Regional Funding and Infrastructure Gaps

Persistent underinvestment and complex funding formulas, especially in Wales and the North, continue to hinder infrastructure upgrades. Businesses face challenges in logistics, labour mobility, and regional development, with new government strategies aiming to address disparities.

Accelerated Trade Policy Reforms

India’s government has rapidly expanded free trade agreements with the UK, New Zealand, Oman, and EFTA, recalibrating trade policy to diversify export markets and attract FDI. These reforms enhance global market access but also expose India to external risks, including US tariffs and global trade disruptions.

EU-Mercosur Trade Agreement Tensions

France’s opposition to the EU-Mercosur trade deal has triggered mass farmer protests and political divisions. The agreement, set to be signed despite French resistance, could flood markets with cheaper imports, threatening French agriculture and food sovereignty.

Labor Market Reform and Wage Pressure

2026 brings decisive labor reforms, including stricter inspections, higher minimum wages, and possible workweek reductions. These changes raise compliance costs and affect competitiveness, especially for SMEs and export-oriented sectors, while informal employment remains a persistent challenge.

Persistent Political and Corruption Risks

High-profile anti-corruption raids, including against opposition leader Yulia Tymoshenko, highlight ongoing governance challenges. Political infighting and corruption allegations can delay reforms, undermine EU accession, and complicate the investment climate, despite progress in institutional reforms and external oversight.

Sustainability Standards and Market Access

Environmental regulations and sustainability standards are increasingly shaping Brazil’s export competitiveness. The end of the Soy Moratorium raises deforestation concerns, potentially threatening market access, especially in the EU, where new trade deals include strict environmental provisions.

Supply Chain Relocation and Resilience

Vietnam remains a top destination for supply chain relocation, with firms like Google shifting production from China. However, underdeveloped local supplier networks, logistics gaps, and regulatory bottlenecks present ongoing risks to supply chain resilience and operational efficiency for international manufacturers.

Energy Costs and Industrial Competitiveness

High energy costs and unreliable infrastructure continue to undermine Pakistan’s industrial competitiveness. Policymakers are considering lowering power tariffs and improving credit access for SMEs to boost manufacturing and attract foreign direct investment, contingent on IMF approval.

Trade Policy And FTA Leverage

Vietnam actively expands and upgrades FTAs, targeting 8% export growth and a $23 billion trade surplus in 2026. FTAs with the US, EU, CPTPP, and RCEP drive market access, regulatory reforms, and higher standards, fostering export diversification and resilience against global trade tensions.

Nile Water Crisis and GERD Dispute

The Grand Ethiopian Renaissance Dam (GERD) has intensified Egypt’s existential concerns over Nile water security. Ongoing disputes with Ethiopia threaten agricultural output, food prices, and political stability, while U.S. and Israeli mediation efforts aim to secure binding water-release guarantees critical for Egypt’s future.

Robust Public Investment Surge

Turkey’s 2026 Public Investment Program allocates nearly 1.92 trillion TRY across 13,887 projects, prioritizing infrastructure, energy, health, education, and earthquake resilience. This unprecedented scale of investment is set to enhance logistics, energy independence, and social infrastructure, directly impacting supply chains and regional connectivity.

Agricultural and Resource Export Diversification

Australia continues to diversify export markets and products, leveraging new trade agreements and investments in minerals, agriculture, and technology. However, exposure to external shocks—such as Chinese trade actions or global commodity price swings—remains a significant risk for international investors and supply chains.

Vision 2030 Drives Economic Diversification

Saudi Arabia’s Vision 2030 reforms are transforming the business landscape by reducing oil dependence, opening new sectors, and attracting record foreign investment. Over $400 billion in investment volume and a fivefold increase in FDI since 2017 underscore the scale and momentum of economic diversification.

Chinese Imports Challenge Local Industry

A surge in Chinese vehicle imports has widened South Africa’s trade deficit with China, threatening the competitiveness of the domestic automotive sector—a major employer and exporter. This trend may impact local manufacturing, supply chains, and trade sustainability.

Energy Revenue Decline Strains Budget

Russia’s oil and gas revenues fell 24% in 2025, hitting a five-year low and driving a record budget deficit of 2.6% of GDP. Lower prices, sanctions, and Ukrainian attacks undermine fiscal stability, pressuring government spending and increasing economic uncertainty for investors.

Energy Transition and Renewables Surge

Saudi Arabia is rapidly expanding renewable energy capacity, with solar and wind projected to deliver nearly 20% of electricity by 2029. The Kingdom’s energy transition, supported by facilities like CATL’s Riyadh hub, is critical for decarbonization, industrial competitiveness, and compliance with global standards such as the EU’s Carbon Border Adjustment Mechanism.

Escalating Human Rights Crisis and Crackdown

Iran’s security forces have responded to protests with lethal force, causing mass casualties and widespread arrests. The government’s actions have drawn international condemnation, increasing reputational and compliance risks for foreign investors and partners.

