This year there have been some changes to the methodology for Euromoney’s biannual country risk survey. In order for the ranking to become more subjective to the opinions of economists and research heads globally, the survey weightings have been changed to increase the influence of political risk, economic performance and access to bank finance/capital markets categories.
Within political risk there are now five categories the market can give their opinion on: government stability, regulation/regulatory environment, non-payment of loans/dividends/trade-related finance, non-repatriation of capital and corruption perception.
This makes for a far more robust data set and analytical tool. The same process has been applied to the economic performance sector where there are now five categories rather than one: bank stability/risk, monetary/currency stability, budget deficit/surplus, unemployment and economic GNP growth.
Selected results and tables for these category breakdowns have been published alongside the overall ranking.
To obtain the overall country risk score, Euromoney assigns a weighting to seven categories. These are political risk (30% weighting), economic performance (30%), debt indicators (7.5%), debt in default or rescheduled (5%), credit ratings (7.5%), access to bank finance/capital markets (10%), discount on forfaiting (10%).
• Political risk (30% weighting): Economists and heads of research worldwide were asked to rate each country for which they have knowledge across five categories: government stability, regulation/regulatory environment, non-payment of loans/dividends/trade-related finance, non-repatriation of capital and corruption perception. These raw scores were then averaged to produce a total score.
• Economic performance (30%): Economists and heads of research worldwide were asked to rate each country for which they have knowledge across five categories: bank stability/risk, monetary/currency stability, budget deficit/surplus, unemployment and economic GNP growth. These raw category scores were then averaged and the score was adjusted by the growth forecast percentage to produce a total score. For political risk and economic performance, where a country received fewer than three responses the score was weighted down by 20%.
• Access to bank finance/capital markets (10%): heads of debt syndicate and loan syndications rated each country’s accessibility to international markets.
• Debt in default or rescheduled (5%): scores are based on the ratio of rescheduled debt to debt stocks, taken from the World Bank’s Global Development Finance figures. OECD and developing countries that do not report under the debtor reporting system (DRS) score 10 and zero respectively.
• Debt indicators (7.5%): calculated using these ratios from the World Bank’s Global Development Finance figures: total debt stocks to GNP (A), debt service to exports (B); current account balance to GNP (C). Developing countries that do not report complete debt data get a score of zero.
• Credit ratings (7.5%): nominal values are assigned to sovereign ratings from Moody’s, Standard & Poor’s and Fitch IBCA. The higher the average value, the better. Where there is no rating, countries score zero.
• Discount on forfaiting (10%): reflects the average maximum tenor for forfaiting. Countries where forfaiting is not available score zero.
With special thanks to: The World Bank, Standard and Poor’s, Moody’s, Fitch IBCA, Mezra, Swissforfaiting, Deutsche Forfait AG, London Forfaiting, HVB UniCredit, Atlantic Forfaiting Thanks go to the following economists/institutions who gave their input as well as all the other contributors: Cynthia Moskovits, Fundación de Investigaciones Económicas Latinoamericanas (FIEL); Lakshman Alles, Curtin Business School, Australia; Neville Norman, University of Melbourne; Loreti Isabella Dobrescu, University of New South Wales; Birgit Niessner, Erste Bank; Christian Helmenstein, Federation of Austrian Industries; Hardy Hanappi, University of Technology of Vienna; Cláudio Djissey Shikida, Ibmec Minas; Plamen Pantev, ISIS Sofia; Serdar Kaya, Simon Frasier University; Pablo A Correa, Santander Investment; Radmila Jovancevic, University of Zagreb; Bernard Musyck, Frederick University; Risto Herrala, Bank of Finland; Tiina Helenius, Handelsbanken Capital Markets; Nicholas M Firzli, Canadian European Economic Council; Thierry Apoteker, TAC; Matthias Goethel, Deutsche Postbank; Christian Dreger, DIW Berlin Public Economics; Michalis Vassiliadis, Foundation for Economic and Industrial Research (FEIR/IOBE); Ilias Lekkos, Piraeus Bank; Aristides Hatzis, University of Athens; Connie Bolland, ERA Economic Research Analysis; Atsi Sheth, Macro-Sutra; Anjali Verma, MF Global Sify Securities; Arga Samudro, BNI Securities/Indonesia; Francesca Panelli, Aletti Gestielle; Gregorio De Felice, Intesa Sanpaolo; Matteo Ferrazzi, UniCredit Group; Natalia Volchkova, CEFIR (Centre for Economic and Financial Research); Anton Bogdanov, Inform Gaz; Denisa Baranova-Ciderova, University of Economics Bratislava; Maria Andrejcíková, University of Economics Bratislava; Monika Tökészky, University of Economics Bratislava; Shakill K Hassan, University of Cape Town; Jose Casas-Pardo, University of Valencia; Peter Rohner, LGT Capital Management; Olena Bilan, Dragon-Capital; Tetyana Korneyeva, TACIS Project; Fraser Bomford, AkE Group; Andres Tacsir, Dun & Bradstreet Ltd; Julian Cooper, University of Birmingham & Chatham House; Nestor Gandelman; Universidad ORT Uruguay; Denise Youngblood Coleman, CountryWatch; Henry Mo, Credit Suisse; William E Dugan, Summit Analytical Associates; Mary Lou Walsh, The PRS Group; Llewellyn D. Howell, Thunderbird School of Global Management; Olufemi Babarinde, Thunderbird School of Global Management; Oswaldo López, BBVA Banco Provincial; Economic Research and Strategies Department, Grupo Bancolombia
