The political index is an indicator of political stability, seen as a pre-requisite for a stable economy and Operational Risk. The long- term political score considers more structural elements such as: Is there a functioning democracy? ...Have recent governments pursued similar, enlightened policies amid a stable political environment? The short-term political score considers more transient influences such as: Have there been recent large-scale dem- onstrations or strikes? To what extent have these threatened the political status quo? ...What is the current position in the political cycle � to what extent is this contributing to political risk? Is the government having trouble passing legislation?
...The economic index assesses the degree to which the country approximates the ideal of non-inflationary growth with contained fis- cal and external deficits and manageable debt ratios. The index uses as raw material historical data and forecasts fed in from BMI s country databases: as historical data are revised and forecasts change, so the scores change. Factors in the long-term score include GDP growth, unemployment, inflation, real interest rates, exchange rates, the fiscal balance, the current account balance and external debt. A number of other structural factors are also thrown into the equation, including dependence on the primary sector, reliance on commodity imports, reliance on a single export sector and central bank independence. The factors included in the short-term score are a subset of those in the long-term score. ...A number of other structural factors are also thrown into the equation, including dependence on the primary sector, reliance on commodity imports, reliance on a single export sector and central bank independence. The factors included in the short-term score are a subset of those in the long-term score.
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