 2,003 ship arrivals and over 84.4 million tons in FY2025-26. New transshipment rules, fee concessions, and feeder links improve logistics optionality, though sustainability depends on continued reforms and stability.

High Rates, Sticky Inflation

The Central Bank cut the Selic to 14.25%, yet inflation reached 4.72% year-on-year in May, above the 1.5%-4.5% tolerance band. Elevated borrowing costs still constrain credit, consumer demand, and corporate financing, while volatile commodities keep pricing and hedging conditions difficult.

US Tariff and Compliance Risks

Washington’s scrutiny of Vietnam’s US$123.5 billion 2025 trade surplus, transshipment controls, intellectual property enforcement and market access raises tariff and compliance risks for exporters, especially electronics, solar, steel and wood supply chains serving the US market.

Japan-China Business Climate Deterioration

Diplomatic tensions with China are spilling into business operations through detentions, trade restrictions and reduced official dialogue. Japanese firms operating in or sourcing from China face greater legal, regulatory and reputational risk, especially in sensitive sectors linked to critical inputs and technology.

Indo-Pacific Alliance Diversification

Japan is deepening economic and strategic ties with Australia, ASEAN, and other partners through funding, energy cooperation, and supply-chain initiatives. This broadens market and sourcing options for international firms while supporting regional resilience against geopolitical shocks and concentrated trade dependencies.

Regional Supply Chain Realignment

Vietnam is deepening economic ties with ASEAN partners such as Thailand and the Philippines while positioning itself as a diversification hub beyond China. This supports electronics, agriculture and digital trade flows, but also intensifies competition for export share, skilled labor and multinational capital.

Black Sea Export Route Rebalancing

Ukraine’s maritime exports have improved through the Black Sea corridor, reducing some pressure on Danube routes, but shipping remains exposed to war-related security disruptions. Grain, metals, and bulk exporters still face elevated insurance, routing, and infrastructure reliability costs.

External Sector Fragility Eases

Pakistan’s external position improved through March with remittances up 8.2% and a US$72 million current-account surplus, but April swung to a US$324 million deficit after Middle East disruptions increased oil and freight costs, exposing continued vulnerability in trade financing and import planning.

Deepening Dependence On China

Russia’s dependence on China continues to deepen across trade, finance, technology and inputs. One study estimates China now accounts for about 35% of Russia’s external trade and roughly three-quarters of the increase in sanctioned critical-component imports, creating concentration and geopolitical dependency risks.

Trade Diversification and China Curbs

Mexico imposed 50% tariffs on Asian vehicle imports to curb Chinese expansion, while deepening ties with Brazil (Pemex-Petrobras pact, $18.5B trade). Washington pushes stronger verification to block indirect Chinese goods, reshaping sourcing strategies and supplier networks.

Defense Industrial Localization Push

The government is accelerating indigenous drone and unmanned-vessel procurement, including a proposed NT$210 billion program through 2031 linked to non-China supply chains. This creates openings in electronics, batteries, sensors, software, and maintenance, but legislative delays still complicate contracting visibility and investment timing.

Labor law revision uncertainty

A new labor law is being drafted for completion by late 2026, with unions and employers debating wages, outsourcing, worker protections, and industrial relations. The revision could reshape manufacturing cost structures, compliance obligations, hiring flexibility, and dispute risks across labor-intensive sectors.

Defense Spending Reshapes Industrial Priorities

Canada has reached NATO’s 2% target and now faces pressure to present a credible path toward 5% of GDP by 2035, from roughly C$63 billion today. Rising military spending and domestic-content goals will redirect procurement, industrial strategy and advanced-manufacturing opportunities.

Industrial policy and green transition

Cabinet approved a revised industrial strategy centred on decarbonisation, digitalisation and diversification, prioritising steel, automotive, mining, agro-processing and the green economy. This supports medium-term manufacturing and renewable investment, but commercial outcomes will depend on policy execution, grid reliability, skills development and permitting efficiency.

