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The first thing I do when evaluating investment opportunities in a new country is to take a big-picture snapshot. The three most important macroeconomic indicators across the board in my mind are:

• Real GDP growth (as you mentioned) – preferably at least for the past five years and consensus forecasts for the next twelve months

• Producer or consumer price inflation (pay more attention to the producer number if the country is a major manufacturing center like China)

• Headline unemployment.

For the next level of detail, GDP composition is important – that is, percentage contribution to GDP of personal consumption expenditures (PCE), business investment, government spending, and net exports. That gives you direction for what other indicators really matter given what sectors of the economy create value.

For example a consumer-driven economy like the US, where the contribution of PCE makes up about 70% of GDP, is highly sensitive to indicators like the Consumer Confidence Index and figures for retail sales. In a more manufacturing-oriented economy, like China, you would look at other data points such as the price trends for industrial commodities like copper, crude oil and building materials. It’s also important to understand what economic sectors contribute the most value to the economy: Is it mostly reliant on natural resources and basic raw materials (e.g. Russia)? or on value-added services (such as India)? or a diverse mix of basic commodities, value-added manufacturing and financial services (such as Malaysia)?

On the risk side of the equation, you are looking at many of the same metrics as discussed above, but with a focus on whether year-to-year trends are stable or volatile. A good place to start is the MSCI Country Index for equities – this is a good proxy for the national stock market. Compare the standard deviation of the country index in question to a developed-economy benchmark like the S&P 500. Look at population trends – for example, countries like Russia and Japan are seeing population declines, which can be a worrying long-term trend. Price levels provide information about risk – look at trends in central bank lending rates, currency fluctuation (if it is a freely floating currency), and inflation rates to get a

sense of how stable or not prices are. Finally, check out the latest Transparency International ratings to see where the country ranks in terms of fair business practices or institutional corruption. Trend comparisons can be more important than static numbers – e.g. a country that is ranked 50th today but was 95th a couple years ago may be a better bet than one that is ranked 30th but used to be in the top 10.