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For historical country risk data please visit the Euromoney Country risk website |
| GLOBAL ECONOMIC PROJECTIONS |
| 1-50 |
| 51-100 |
| 101-150 |
| 151-171 |
The global economy is in good shape. Big gains in this year’s first Euromoney country risk survey are made by sub-Saharan Africa, most oil-producing countries and also northern European countries. Robust commodity prices lift Madagascar and Tanzania by 44 and 34 places respectively. The benefits of higher commodity revenues are widespread: 29 of the top 50 biggest climbers in the latest survey are African. As presidential elections approach, Russia rises 20 places thanks to recovering oil prices, the impact of the rouble devaluation on imports, and progress in the London club talks on restructuring of its commercial bank debts.
Scandinavian countries also score well in the survey and are showing very healthy growth and low inflation. Central Europe disappoints but may yet have a good year ahead if the western European economy maintains its strong growth rate and increases imports from the region. Poland drops back one place to 43rd position on worries about its current account deficit. Analysts are more bullish about the Czech Republic with average predicted growth for this year revised up from 1.5% to 1.8%. Romania falls 12 places to 107th position on expectations of only modest growth and doubts about the strength of commitment to fiscal discipline in an election year.
In Asia, recovery is very much export-led, as the region continues to benefit from strong US demand, despite the reducing relative strength of the dollar. Growth projections have been adjusted upwards since September for South Korea, Hong Kong, Thailand and Malaysia. Malaysia climbs 10 places for economic performance after a rise of 28 places in last September’s country risk survey.
Japan suffered a technical recession in the last half of 1999 and falls three places in the overall risk categories. Despite this, Japanese growth forecasts for this year average 1.1% , up from 0.5% in September.
China rises two places to 48 and analysts are less cautious in their GNP forecasts, with an average of 7% predicted for next year compared with consensus estimates of 6.5% in September. Foreign direct investment and consumption remain sluggish following the country’s accession to the WTO, as investors adopt a wait-and-see approach.
Latin America is emerging from recession, again helped by strong oil prices. Brazil has seen good GDP growth, assisted by strong capital inflows and lower interest rates. Growth forecasts for both Brazil and Argentina reflect optimism about the progress of fiscal reform in both countries. Surprisingly, Mexico falls a place in the overall rankings despite having perhaps the most positive prospects of any country in the region. Strong links to the US and oil-prices at a 10-year high have helped shield the economy from the worst effects of the recession in Latin America.
The members of the Andean group have their own troubles – Ecuador’s recent debt default is reflected in a 42-place fall in its ranking, Peru falls 18 places.
Elsewhere, Iran climbs 19 places with its political score improved by expectations that conservatives will lose their majority in parliamentary elections being held this month.
Poor scores for the Pacific states – Tonga, Vanuatu, Samoa and the Solomon Islands – reflect lack of data on economic projections rather any adverse change in recorded economic performance or political outlook.
Methodology
To obtain the overall country risk score, Euromoney assigns a weighting to the nine categories listed below. The best underlying value per category achieves the full weighting (25, 10 or 5); the worst scores zero and all other values are calculated relative to these two. The formula used is the following: A – (A / (B-C)) x (D-C), where A = category weighting; B = lowest value* in range; C = highest value* in range, D = individual value.
* NB for debt indicators and debt in default, B and C are reversed in the formula, as the lowest score receives the full weighting and the highest gets zero.
* Political risk (25% weighting): the risk of non-payment or non-servicing of payment for goods or services, loans, trade-related finance and dividends, and the non-repatriation of capital. Risk analysts give each country a score between 10 and zero – the higher, the better. This does not reflect the creditworthiness of individual counterparties.
* Economic performance (25%): based (1) on GNP* figures per capita and (2) on results of Euromoney poll of economic projections, where each country’s score is obtained from average projections for 1999 and 2000. The sum of these two factors, equally weighted, makes up this column – the higher the result, the better.
