March 2001
Country risk Mar 2001: Cautious optimism on world economy
In the past Euromoney’s country risk ratings have been reliable lead indicators of dips and surges in the world’s economic cycle. Six months ago the global economy looked in fine fettle, underpinned by favourable commodity prices and strong growth in developed countries. Financial markets are fearful this is about to change. Analysts’ forecasts for economic performance are noticeably lower than in September’s survey. But it’s not all doom and gloom. Research by Damon Ivanics and Andrew Newby
Our analysts are still optimistic about the world's largest economy, for all the recent discussion about a possible recession. Any concerns about a hard landing in the United States are not reflected in their overall rating of its economic performance, which has even risen since last September's review.
Indeed ratings for a clear majority of countries - 106 in all - and 94 country scores for wealth-adjusted economic performance have been revised upwards. Some caution is advisable however, especially in emerging markets.
In Japan and China, GNP growth projections for both 2001 and next year have been revised upward since September's survey. Despite this, overall country risk ratings for all major Asian economies, with the exceptions of Singapore and India, have fallen. The steady decline of Japan down the risk ratings now raises the prospect of its country risk scores being de-coupled from those of its peers in the developed world. On February 22nd, Standard&Poor's lowered its long term sovereign credit ratings on Japan to AA+ from AAA. This reflected the government's diminished fiscal flexibility, its rising debt levels, and its protracted approach to structural reform.
More information on country risk
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