In the 1960 the South Korean economy was estimated to be smaller than that of Nigeria. The assignment requires you to compare the development of the two economies since 1960 and explain the basic elements of country risk analysis in terms of the economic, financial, political and social risks for South Korea and Nigeria.
1. Executive Summary
The report should start with an executive summary of no more than 600 words that identifies the key risks faced by investors in the each country. This should be agreed by the group.
The executive summary should identify the key risks faced in investing in each country and must have a clear conclusion as to which country’s sovereign bonds the group would invest in and why..
The student responsible for the executive summary will also be responsible for editing the report. This is to avoid repetition and inconsistency.
(600 words plus currency charts)
2. GDP Growth
Students should analyse the country’s growth potential in terms of the formula for GDP. The student should work on the four constituents of GDP.
Y = C+I+G+(X-M)
In this section: Students should obtain historical data, where available, and make projections for each constituent. The focus should be on the ability to grow domestic consumption; attract domestic / foreign investment; government spending (on infrastructure, healthcare and education); the net trade balance and each country’s ability to fund these activities through taxes. (500 words each)
A country’s currency is an indicator of a country’s economic health. The student should plot the graph of the South Korean Won against the US dollar and the Nigerian Naira against the US dollar over a 25 year period.
The student should refer to any impact from currency movements on each GDP component.
For part 3: The student should look at:
3. Country Risks
Students should consider the distribution of wealth, (GINI Co-efficient) and other development indicators, for each country.
Discuss the political risks associated with the chosen country, looking at. Internal conflicts and external conflicts.
Discuss the country’s ability to pay back its debt obligations, based on current sovereign debt levels and future obligations and on expected currency movements. Students should look at Budget deficits / surpluses.
(600 words each – 3 students)
Students should ensure that their reports use the most current data available and refer to recent news items as they relate to the assignment. Students will also receive credit for the use of relevant data, presented graphically or in tables.
As an example; the student looking at the net trade balance should obtain a 10 year history of the country’s balance of trade and present it in a table or graph. Identify the key exports and key imports of the country and discuss the outlook for these key industries. Explain any large swings (typical causes are currency movements and/or product prices).