Sudan Business Forecast Report Q3 2008

Publication Date	June 2008
Publisher	Business Monitor
Product Type	Report
Pages	50
ISBN Number	1757-076X
Product Code	BMI02077

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Summary

Political Risk To The Forefront A surprise attack by Darfur rebels in the capital in May has created a significantly more volatile political environment in Sudan. It is uncertain yet whether the latest events will provoke the government into a general hardening of its stance, or force it into reviving long-delayed power-sharing provisions with South Sudan. In the economy, meanwhile, expansion is still taking place at a rate which other countries would be envious of. Strong investment - both in the oil sector and non oil physical infrastructure - means that the broad outlook remains good, with real economic growth on course to remain at around 8% throughout our forecast period (to the end of 2012).

The rebel attack on Khartoum, Sudan's capital, came as a shock to the regime and international observers alike, raising political risk above its already-elevated level. The Justice and Equality Movement (JEM) was responsible for the attack which reportedly killed around 65 people. At this stage, it is possible to make only tentative predictions as to the consequences of the attack on Khartoum. It is difficult to see the government of President Omar al-Bashir collapsing as a result - it is a battle-hardened regime that has proved itself a durable and obstinate survivor. One thing is clear: the government has been given a good excuse to crack down on enemies, whether real or perceived.

The prospects for Sudan's dominant oil sector remain robust. We anticipate a rise in oil output during the course of 2008 to 560,000 barrels per day. Taken in tandem with our upbeat growth forecast for the non oil sector, this produces economic growth for the economy as a whole of 7.9% in 2008, little changed from the rate seen in 2007. However, Sudan's consumer prices are being hit by the double whammy of rising energy prices and food prices, and we expect inflation to average 10.0% in 2008. The fiscal position, meanwhile, is set to receive a boost from the elevation of oil prices, and we forecast that the fiscal accounts will move into surplus this year.

Sudan's business environment is hindered by its relatively small workforce, heavy regulatory burden and widespread insecurity. Corruption and the ineffective judiciary are also key problems for companies operating in the country. Looking ahead, however, infrastructure in Sudan is likely to benefit significantly from oil-funded investment. The country continues to benefit from its strong relationship with China.

Content

Executive Summary
Political Risk To The Forefront
Chapter 1: Political Outlook6
- SWOT analysis
- BMI Political Risk Ratings
- Table: Sudan Political Overview
- domestic Politics8
- Rebel attack no Threat To Central Government Stability
- A surprise attack by Darfur rebels in the capital in May has created a significantly more volatile political
- environment
- Foreign Policy
- uS Relations to normalise?
- Relations between the US and Sudan may ameliorate from a low base over the remainder of this year, but
- progress in Darfur will be fitful at best, despite the (partial) deployment of the hybrid UN-AU force
Chapter 2: Economic Outlook
- SWOT analysis13
- BMI Economic Risk Ratings
- Introduction
- Although GDP growth came in below expectations in 2007, the economy is still expanding at a rate which other
- countries would be envious of
- Economic activity
- a Well-Oiled Economy
- Growth and foreign investment in this oil-buoyed economy remain strong, helping to offset concerns about the
- country's high current account deficit
- Table: Economic activity
- Table: Monetary Policy16
- Monetary Policy
- Inflation Outlook Worsens
- Rising global food prices mean that Sudan's consumer price inflation is likely to average nearly 10% y-o-y in 2008
- Volatility of food prices and the fixed exchange rate peg pose significant risks to both the upside and the downside
- Fiscal Policy
- Oil Prices To Shore up Fiscal accounts
- Amid a further surge in oil prices Sudan should see a fiscal surplus this year equating to 2% of GDP. However,
- an anticipated correction in oil prices will likely see the surplus reduced during subsequent years
- Table: Fiscal Policy
- Balance Of Payments
- Widening C/A Deficit To Be Covered
- Sudan's current account deficit remains extremely high, and is likely to rise to over 16% of GDP in 2009, but
- significant investment inflows mean that this deficit can be absorbed
- Table: Balance Of Payments
- Exchange Rate policy
- Managed Float To Stay, For now
- Sudan's New Sudanese Pound remains pegged to the US dollar, and the authorities are likely to continue to
- operate a heavily managed exchange rate
Chapter 3: Special Report
- Business Outlook For Global Frontier Markets
- Growing Fast On The new Frontier
- The 41 states that BMI examines in a new report on our online service may make up only a small slice of the world
- economy, but they possess characteristics that will see them gain importance in the eyes of investors and global
- businesses over the coming years
- Frontier Investment
- Potential and Pitfalls
- The spectacular macroeconomic performance of frontier markets in recent years has been matched by mildly
- successful efforts to deepen capital markets
- Table: Frontier Markets - Key data and Projections For Top 10 Countries
- Table: GdP Per Capita, uS$ (In Order Of % Increase)
- Table: Diversity Through Frontier Markets - Correlation Coefficients January 2004-April 2008
- Table: Frontier Market Indices24
- Regional Overview
- Laos
- neighbouring Economies The Key To Growth
- Laos's GDP growth has been boosted in recent years as neighbours China, Thailand and Vietnam compete for its
- natural resources
- Yemen
- Huge Potential, But don't Bank On GCC Membership
- Markets do not come much more frontier than Yemen, and, as would be expected, there is huge potential for
- development, with the prospect of eventual GCC membership likely to act a key investment pull
- Table: Yemen Economic activity
- democratic Republic Of The Congo
- Mining Industry To drive Growth
- The Democratic Republic of the Congo's mining industry will be a key driver of growth and is likely to attract
- significant levels of FDI, with our real GDP forecasts standing at 8.3% and 7.9% in 2008 and 2009, respectively
- Table: democratic Republic Of The Congo - Economic activity
- Cuba
- Investment Prospects after Fidel
- The accession of a new leadership structure in Cuba has sparked excitement that the 45-year-old trade embargo
- with the US may be lifted and Cuba may move toward market liberalisation
- Table: Cuba Macroeconomic data and Forecasts35
- Mongolia
- Minerals To drive Economic Boom
- Mongolia is in the midst of a massive resource-led economic boom that should lift GDP growth into the double
- digits and underpin robust increases in exports and inflows of foreign investment capital over the long term
- Table: Mongolia - Economic activity
Chapter 4: Business Environment38
- SWOT analysis
- BMI Business Environment Risk Ratings39
- Sudan Business Environment
- Table: BMI Business & Operational Risk Ratings
- Institutions
- Table: BMI Legal Framework Ratings42
- Infrastructure
- Market Orientation
- Sudan: Annual FDI Inflows45
- Table: Middle East & africa, Annual FDI Inflows
- Table: BMI Trade Ratings46
- Table: Top Export destinations
- Operational Risk