Possibly by now everyone is already aware that the business world has been hit by a global financial crisis which affected adversely many companies in terms of their operation. As a consequence big investment and lending companies have either reduced or totally cut-off their investment as the market is no longer receptive to any business venture whether new or expansion.
Thus, this phenomenon has created a ripple effect which gives fears among the general public and resulted to holding-on of purchases on personal needs and deferring of personal investment. People in general are now skeptical about business and investment especially in countries that are badly affected by this crisis for fear that they will just end up losing their money. Although this crisis is global in nature there are still countries that provides a good investment climate, hence this would be the task now of an investor to identify.
And one of the best ways is to know and understand the macro-economic performance of a country through their economic indicators. With Investment climate the breakthrough in information technology this is not difficult to obtain these economic indicators and from this data one can set up criteria to be a guide for investment.
If in the stock market one should look at the performance of the particular company, so as with the investment in the country one should look at the macro-economic performance through its economic indicators as follows:
a) Gross domestic products (GDP) – refers to the economic growth or shrinkage and is normally presented in percentage. A negative GDP or barely above zero will show you that the country is in economic troubles.
b) Gross International Reserve (GIR) – refers to amount of the country’s wealth and this is shown mainly in terms of its capacity to pay for its imports. Normally this is measured in terms of the number of months to cover for imports. A month import cover is critical; hence, it is not a good move to invest.
c) Currency- refers to the value of the country’s money with respect to the generally accepted monetary standard value (US Dollars & Euros). A lower value of money compared with its historical record is not good as it makes investment becoming expensive.
d) Inflation – refers to the rate of change of prices of basic goods and services. A high inflation is not good for the people as their expenses on basic needs tend to go up; thus, reducing their savings for purchases of other goods and may not be good for the business in general.
e) Interest rate – refers to the cost of using or borrowing money. A high interest rate is not ideal for the country’s investment and business as it becomes more expensive to operate.
f) Industry sector growth – this refers to the different areas of operation such as: Agriculture, Automotive & Machinery, Power, Real Estate, Telecommunication & Information Technology, etc. This is quite important to look because your investment success is determined by the performance of your chosen industry.
These are but a few of the macro-economic indicators to evaluate aside from the particular project description and business details that a potential investors should evaluate when planning to invest. Though this is not a 100% guide to a viable investment it is relatively an important point to consider in order to achieve a higher degree of success.