Strategic Shift Toward India and Indo-Pacific

Germany is deepening economic, technological, and defense ties with India, positioning the Indo-Pacific as a core region for diversification. The India-EU Free Trade Agreement, expanded mobility, and joint ventures in green energy and semiconductors are set to reshape supply chains and investment flows.

Fragile Economic Recovery at Risk

Germany’s modest economic rebound is jeopardized by renewed transatlantic trade tensions. After years of stagnation and a 0.2% GDP growth in 2025, new tariff threats and global uncertainty could derail forecasts for 1.3% growth in 2026, especially as exports to the US fell 9.4% year-on-year, highlighting vulnerability to external shocks.

Domestic Refining Versus Export Pipelines

Canada’s energy debate is shifting toward building domestic refining capacity to capture more value and reduce reliance on US processing. This strategic choice will shape future investment, competitiveness, and resilience against global oil market shocks and trade policy shifts.

EU Accession Progress and Challenges

Ukraine’s path toward EU membership is marked by significant legal and institutional reforms, but faces hurdles from internal politics and EU member state vetoes. The accession process shapes regulatory alignment, market access, and long-term investment prospects.

Monetary Policy Shifts And Interest Rate Uncertainty

The Federal Reserve faces leadership changes and ongoing debates over inflation and interest rates. Uncertainty in monetary policy affects capital costs, currency volatility, and investment strategies for international businesses operating in or exposed to the US market.

Political Centralization and Reform Acceleration

Vietnam’s leadership is consolidating under General Secretary To Lam, who is likely to combine the roles of party chief and president. This centralization enables rapid policy shifts, deep administrative reforms, and streamlined investment approvals, but raises concerns over checks and balances and long-term institutional resilience.

Energy Independence and Downstreaming Push

Indonesia is accelerating its drive for energy independence, targeting a five-year timeline to reduce fuel imports through new refineries, solar energy, and downstream projects. This policy shift will reshape energy supply chains, investment flows, and local sourcing requirements.

Japan’s Strategic US Alignment Deepens

Amid regional uncertainty, Japan is accelerating defense cooperation and supply chain realignment with the US, including a ¥80 trillion ($550 billion) investment plan. This shift is intended to reduce dependence on China and bolster economic and security resilience.

Escalating Agricultural Protests and Policy Risk

Mass farmer protests in Paris highlight deep discontent with trade liberalization, regulatory burdens, and competitiveness concerns. These disruptions impact logistics, threaten political stability, and increase the risk of abrupt regulatory changes affecting agri-business, food imports, and rural supply chains.

Privatization and Foreign Investment Drive

Egypt is accelerating privatization and asset sales, offering incentives and infrastructure upgrades to attract foreign investors. Recent FDI inflows rose by 20-25%, supported by IMF agreements and credit rating upgrades. The government aims to reduce state participation and position Egypt as a regional trade and investment hub.

Energy Sector Expansion and Regional Integration

Major investments in natural gas infrastructure, such as the Leviathan field expansion and long-term export deals with Egypt, position Israel as a key regional energy supplier. These developments support energy security and export revenues but are exposed to regional tensions and shifting global energy markets.

Labor Reform and Compliance Pressures

2026 marks a pivotal year for labor reform enforcement, including stricter inspections, reduced workweek to 40 hours, and higher minimum wages. Companies must adapt to new compliance standards under USMCA commitments, affecting cost structures and operational flexibility, especially for SMEs.

Regional Alliances and Competitive Dynamics

China’s actions are testing US support for Japan and may influence broader regional alliances, including South Korea and the Quad. The evolving landscape could reshape trade patterns, investment strategies, and the competitive environment for international businesses in Asia.

Ruble Volatility and Financial Strain

The Russian ruble faces renewed pressure due to falling export revenues and reduced central bank interventions. Currency instability heightens risks for foreign investors and complicates cross-border transactions and financial planning.

EU Accession and Regulatory Reform

Ukraine’s progress towards EU membership is tied to reforms in governance, anti-corruption, and economic policy. EU integration promises a more predictable regulatory environment for investors but requires sustained compliance and institutional strengthening.

Export Controls and Supply Chain Security

China is intensifying export controls on critical minerals and dual-use goods, especially targeting countries perceived as adversaries. These measures disrupt global supply chains, particularly in high-tech and automotive sectors, and signal a willingness to weaponize trade policy for geopolitical leverage.

Sectoral Divergence: Defense Gains, Cyclicals Suffer

While export-driven sectors like automotive and luxury goods face losses, defense companies such as Rheinmetall and Renk have seen stock gains amid heightened geopolitical tensions. This divergence underscores shifting investor sentiment and the growing importance of security-related industries in Germany’s economic landscape.

Defense Technology as Economic Anchor

Israel’s defense-tech sector has become a key diplomatic and economic asset, attracting major foreign investment and strategic partnerships, especially from Europe. This shift bolsters Israel’s global influence but also ties its economic resilience to the volatile defense sector.

Persistent High Inflation Challenges

Turkey’s inflation remains elevated at 30.89%, with projections aiming for 16% by year-end. Tight monetary policy continues, impacting borrowing costs, consumption, and business planning. Inflation volatility poses risks to investment strategies and supply chain cost management.