Investment Climate Reform Imperative

Vietnam remains highly attractive to foreign investors, with 93% of European business leaders willing to recommend it, but administrative complexity still raises costs. Legal overlap, permitting friction, workforce constraints, and infrastructure gaps increasingly shape location decisions as regional competition for quality FDI intensifies.

High Rates, Fiscal Friction

Brazil’s Selic was cut to 14.5%, but inflation remains elevated, with April IPCA at 4.39% year on year and 2026 forecasts near or above 4.5%. Fiscal-discipline concerns keep financing costs high, constraining investment, working capital and consumer demand.

Defense Industry Attracts Partners

Ukraine’s battlefield-tested defense and dual-use sectors are becoming a major investment and industrial partnership opportunity. New EU-Ukraine and bilateral programs include €161 million in funding, six joint projects with Germany, and expanding Drone Deal frameworks that integrate Ukrainian technology into wider supply chains.

Sanctions and Compliance Fragmentation

US sanctions, especially on Chinese refiners tied to Iranian oil, are colliding with Beijing’s anti-sanctions rules. Multinationals now face conflicting legal obligations across banking, shipping, insurance, and procurement, increasing the need for parallel compliance structures and more cautious transaction screening.

Labor Unrest In Manufacturing

Escalating union disputes at Samsung, Hyundai and other major manufacturers threaten production continuity in semiconductors, autos and shipbuilding. A possible Samsung strike alone could reportedly cause about 30 trillion won in losses, delaying exports, disrupting suppliers, and weakening Korea’s industrial competitiveness.

Reputational And Compliance Exposure

International firms operating in or with Israel face heightened scrutiny over conflict exposure, humanitarian access, and counterparties linked to sanctioned, disputed, or politically sensitive activities. This raises due-diligence demands, insurance and legal costs, and the potential for stakeholder backlash across global markets.

Data Center Incentives Await Approval

The stalled Redata bill would suspend key federal taxes on data center equipment, aiming to attract billions in digital infrastructure investment. Yet Senate delays and disagreement over eligible power sources create uncertainty for technology investors, suppliers, utilities, and industrial policy planning.

Regulatory Reform Still Incomplete

Vietnam’s investment appeal is strong, but businesses still report costly legal overlap, approvals friction and compliance burdens. Investors increasingly prioritize transparent, predictable rules over tax incentives alone, making implementation quality, dispute resolution and administrative streamlining central to project timing and operating efficiency.

FDI Liberalisation Accelerates Manufacturing

India is easing FDI rules for foreign firms with up to 10% Chinese or Hong Kong ownership, while fast-tracking approvals in strategic manufacturing. Total FDI reached $88.29 billion in April-February FY2025-26, improving capital access for electronics, batteries, and industrial supply chains.

Regional war escalation risk

Israel’s business environment remains dominated by volatile conflict spillovers involving Iran, Gaza and Lebanon. Escalation risk threatens investor confidence, insurance costs, workforce availability and contingency planning, while any renewed fighting could disrupt air links, ports, energy infrastructure and cross-border commercial operations.

Supply Chains Exposed to Regional Conflict

Conflict in the Middle East is increasing risks to transport corridors, energy shipments, tourism revenues, and regional trade routes. Turkish policymakers also warned of supply-chain disruptions, meaning firms using Turkey as a hub should plan for delays, insurance costs, and contingency routing.

Critical Minerals Supply Vulnerability

US manufacturers remain exposed to Chinese rare earth restrictions affecting aerospace, semiconductors, autos, and defense. China’s dominance in refining and processing has already triggered shortages and sharp price spikes, raising urgency around supplier diversification, inventory buffers, and domestic capacity investments.

Energy Import Exposure Intensifies

Egypt raised its FY2026/27 fuel import budget to $5.5 billion, up 37.5%, reflecting vulnerability to regional energy shocks. Higher diesel, LPG, and gasoline costs increase inflation, pressure foreign-exchange needs, and raise production, logistics, and utility expenses for trade-exposed businesses.

Infrastructure licensing delays projects

Large Brazilian projects continue to face delays from environmental licensing and indigenous consultation disputes. Reports cite 17 strategic projects stalled, with projected losses including over R$8 billion annually in freight costs, constraining logistics expansion, energy supply and long-term industrial competitiveness.

Trade imbalance and external dependence

France’s chronic goods deficit reached €62.3 billion on a 12-month basis by March, driven partly by imported energy. Persistent external dependence raises sensitivity to shipping disruptions, commodity shocks, and exchange-cost pressures, influencing sourcing strategies, trade exposure, and industrial competitiveness.

Wage Growth Reshaping Cost Base

Spring wage settlements exceeded 5% for a third straight year, while base pay rose 3.2% in March and nominal wages 2.7%. Stronger labor income supports demand, but it also raises operating costs and margin pressure, especially for smaller suppliers and subcontractors.

Higher Rates, Slower Growth

The Reserve Bank lifted the cash rate to 4.35% after inflation rose to 4.6%, with markets pricing possible further tightening toward 4.60%. Elevated borrowing costs, softer growth and weaker confidence will affect consumer demand, financing conditions and project timing.

US Tariffs Rewire Export Strategy

US tariff pressure is eroding Korea-US FTA advantages and forcing trade diversion. Korea’s tariff burden on exports to the United States rose from 0.2% to 8% by March 2026, pushing firms to rebalance sales, production footprints and market diversification plans.

