Disinflation Amid Tight Policy

Turkey’s annual inflation slowed to 32.61% in May, but pricing pressures remain elevated and sensitive to energy volatility. High rates, fiscal restraint and lira management still shape financing costs, demand conditions, contract pricing and investment timing for foreign firms.

Administrative Reform Execution Risks

Vietnam is pursuing sweeping state restructuring, including ministry consolidation, provincial reorganization, and major civil-service cuts. While intended to speed decisions and improve the investment climate, the transition has already disrupted enforcement, approvals, and coordination, creating near-term regulatory and operational uncertainty for businesses.

Security Gains and Regional Investment

Government officials are linking reduced domestic terrorism threats to faster investment and energy development in southeast Turkey. Expanded production in Gabar and planned drilling in Diyarbakir may improve regional infrastructure and industrial activity, though execution and security risks remain.

Targeted European Investment Push

Thailand is actively courting French and broader European investment in aerospace, alternative energy, smart grids, AI infrastructure, data centres, rail, and digital aviation. If converted into projects, these inflows could deepen industrial upgrading, improve technology transfer, and diversify foreign capital sources.

Human Rights and Sanctions Exposure

Conflict-related allegations, civilian casualties and displacement plans in Gaza are increasing legal, ethical and compliance scrutiny around Israel-linked business. Multinationals face greater exposure to ESG backlash, procurement exclusions, activist pressure and potential future sanctions or export-control complications in sensitive sectors.

Suez Canal Revenue Shock

Red Sea and wider regional shipping disruptions have cut Egypt’s Suez Canal transit income by more than $10 billion, worsening foreign-exchange shortages, debt servicing pressure, import financing constraints, and logistics uncertainty for firms routing cargo through or near Egyptian trade corridors.

Port Capacity Expansion Delayed

The proposed Tecon Santos 10 terminal would require R$6.4 billion and increase Santos container capacity by 50%, but regulatory disputes and possible litigation threaten timing. Delays would prolong port congestion, freight inefficiencies, and uncertainty for importers and exporters.

Hormuz Disruption Reshapes Logistics

Conflict-driven restrictions around the Strait of Hormuz are pushing Saudi Arabia to reroute trade via the East-West pipeline, Red Sea ports, and overland trucking. This improves resilience but raises transport costs, delivery complexity, insurance exposure, and regional contingency planning requirements.

Industrial Zone Investment Push

Egypt is intensifying efforts to attract manufacturing and supply-chain investment through the Suez Canal Economic Zone and new industrial clusters. Proposals include a Japanese industrial zone, while Ras El Hekma and Abu Qir logistics and port projects expand trade-facing capacity.

Fiscal strain and budget reprioritization

War costs are forcing tougher budget trade-offs, with reports of at least a $28 billion overspend and Russia’s deficit widening to ₽5.9 trillion by April. More resources are being diverted to defense and security, squeezing civilian sectors and increasing policy unpredictability.

Deforestation Rules Reshape Exports

Although Brazil’s 2025 deforestation fell 20.6% and dropped below 1 million hectares, compliance pressure is intensifying. EU anti-deforestation rules may affect nearly 264,000 properties, while US scrutiny links environmental enforcement directly to trade penalties, raising traceability and sourcing costs for exporters.

Mobilization Pressures On Business

Wartime mobilization and stricter rules for reserving staff at critical enterprises risk pulling additional employees from the workforce. For employers, this compounds staffing uncertainty, especially in transport, industry, and infrastructure, and complicates workforce planning, contract execution, and business continuity.

Strait of Hormuz Shipping Risk

Iran’s leverage over the Strait of Hormuz continues to disrupt a corridor that normally carries about one-fifth of global oil and LNG trade. Restricted transit, mine-clearing uncertainty, and possible permit or fee systems raise freight, insurance, and supply-chain continuity risks.

Judicial and Regulatory Uncertainty

Domestic institutional changes are becoming a material investment constraint. The OECD cut Mexico’s 2026 GDP forecast to 0.8% from 1.3%, citing uncertainty around judicial reform and the replacement of autonomous regulators, especially affecting investor confidence in energy, telecommunications and other strategic sectors.

Carbon Policy and Industrial Competitiveness

Federal review of industrial carbon pricing is creating uncertainty for manufacturers, energy producers and capital-intensive investors. Ottawa is weighing adjustments while provinces dispute competitive impacts, making emissions costs, project economics, and location decisions more difficult across Canadian industrial sectors.

Energy Price Shock Exposure

The Middle East conflict is keeping fuel and energy costs elevated, despite no immediate supply shortage. France has launched up to €1.2 billion in targeted relief while pushing electrification, but transport-intensive sectors, freight costs, margins and inflation-sensitive supply chains remain exposed.

Exchange Rate and External Vulnerability

Authorities and the IMF continue to back exchange-rate flexibility as a shock absorber, even as Pakistan remains exposed to imported fuel and regional disruptions. Businesses face ongoing currency volatility, margin uncertainty and higher hedging requirements for trade and procurement.

Nuclear Restarts Reshaping Power Mix

Japan is accelerating selective nuclear restarts to reduce LNG dependence and stabilize electricity costs, including Kashiwazaki-Kariwa Unit 6. Progress remains uneven because of regulatory hurdles and local opposition, leaving manufacturers exposed to continued energy-price volatility and regionally uneven power conditions.

