Interest Rate and Inflation Volatility

The Bank of Canada held its policy rate at 2.25%, but warns geopolitical shocks could still lift inflation and weaken growth. Economists now see 2026 inflation at 2.4%, unemployment at 6.7% and growth at 1.1%, complicating financing, pricing and capital-allocation decisions.

Industrial Export Sectors Under Pressure

Steel, autos, lumber, cabinets, and other manufacturing segments remain exposed to U.S. duties. Canadian steel exports to the U.S. were reportedly down 50% year-on-year in December, while affected firms are cutting output, jobs, and capital spending.

Supply Chain Diversification Opportunity

Thailand’s manufacturing base and location position it to capture supply-chain diversification from global tensions, especially in electronics and industrial exports, but success depends on regulatory reform, competitiveness upgrades, and sustained political stability to convert interest into FDI.

Gas Output Decline Hurts Industry

Declining domestic gas production since its 2021 peak, combined with limited Israeli supplies and costlier LNG, is tightening energy availability. Energy-intensive sectors such as fertilizers, steel, and cement face rising input costs, rationing risk, and possible summer production disruptions.

Regulatory Reforms Improve Entry

Authorities are amending housing and real-estate laws to simplify procedures, reduce compliance burdens, and improve legal consistency. Combined with efforts to clear blocked investment projects, reforms should support foreign investors, though execution risk and uneven local implementation remain important operational considerations.

Neom Scale-Back and Repricing

Recent contract cancellations at Neom, including Webuild’s roughly $5 billion Trojena dam deal, signal rising execution and counterparty risk in giga-projects. International contractors should expect scope revisions, slower awards, payment scrutiny, and a pivot toward commercially bankable industrial and digital assets.

Non-Oil Export Growth Surge

January non-oil exports including re-exports rose 22.1% year on year to SR32.57 billion, led by machinery and electrical equipment. The growth supports diversification, but falling national non-oil exports excluding re-exports shows underlying industrial depth remains uneven for long-term trade planning.

Major Fiscal Stimulus Reshapes Demand

Berlin is pivoting toward large-scale fiscal expansion, with infrastructure and defence spending potentially reaching €1 trillion over multiple years. Planned 2026 investment and defence outlays of €232 billion could lift growth, procurement demand, and project opportunities across sectors.

Automotive Restructuring and Tariffs

Germany’s auto sector faces simultaneous pressure from U.S. tariffs, Chinese competition and costly EV transition. Combined earnings at BMW, Mercedes and Volkswagen fell 44% to €24.9 billion in 2025, prompting restructurings, supplier stress and production-footprint adjustments.

US Tariff and Trade Exposure

Vietnamese exporters face acute uncertainty from the US 150-day tariff regime, with duties at 10% and potential escalation to 15%. Low-margin sectors such as garments, footwear and seafood are most exposed, alongside stricter origin and anti-circumvention scrutiny.

Tariff and QCO Compliance

India’s complex tariff regime and expanding Quality Control Orders create substantial compliance burdens for foreign suppliers. U.S. data cites applied tariffs averaging 16.2%, with steep duties in agriculture, autos, and alcohol, while testing, licensing, and customs discretion complicate market entry.

US Tariffs Hit Auto Exports

Japan’s export engine faces renewed strain from 15% US tariffs on autos, with February shipments to the US down 8%. The pressure extends through auto parts and supplier networks, raising costs, complicating pricing decisions, and weakening investment visibility for manufacturers.

Austerity And Demand Constraints

To meet IMF targets, authorities are targeting a 1.6% of GDP primary surplus in FY26 and 2% underlying balance in FY27, alongside spending cuts. Fiscal restraint may stabilize sovereign risk, but it can suppress domestic demand and public-project momentum.

Slower Growth, Weaker Demand

Banque de France cut growth forecasts to 0.9% this year and 0.8% next year, with downside scenarios far weaker. Softer consumption, investment, and industrial activity would affect market demand, site expansion decisions, and working-capital planning for foreign firms.

Gas Supply Constraints Hit Industry

Declining domestic gas production, maturing fields, and limited Israeli supply have turned Egypt into a costlier hydrocarbon importer. LNG prices are reportedly triple last year’s contracted levels, raising risks of electricity rationing and disruption for fertilizers, steel, cement, and other heavy industry.

Ports and Railways Under Fire

Russia is intensifying attacks on Ukrainian ports and railways, with officials reporting roughly 10 rail strikes nightly and damage to civilian vessels in Odesa. The pressure threatens export capacity, inland logistics reliability, cargo timing, and insurance costs for trade-dependent businesses.

US Tariffs Reshape Export Outlook

Washington’s tariff actions on Indian goods, including previously cited rates of 25–26% and sector-specific penalties, continue to inject uncertainty into export planning. Apparel, engineering and chemicals face margin pressure, accelerating market diversification toward the UK, EU and Gulf partners.

Fiscal Strain and Sovereign Confidence

Higher oil prices, rupiah weakness, and expansive spending plans are tightening Indonesia’s budget position near the 3% deficit ceiling. Negative rating outlooks and market concerns could raise financing costs, weaken investor sentiment, and delay public projects affecting infrastructure and procurement.