Manufacturing Competitiveness Erosion

Turkey’s apparel and textile base is under acute cost pressure: sector exports fell from $21.2 billion in 2022 to $16.8 billion, around 376,000 jobs were lost, and nearly 10,000 firms stopped operating. Broader manufacturing competitiveness and supplier stability are under strain.

Policy Discretion Raises Compliance Costs

U.S. trade governance is becoming more discretionary, with country-specific negotiations, exemptions, and security-based restrictions layered across regimes. Companies must invest more in origin tracing, customs classification, sanctions screening, and scenario planning as regulatory complexity becomes a core operating cost.

Banking Isolation and Payment Frictions

Even if partial sanctions relief emerges, Iran’s financial channels remain constrained by longstanding compliance concerns and weak correspondent access. Businesses should expect persistent settlement frictions, higher due-diligence burdens, restricted trade finance and elevated exposure to secondary sanctions and reputational risk.

Political Instability Undermines Economic Strategy

Keir Starmer is stepping down amid collapsing Labour support and Reform UK's surge, paving way for Britain's seventh PM since 2016. Chronic leadership churn raises doubts about long-term reform credibility, fiscal continuity, and investor confidence in stable governance.

Trade Realignment From China

Taiwan’s trade and investment exposure is shifting away from China toward the United States and other partners. Officials say China’s share of Taiwan’s outward investment fell from 83.4% a decade ago to 3.7%, reshaping sourcing, market priorities, and geopolitical compliance for multinational firms.

Certeza jurídica pesa en inversión

Las reformas judiciales de 2024 y dudas sobre independencia de tribunales han elevado inquietud inversora justo antes de la revisión comercial. Para proyectos intensivos en capital, la combinación de menor certeza jurídica y negociación externa compleja puede frenar expansión, financiamiento y decisiones de largo plazo.

Reconstruction Finance and Project Pipeline

Large external financing is sustaining public spending and future reconstruction demand, including the EU’s €90 billion Ukraine Support Loan program for 2026-2027. International firms should expect opportunities in power, transport, housing, engineering, and public procurement, but with execution and governance risks.

US-France tariff and tax tensions

Trade friction with Washington has re-escalated after threats of 100% tariffs on French wine and champagne over France’s 3% digital services tax. Exporters, luxury groups, and agri-food supply chains face heightened exposure to retaliatory trade measures.

Semiconductor Expansion Deepens Clustering

Vietnam is strengthening its semiconductor and advanced electronics position through major footprints from Intel, Samsung, LG and Amkor, including Amkor’s US$1.6 billion Bac Ninh project. This supports supply-chain diversification from China, but intensifies competition for skilled labor, infrastructure and qualified local vendors.

Foot-and-Mouth Disease Devastates Agriculture

An uncontrolled FMD outbreak across all nine provinces caused roughly R80bn in losses, a 26% drop in beef exports and 69% cut in shipments to China. The crisis triggered a cabinet reshuffle, with new control measures aiming to restore trade and confidence.

Risco regulatório e judicial

Conflitos entre Executivo, Congresso e Supremo sobre pautas fiscais e compensações ampliam a insegurança regulatória. Propostas com impacto anual estimado em R$111 bilhões podem ser judicializadas, atrasando regras, encarecendo compliance e dificultando previsões para projetos de longo prazo.

Wine and Spirits Export Vulnerability

French wine and spirits exporters remain exposed to geopolitical spillovers, with US tariff threats coming as exports to the US have already weakened. For consumer goods companies, this underlines sector-specific concentration risk, margin pressure, and the need for market diversification.

Sanctions Volatility in Energy Markets

US policy on Russian oil sanctions has shifted repeatedly, reflecting tension between geopolitical pressure and energy-market stability. Temporary exemptions reportedly allowed Russia over US$2 billion in added revenue, underscoring how abrupt sanctions changes can affect shipping, pricing, and procurement strategies.