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Haiti Country Risk Report 2Q 2016

Haiti Country Risk Report 2Q 2016

Core Views

Haiti will struggle with subdued growth, significant political unrestand sustained budget deficits over our 10-year forecast period. Whilethere is concerted international effort to assist Haiti’s reconstructionfollowing the 2010 earthquake, it will take decades for the countryto raise living standards to those of regional peers.

Suppressed global oil prices will damage Haitian long-term growthprospects. Haiti relies on discounted oil from Venezuela as its primaryfuel cost. With low global oil prices set to hit the Venezuelaneconomy hard, the government in Caracas is likely to scale back its‘Petrocaribe’ discounted oil programme, to the detriment of long-termHaitian economic activity.

We expect economic growth in Haiti to tick up marginally in 2016on the back of robust exports to the US. We forecast the Haitianeconomy to grow by 1.9% in 2016 compared to 1.7% in 2015. Tradeagreements with the US together with stronger growth in the USeconomy will drive Haiti’s apparel exports over the year ahead.

Persistent fiscal deficits and waning Petrocaribe flows, in the wakeof lower oil prices, will create a financing gap over 2016 and 2017.

We forecast the fiscal balance to remain in deficit over the next twoyears and will average 5.2% of GDP.

The weak exchange rate will be the main driver of inflation over theyear ahead due to a high exchange rate pass-through to inflation.

Furthermore, the drought experienced in 2015 will keep food priceselevated due to reduced domestic agricultural output.

The indefinite postponement of Haiti’s second-round presidentialelection will increase political risk in the country, as it approachesthe end of President Michel Martelly’s term. Continued public unrestwill complicate negotiations for an interim government and increasethe risk a constitutional crisis.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Exports To Outperform Amid Slow Growth
Economic growth in Haiti will accelerate marginally in 2016 on the back of robust exports to the US. Favourable trade agreements and
stronger growth in the US economy will drive demand for Haiti's apparel exports.
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Monetary Policy
Exchange Rate Depreciation Will Send Inflation Higher
Inflation in Haiti will head higher in the next year, as depreciation stokes imported price growth and drought conditions push up food
prices. The elevated inflation will undermine already weak consumer purchasing power and further exacerbate elevated popular
discontent.
Monetary Policy Framework
Fiscal And Debt Outlook
End Of Petrocaribe Will Keep Financing Gap Substantial
Haiti 's fiscal deficit will remain relatively wide through 2017 as financial inflows from Venezuela's Petrocaribe programme into the
country dissipate in the wake of low oil prices. Haiti will finance its shortfalls through debt issuances, increasing its debt load as well as
raising the cost of financing new debt.
Structural Fiscal Position
External Trade And Investment Outlook
Import Dependence To Drive Widening Deficit
Haiti's current account deficit will widen in the next two years as demand for agricultural products and manufacturing inputs boosts
goods imports. Remittance in flows will provide support to the current account, preventing a more significant widening of the shortfall.
Outlook On External Position
TABLE: TOP FIVE GOODS EXPORTS IN
TABLE: TOP FIVE GOODS IMPORTS IN
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
Long-Term Economic Outlook
Likely Withdrawal Of Petrocaribe Programme To Weigh On Outlook
Haiti will struggle with subdued growth, significant political unrest and sustained budget deficits over our 10-year forecast period. While
there is concerted international effort to assist Haiti's reconstruction following the 2010 earthquake, it will take decades for the country to
raise living standards to those of regional peers.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 2: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Election Postponement Signals Rising Political Risk
The indefinite postponement of Haiti's second-round presidential election will increase political risk in the country, as it approaches the
expiration of President Michel Martelly's term. Continued public unrest will complicate negotiations for an interim government and could
risk a crisis of legitimacy.
Long-Term Political Outlook
Major Threats To Stability To Remain Prominent
Haiti will remain one of the most politically unstable countries globally. The country is still struggling to recover from the catastrophic
2010 earthquake, a situation made worse by rampant poverty, weak governance and endemic corruption.
Chapter 3: Demographic Outlook
Demographic Outlook 2016
TABLE: POPULATION BY AGE GROUP
TABLE: POPULATION BY AGE GROUP %
TABLE: POPULATION HEADLINE INDICATORS
TABLE: KEY POPULATION RATIOS
TABLE: URBAN/RURAL POPULATION & LIFE EXPECTANCY
Chapter 4: BMI Global Macro Outlook
Global Macro Outlook
Downside Risks Gather Momentum
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
TABLE: MACROECONOMIC DATA & FORECASTS

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