Reserve Erosion and Intervention

The central bank has sold or swapped roughly $45-55 billion in FX and gold reserves since late February, including about 58-60 tons of gold. This supports short-term stability, but increases concerns over reserve adequacy, policy durability and future currency volatility.

Weak Growth, Higher Insolvencies

Economic institutes cut Germany’s 2026 growth forecast to 0.6% and 2027 to 0.9%, while 24,064 firms filed for insolvency in 2025, the highest since 2014. Sluggish demand and elevated financing costs are raising counterparty and market risks.

Energy Price Stabilization Intervention

Authorities froze electricity rates at NT$3.78 per kilowatt-hour for six months despite proposed increases, aiming to contain inflation and protect industrial competitiveness. Short-term cost relief supports manufacturers, but delayed tariff adjustments could pressure utility finances and future pricing decisions.

Energy Import Vulnerability Deepens

Turkey imports about 90% of crude oil and 99% of natural gas, leaving it highly exposed to Middle East disruptions. Oil above $95-$100 raises the import bill, inflation, and current-account pressure, weakening margins for manufacturers, transport operators, and energy-intensive supply chains.

Trade Diversion Toward Europe

China’s trade patterns are shifting as exports of rare earth magnets and other strategic goods tilt away from the US and toward Europe. For multinationals, this suggests changing tariff exposure, partner dependence and logistics routing, with greater regionalization across procurement and sales networks.

Public investment and logistics constraints

Federal infrastructure investment rose 49.7% in real terms in January-February to R$9.5 billion, offering some support to transport and logistics capacity. However, discretionary spending remains exposed to fiscal compression, limiting execution certainty for ports, roads, and broader supply-chain modernization.

Hormuz Transit Control Risks

Iran’s de facto IRGC-controlled transit regime in the Strait of Hormuz has sharply reduced normal vessel traffic, imposed clearance and disclosure requirements, and reportedly involved yuan-denominated tolls, materially raising shipping, insurance, sanctions, and legal exposure for global traders.

Middle East Energy Shock

Conflict-driven disruption around the Strait of Hormuz is raising Korean import costs, freight rates and inflation risks. Around 70% of crude imports come from the Middle East, exposing manufacturers, logistics operators and energy-intensive sectors to sustained cost pressure and operational uncertainty.

China De-risking Reshapes Model

Berlin increasingly recognizes that the old model built on cheap Russian gas and lucrative China business is over. Exporters and investors must adapt to weaker China dependence, more localised production, and tougher scrutiny around strategic technologies and market exposure.

Raw Material Logistics Vulnerable

German manufacturers remain exposed to imported chemicals, LNG, polymers, and metals facing delays and price surges. Hormuz-related shipping disruption, supplier force majeure in Asia, and low substitution capacity increase procurement risk, especially for Mittelstand firms with limited sourcing flexibility.

Power Security Becomes Critical

Vietnam is accelerating energy diversification as officials warn of possible southern electricity shortages in 2027–2028 from declining domestic gas and LNG constraints. Faster grid upgrades, imports, storage, and renewables deployment will be crucial for high-tech manufacturing, industrial parks, and data-center investment.

Macroeconomic Volatility and Currency Pressure

Regional conflict, inflation and capital outflows are straining Egypt’s macro stability. The pound weakened beyond EGP 54 per dollar, inflation reached 13.4%, and policy rates remain at 19%-20%, raising hedging, financing and import-cost risks for foreign businesses.

Internal Trade Barrier Reduction

Federal and provincial governments are moving to expand mutual recognition for goods and, potentially, services across Canada. If implemented effectively from June 2026, reforms could reduce duplicative rules, improve labor mobility, lower compliance costs, and partially offset external trade volatility for domestic operators.

USMCA Review and Tariff Risk

Mexico’s top business issue is the 2026 USMCA review, covering $1.6 trillion in annual trade. Uncertainty over tariffs on autos, steel, aluminum and copper, plus possible bilateralization, could materially affect export planning, capital allocation and cross-border supply chains.

Trade Diversion from China

Chinese exporters are redirecting goods to the UK as US tariffs reshape trade flows, lowering prices for cars, electronics and furniture. This may ease goods inflation but intensifies competitive pressure on domestic manufacturers, pricing power, sourcing choices and trade-defense policy risk.

Government Austerity Disrupts Operations

Authorities have imposed temporary conservation measures, including early shop closures, remote work mandates, slower fuel-intensive state projects, and 30% cuts to government vehicle fuel use. These steps may reduce near-term pressure, but they also complicate retail activity, logistics, and project execution.

Reconstruction Finance Still Conditional

International capital is available for Ukraine’s recovery, but large-scale foreign investment still depends on durable security, continued reforms and de-risking tools. The EBRD invested €2.9 billion last year, yet investors remain cautious pending stability, stronger governance, and clearer postwar conditions.

Infrastructure Delays Affect Logistics

Thailand’s 3-Airport High-Speed Rail project still awaits contract amendments, with July 2026 set as a critical deadline. Continued delays risk slowing logistics modernization, raising execution uncertainty for connected industrial zones and limiting long-term efficiency gains for transport-reliant investors and suppliers.