*GNP figures were unavailable for the following countries, so GDP data were used instead: Afghanistan, Bahamas, Cuba, Cyprus, Djibouti, Iraq, North Korea, Kuwait, Liberia, Libya, Macau, Myanmar, New Caledonia, Rwanda, Somalia, Taiwan.
* Debt indicators (10%): calculated using these ratios from the World Bank’s Global Development Finance 2000: total debt stocks to GNP (A), debt service to exports (B); current account balance to GNP (C). Scores are calculated as follows: A + (B x 2) – (C x 10). The lower this score, the better. Figures are for 1998.
Because of lack of consistent economic data for OECD and rich oil-producing countries, these score the full weighting, except where they report debt figures to the IMF. Developing countries which do not report complete debt data get zero.
* Debt in default or rescheduled (10%): scores are based on the ratio of rescheduled debt to debt stocks, taken from the World Bank’s Global Development Finance 2000. The lower the ratio, the better. OECD and developing countries which do not report under the debtor reporting system (DRS) score 10 and zero respectively.
* Credit ratings (10%): nominal values are assigned to sovereign ratings from Moody’s, S&P and Fitch IBCA. The higher the average value, the better. Where there is no rating, countries score zero.
* Access to bank finance (5%): calculated from disbursements of private, long-term, unguaranteed loans as a percentage of GNP. The higher the result, the better. OECD and developing countries not reporting under the DRS score five and zero respectively. Source: the World Bank’s Global Development Finance 2000.
* Access to short-term finance (5%): takes into account OECD consensus groups (source: ECGD) and short-term cover available from the US Exim Bank and NCM UK. The higher the score, the better.
* Access to capital markets (5%): heads of debt syndicate and loan syndications rated each country’s accessibility to international markets at the time of the survey. The higher the average rating out of 10, the better.
* Discount on forfaiting (5%): reflects the average maximum tenor for forfaiting and the average spread over riskless countries such as the US. The higher the score, the better. Countries where forfaiting is not available score zero. Data were supplied by Deutsche Bank, Standard Bank and West Merchant Capital Markets.
Economic projections methodology
Euromoney received replies from 30 economists at leading financial and economic institutions. They gave each country’s economic performance for 2000 and 2001 a score out of 100. The world’s fastest-growing, best-performing economy in an ideal year would score 100; the worst economy in a disastrous year would score zero. Respondents were asked to consider economic growth, monetary stability, current-account, budget deficit or surplus, unemployment and structural imbalances. Economists also gave their GNP growth forecasts for 2000 and 2001. Countries which received no votes were excluded from this table.
Our thanks go to the 47 political analysts and economists who took part in our surveys. Those who did not wish to remain anonymous were:
I Colhoun, Deutsche Bank Australia; C Schuller, Erste Bank; P Papadopoulos, Arab Banking Corp; E Roosens, KBC Bank; G Samu, Royal Bank of Canada; J Krijgsman CIBC Wood Gundy; R Heiskanen, MeritaNordbanken; F Nicollas, Crédit Lyonnais; C Henke, Dresdner Bank AG; N Braems, Oppenheim Finanzanalyse; S Mok, Bank of East Asia; L Ruggerone, Banca Commerciale Italiana; H.O. Jankee, Bank of Mauritius; M Zewuster, ABN Amro Bank N.V.; G Verberne, MeesPierson Securities; C Tan, Bank of Taiwan; D Readman, Barclays Bank; Dr M O’Leary, PRS Group, LLC; M Every, Dun & Bradstreet; M Wall, Deutsche Bank; S Patel, Afrinvest; M Walsh, PRS Group, LLC; Karla Schestauber and Thomas Spanel, Creditanstalt; E Schuitemaker, ABN Amro; G Seyler, BCEE Luxembourg; Janet Henry, HSBC.
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For historical country risk data please visit the Euromoney Country risk website |
