Manufacturing Supply Chain Strains

UK factories face the worst supply-chain stress since 2022, with slower delivery times, customs delays, port disruption and material shortages. Input costs are rising at the fastest pace since October 2022, increasing inventory risk, procurement complexity and contract repricing pressure.

Foreign investment remains resilient

Costa Rica attracted $5.12 billion in FDI in 2025, above $5 billion for a second year, with manufacturing receiving $3.9 billion. Reinvestment rose 26%, but new capital fell 18%, signaling confidence in incumbents yet more selective greenfield expansion.

Five-Year Plan Favors Industry

China’s new 2026–2030 Five-Year Plan emphasizes innovation, advanced manufacturing and industrial upgrading over a decisive consumption-led rebalancing. That supports strategic sectors, but also reinforces overcapacity concerns, intensifies foreign competition and shapes investment opportunities toward state-backed technology, energy and advanced industrial ecosystems.

China Trade Stabilisation with Limits

Relations with China have stabilised, supporting trade recovery and possible expansion under a reviewed bilateral FTA, but dependence remains high in minerals and energy. Businesses still face strategic exposure from policy frictions, concentration risk and China’s dominant midstream processing ecosystem.

Energy Import Dependence Shock

Turkey’s heavy reliance on imported energy leaves trade balances, industrial costs and inflation highly exposed to oil and gas shocks. Officials estimate some years’ energy bill at $70-$100 billion, while a $10 Brent increase could add $4-$5 billion to the current account deficit.

Monetary Tightening and Lira Stability

Turkey’s disinflation drive remains central to business planning, with March inflation at 30.9%, policy funding near 40%, and heavy FX intervention. Borrowing costs, pricing, hedging, and repatriation strategies remain highly sensitive to reserve trends and exchange-rate management.

US-China Strategic Economic Decoupling

US-China goods trade keeps shrinking as tariffs, export controls, and security restrictions deepen structural decoupling. The US goods deficit with China fell 32% in 2025 to $202.1 billion, pushing firms toward China-plus-one strategies, compliance upgrades, and alternative manufacturing hubs.

Energy Infrastructure Vulnerability

Russian strikes continue to damage power and heating assets, creating blackout and winter-readiness risks. Work is underway at 245 facilities, but delayed external support, including €5 billion intended for winter preparation, raises operational uncertainty for manufacturers and critical services.

Regional energy trade dependence

Israel’s gas exports are commercially and diplomatically significant for Egypt and Jordan, both of which faced shortages during the Leviathan halt. This underscores Israel’s role in regional energy trade, but also shows how security shocks can rapidly transmit through export contracts, pricing, and bilateral business relations.

Punitive Pharma Tariffs Reshape Trade

Washington’s new Section 232 regime imposes up to 100% tariffs on patented drugs and ingredients for noncompliant firms, with 120-180 day deadlines. The policy materially alters import economics, supplier selection, pricing strategies, and market-entry planning for multinational drug manufacturers.

Growth Slowdown and Inflation

The government cut its 2026 growth forecast to 0.9% from 1.0% and raised inflation to 1.9% from 1.3%, citing Middle East-related pressures. Slower demand and higher input costs could affect pricing, investment timing, consumer spending and logistics planning.

Strong Growth Faces External Shocks

Vietnam’s Q1 GDP grew 7.83%, but inflation reached 4.65% in March and external risks are intensifying. U.S. trade tensions, higher energy costs, and logistics disruption could squeeze manufacturers, weaken demand visibility, and complicate planning for investors and importers.

China ties stabilize cautiously

Australia and China are deepening official dialogue on trade, investment, mining, and clean energy, with discussion of upgrading ChAFTA and expanding Chinese imports. Improved relations support exporters, but businesses should still plan for regulatory friction, strategic scrutiny, and geopolitical volatility.

Antitrust Pressure Targets Big Tech

US regulators and lawmakers are intensifying antitrust pressure on dominant platforms, including Meta and self-preferencing legislation aimed at Amazon and Apple. This could alter digital market access, platform fees, M&A assumptions, and data strategies for internationally exposed businesses.

Energy Shortages and Gas Push

Energy security remains critical as Egypt's gas demand is about 6.2 billion cubic feet per day against production near 4.1 billion. New discoveries, including Eni's 2 trillion cubic feet find, may help, but near-term import dependence still raises costs and operational risk.

Inflation and Rates Turn Riskier

The SARB held the repo rate at 6.75%, but oil shocks and rand weakness are worsening inflation risks. Fuel inflation is expected above 18% in the second quarter, increasing financing costs, pressuring consumer demand, and complicating capital allocation and import-dependent operations.

Middle East Supply Shock

Conflict around Iran and disruption in the Strait of Hormuz have cut shipments to the Middle East by 49.1%, lifted oil prices, and constrained crude, LNG and feedstock flows. Firms face higher transport, energy, insurance and contingency-planning costs across regional operations.

Coalition Politics Complicate Policy Signalling

Coalition dynamics continue to shape economic policy messaging and reform delivery nationally and provincially. Ongoing tensions over budgets, affirmative action, land and empowerment policies can slow implementation, complicate investor forecasting and raise uncertainty around the pace of structural reform.

