Country economic risk

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Country economic risk

Developments in a national economy that can affect the outcome of an international financial transaction.

Country Economic Risk

The likelihood that economic developments in one country may negatively impact international transactions. Suppose Country A and Country B enjoy a free trade agreement, which greatly increased trade between the two nations. A protectionist party may be elected to office in Country B and immediately revoke the FTA. Not only will this affect business, perhaps both positively and negatively, within Country B, but exporters from Country A will suddenly find that their investments have evaporated. See also: Country political risk.