Fiscal and Currency Vulnerabilities

Indonesia’s broader macro backdrop includes rising debt service, a wider fiscal deficit, and rupiah weakness that briefly touched record lows in May. Higher sovereign funding costs and tighter domestic liquidity could increase financing expenses, pressure imported inputs, and weigh on business confidence.

Shadow Fleet Sustains Oil Exports

Despite tighter enforcement, Iran continues using ship-to-ship transfers, dark-fleet tankers, AIS manipulation and relabelling to move crude toward Asian buyers, especially China. This keeps legal, insurance, ESG and maritime safety risks elevated for refiners, traders, ports, and service providers.

High-Tech FDI Upgrading Supply Chains

Vietnam remains a major diversification hub as FDI shifts toward semiconductors, electronics, AI, data centres and advanced manufacturing. Registered FDI reached US$15.2 billion in Q1 2026, up 42.9% year on year, supporting deeper integration into higher-value global supply chains.

Energy Revenue Volatility Persists

Oil and gas remain central but increasingly unstable for planning. January-April oil-and-gas revenues fell 38.3% year on year to RUB 2.3 trillion, while April export revenue still reached about $19.2 billion, exposing counterparties to sharp fiscal and pricing swings.

Energy shock widens external gap

The Iran war pushed Brent nearly 50% higher, raising Turkey’s energy import bill and widening March’s current-account deficit to $9.6-$9.7 billion, about 2.6% of GDP annualized. Higher fuel, petrochemical and fertilizer costs are pressuring manufacturers, transport and trade balances.

Energy Import Vulnerability Intensifies

South Korea remains highly exposed to external energy shocks, with oil and gas comprising about 82% of energy use and roughly 92% sourced from the Middle East. Elevated LNG and oil prices are raising input costs, inflation, freight risks and margin pressure.

T-MEC review uncertainty persists

Mexico expects a prolonged 2026 USMCA review rather than a quick 16-year extension, leaving firms facing annual-policy risk. With roughly US$1.5 trillion in trilateral trade and US$2.5 billion crossing the border daily, delayed clarity could slow investment and sourcing decisions.

Governance and Anti-Corruption Pressure

Governance reform remains central to investor confidence as major corruption investigations reach senior political circles and anti-corruption strategy deadlines tie into EU and donor funding. Stronger enforcement can improve the business climate, but scandals still raise execution, reputational, and policy risks.

IMF-Driven Fiscal Tightening

Pakistan’s IMF-backed programme has unlocked about $1.2–1.32 billion, but ties stability to tighter budgets, broader taxation, and subsidy restraint. This supports near-term solvency and reserves while raising compliance costs, dampening demand, and constraining public spending relevant to investors.

Rare Earth Supply Leverage

China’s dominance in processing remains a major chokepoint, refining over 90% of global rare earths. Heavy rare earth exports are still around 50% below pre-restriction levels, raising prices sharply and threatening production across autos, aerospace, electronics, wind, and defense supply chains.

Trade routes and logistics diversion

Disruption around Hormuz has raised freight costs and left Turkish ships stranded, but Ankara is accelerating alternative land and multimodal corridors, including the Middle Corridor. Businesses should expect route diversification, customs adaptation, and shifting lead times across Gulf-Europe supply chains.

USMCA review and tariffs

Mexico’s July 1 USMCA review is the top business risk, with possible annual reviews replacing a 16-year extension. U.S. Section 232 tariffs still hit steel, aluminum, vehicles and parts, complicating pricing, sourcing, and long-term manufacturing investment decisions.

Domestic Confidence Continues Eroding

Business and consumer sentiment weakened again in April, with the chamber’s confidence index falling to 42.2 and consumer confidence to 50.6, an eight-month low. Soft consumption, high household debt, and weaker farm incomes are increasing downside risks for domestic-facing sectors and SMEs.

LNG Exports Strengthen Geoeconomics

US LNG is becoming a larger strategic lever as disrupted Middle Eastern supply lifts demand from Asia. Shipments to Asia rose more than 175% since late February, improving export opportunities in energy, shipping and infrastructure while tightening domestic-industrial energy planning considerations.

Export competitiveness under pressure

Turkish exporters report eroding competitiveness as domestic inflation outpaces currency depreciation. March exports fell 6.4% year on year while imports rose 8.2%, with textiles, apparel, and leather especially exposed. Foreign firms sourcing from Turkey face mixed prospects on pricing versus financial stability.

Sanctions Enforcement Intensifies Globally

Washington is expanding sanctions on Iranian exchanges, front companies and 19 vessels, while warning of secondary sanctions for firms facilitating oil, petrochemicals or transit payments. This raises compliance, banking and counterparty risks across shipping, trade finance, and regional intermediaries.

Tourism Rules Tighten Amid Slump

Thailand is cutting visa-free stays from 60 to 30 days for travellers from 93 countries as arrivals weaken. Foreign tourist numbers reached 12.4 million through May 10, down 3.43% year on year, affecting hospitality demand, aviation, retail, and labor planning in tourism-linked sectors.

Red Sea Port Expansion

Port and shipping expansion is accelerating under the logistics strategy, with 18 new maritime services totaling 123,552 TEUs and container throughput up 20.89% year on year in February. Better connectivity supports trade, re-export, warehousing and distribution investment decisions.