EU Alignment Reshapes Regulation

Brussels is pressing Kyiv to pass overdue laws on judicial reform, energy markets, railways, and regulatory procedures to unlock up to €4 billion. Parallel labor-code changes could add 300,000 formal jobs and over Hr.40 billion in annual tax revenue if effectively implemented.

Inflation and Rate Pressure Rising

Headline inflation eased to 3.7% in February, but fuel and fertiliser shocks are expected to reverse progress, with some forecasts pointing toward 4.5-5.0% inflation, raising borrowing costs, weakening demand visibility, and complicating pricing, hiring, and capital-allocation decisions.

Middle East Conflict Spillovers

Regional war dynamics are feeding market outflows, higher energy bills and weaker investor sentiment. The central bank estimates a 10% supply-side oil shock could cut growth by 0.4-0.7 points, while uncertainty dampens investment, consumption, tourism and export demand.

Production Cut and Supply Risk

With pipelines choked and storage filling, industry sources say Russia may need oil output cuts after export capacity fell by about 1 million bpd. Any sustained shut-ins would affect upstream services, equipment demand, and global commodity balances, with knock-on effects across industrial supply chains.

Gas infrastructure security risk

War-related shutdowns at Leviathan and Karish exposed the vulnerability of Israel’s offshore gas system. The month-long disruption was estimated to cost around NIS 1.5 billion, raised electricity generation costs by about 22%, and tightened export flows to Egypt and Jordan before partial restoration.

Foreign investment rules improve

Saudi Arabia’s 2025 Investment Law allows full foreign ownership and strengthens investor protections, supporting capital inflows despite regional turbulence. Incentives including tax exemptions, fee reductions, and easier capital flows improve entry conditions for multinationals in selected sectors.

Ports Gain From Shipping Diversions

Karachi Port, Port Qasim, and Gwadar are benefiting from rerouted regional shipping, with transshipment volumes surging and Port Qasim handling about 450,000 metric tons of petroleum products in March. This creates short-term logistics opportunities but may prove temporary and disruption-driven.

AI Data Rules Turn Pro-Growth

Japan is easing personal-data rules to support AI development while increasing penalties for misuse. The APPI amendment expands consent exemptions for statistical and AI processing, which should improve innovation conditions, but raises compliance demands around transparency, biometrics and minors’ data.

Auto Supply Chain Stress

The integrated North American auto sector remains under pressure from U.S. tariffs and policy uncertainty. January motor vehicle and parts exports fell 21.2% to C$5.4 billion, while manufacturers reported roughly C$5 billion in tariff costs, layoffs, and delayed model investment decisions.

LNG Leverage and Volatility

Higher LNG prices and disrupted Qatari supply have strengthened Australia’s regional energy leverage, but cyclones and domestic policy uncertainty complicate the outlook. Exporters benefit from elevated prices, while manufacturers and energy users face spillover cost pressures and supply volatility.

Energy Costs Erode Competitiveness

South African industry still faces severe energy vulnerability through elevated electricity and diesel costs. Mining groups report electricity tariffs up nearly 1,000% since 2007 and fuel shocks are lifting operating costs, margins, inflation risks and backup-power dependence across sectors.

Supply Chain Regionalization Accelerates

Companies are accelerating China-plus-one and regional diversification as US trade barriers, geopolitical friction, and compliance risks intensify. Deficits surged with alternative suppliers including Taiwan at $21.1 billion and Mexico at $16.8 billion in February, reinforcing nearshoring, dual sourcing, and inventory redesign.

Shadow Banking Payment Networks

Iran’s trade flows increasingly depend on opaque financial channels using shell companies, small banks, and layered accounts across China, Hong Kong, Turkey, India, and Europe. For businesses, this sharply raises sanctions, AML, counterparty, and payment-settlement risks.

Chabahar Corridor Faces Uncertainty

Chabahar remains strategically important for India, Central Asia access, and supply-chain diversification beyond Pakistan, but its sanctions waiver expires this month. Uncertainty over operating rights, financing, and legal protections complicates logistics planning, infrastructure investment, and long-term corridor development for international users.

Red Sea shipping insecurity

Houthi and Iran-linked threats around Bab el-Mandeb and the Red Sea continue to endanger vessels serving Israel, raising freight premiums, extending transit times and increasing rerouting risk for importers, exporters and manufacturers dependent on Asia-Europe maritime supply chains.

IMF Anchors Macroeconomic Stability

Pakistan’s IMF staff-level deal would unlock $1.2 billion, taking programme disbursements to about $4.5 billion. Fiscal consolidation, tighter monetary policy, exchange-rate flexibility and tax reforms remain central, shaping import financing, investor confidence, sovereign risk pricing and corporate planning.

Dual Chokepoint Escalation Risk

Iran-linked pressure on the Houthis raises the possibility that Bab el-Mandeb and the Red Sea could be disrupted alongside Hormuz. This would threaten the main Gulf bypass route, intensify rerouting around Africa, and deepen delays for energy, container, and bulk supply chains.

Energy Import Vulnerability Exposed

Taiwan imports nearly 96% of its energy, with over 70% of crude oil sourced from the Middle East and roughly one-third of LNG from Qatar. Recent petrochemical disruptions and price spikes underline operational exposure for manufacturers, logistics operators, and energy-intensive exporters.