Sanctions Pressure on Energy Exports

Western sanctions and shifting waiver rules continue to disrupt Russian oil trade, shipping and payments. Despite resilient flows to China and India, compliance risks, shadow-fleet exposure, and infrastructure attacks complicate export logistics, pricing, insurance, and long-term energy investment decisions.

Cross-Strait Security and Shipping

China’s intensified military and coastguard activity around Taiwan, including more frequent patrols and grey-zone pressure, raises risks to shipping lanes, cargo insurance, and contingency planning. Any disruption in the Taiwan Strait would quickly affect global trade, semiconductor flows, and regional operations.

Growth outlook remains constrained

Despite stronger oil income and resilient markets, broader growth is under pressure from conflict and uncertainty. The IMF cut Saudi Arabia’s 2026 growth forecast by 0.9 percentage points to 3.1%, signaling softer demand conditions for real estate, tourism, aviation, and discretionary corporate investment.

Industrial Competitiveness Under Pressure

Persistently high energy costs, regulation, and weaker export demand continue to erode Germany’s manufacturing base. Industrial strain is spreading beyond autos and chemicals into pharmaceuticals, raising relocation risks, reducing domestic investment, and complicating long-term capacity planning for international firms.

Managed US-China Trade Friction

Beijing and Washington are institutionalising a managed-trade approach rather than resolving structural disputes. A new bilateral trade board may ease tariffs on roughly $30 billion of non-strategic goods, but higher baseline US tariffs, export controls and policy unpredictability will keep sourcing, pricing and market-access risks elevated.

Sanctions And Blockade Escalation

US pressure on Iran’s oil and petrochemical trade is intensifying through maritime interdictions, secondary sanctions, and blacklisting of vessels, brokers, and front companies across Hong Kong, Singapore, Qatar, UAE, and elsewhere, sharply complicating payments, shipping, and third-country compliance exposure.

Climate and Food Inflation Risks

Below-normal monsoon and El Nino risks could lift food inflation, weaken rural demand and complicate monetary policy. For consumer-facing businesses, this matters for pricing, household purchasing power, agricultural inputs and the broader stability of demand across India’s interior markets.

Investment Hit by Legal Uncertainty

The OECD says uncertainty around judicial reform, regulatory changes and the USMCA review is depressing investment more than exports. It cut Mexico’s 2026 growth forecast to 0.8%, highlighting weaker investor confidence in rulemaking, dispute resolution and long-term project bankability.

Regulatory Burden and Bureaucracy

German businesses continue to cite bureaucracy, regulation, and high taxes as major barriers to investment. In an East German manager survey, 66% prioritized less bureaucracy, while 53% reported no positive impact from current economic policy, reinforcing risks of delayed capital spending and slower expansion.

Digital Border and Compliance Upgrade

Thailand launched a cloud-based digital arrival platform to cut immigration processing to under three minutes and keep personal data hosted locally. The system should ease business travel and tourism flows while signaling broader digitalisation of border management and compliance services.

Foreign Investment Screening Broadens

Political pressure is growing to expand CFIUS review of deals involving foreign capital, including passive sovereign wealth participation where sensitive personal data is involved. Cross-border investors should anticipate longer timelines, more conditions, and heightened review risk in media, technology, data-rich, and critical sectors.

South China Sea Hedging

Vietnam’s business environment remains shaped by careful balancing between China and the United States while defending maritime claims under UNCLOS. This diplomacy supports investor confidence, but any deterioration in South China Sea tensions could disrupt shipping security, energy access, and strategic manufacturing planning.

Transshipment Scrutiny Intensifies

Vietnam’s large U.S. goods surplus reached $178.2 billion in 2025, up $54.7 billion year on year, heightening scrutiny of origin fraud and rerouting from China. Multinationals should expect tighter customs checks, traceability demands, and supplier-audit requirements.

Critical Minerals And Trusted Supply

India and the United States have advanced critical-minerals cooperation as both seek alternatives to China-linked supply dependence. This supports investment in advanced manufacturing, semiconductors, batteries and strategic materials, and strengthens India’s appeal as a partner in trusted supply chains for sensitive industries.

Domestic Energy Output Rising

Sakarya gas output has reached 9.5 million cubic meters per day, targeted at 20 million in 2026 and 45 million by 2028, while Gabar provides 44% of domestic oil output, potentially easing import dependence and industrial energy-cost volatility over time.

Water Infrastructure and Scarcity

Water shortages in Gauteng and court action in the Eastern Cape highlight ageing systems, leaks, sewage failures and tanker dependence. With non-revenue water near 44.7% in Johannesburg, businesses face rising continuity risks for processing, sanitation, food production and workforce reliability.

Ports And Rail Privatization

Logistics reform is advancing through private participation in Durban’s Pier Two and expanded private rail access. Better port and freight performance could ease export bottlenecks, especially for mining and industrial cargo, but execution remains critical for supply-chain resilience.

Cross-Strait Security Overhang

Business planning remains shadowed by Taiwan Strait tensions and uncertainty around US security commitments. Debate over a pending US$14 billion arms package, coupled with persistent Chinese pressure, elevates contingency, insurance, shipping, and board-level resilience planning for multinational firms.