ECR Survey Results Q4 2013: Eurozone woes and tapering fears stalk global economy
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ECR Survey Results Q4 2013: Eurozone woes and tapering fears stalk global economy

Global risk continued to rise in 2013, according to the latest results of Euromoney’s Country Risk Survey. Gloomy analysts remain cautious on the eurozone and the potential impact of the withdrawal of US monetary stimulus on capital flows to emerging market economies.

No fewer than 98 of the 186 sovereigns rated in Euromoney’s Country Risk Survey endured declining country risk scores – or increased risk – in 2013, with 87 becoming safer and only one unchanged.

Triple-A-rated Norway ended the year as it had begun, leading the global rankings – one of 15 top-rated sovereigns lying within the first of ECR’s five tiered categories.

While many countries became safer as the effects of the global financial crisis continued to fade, others still grappling with excessive debt burdens or affected by political instability, civil strife or military conflict saw their ECR scores continue to slide.

The G10, the Brics and a vast array of European sovereigns succumbed to increased risk last year. However, the picture was more balanced across MENA and Latin America – and in sub-Saharan Africa, the Commonwealth of Independent States and the Caribbean regions ECR scores improved. 


Nigeria and Mexico, two of the more populous, rapidly expanding frontier markets – part of the new Mint group: the next four-largest investor hotspots beyond the Brics including Indonesia and Turkey – were among the noteworthy improvers.

Mexico ended the year four places higher and less than four points from tier-two double-A status, while Nigeria’s rating also improved sharply over the year.

By contrast, Brazil, India, Turkey and Indonesia were the big losers in 2013, with their current-account deficits considered more vulnerable to capital outflows. All four were downgraded sharply by country-risk experts in 2013.

G10 weakened by eurozone tail risks

Europe’s debt problems continued to negatively affect the G10 grouping of leading industrialized nations last year. Whereas Germany and Switzerland withstood the rising risk trend with their robust fiscal balances, others, including the UK, France and Italy, were all downgraded by experts worried about rising debt burdens and slow or no growth.

Italy is the worst performer, having seen double-digit declines in its country score since 2010. Analysts remain bearish as Italy’s debt-restructuring programme makes minimal progress, while the possibility of early elections only increase political risk. 

By contrast, the two largest G10 economies performed rather better overall. Economic growth continued in the US, while the risks surrounding the partial government shutdown were alleviated by a temporary suspension to the debt ceiling. Japan climbed four places as reflationary policies saw economic conditions begin to improve.

Eurozone periphery still fuelling anxiety

ECR scores for Ireland, Portugal and Spain finally stabilized last year, but at low levels, with the very weak regional economy keeping many countries in recession and unemployment rates at unprecedented levels in 2013. More than a quarter of the Greek and Spanish labour forces were without work, nudging the eurozone average above 12%.

Concerns about the eurozone shifted from the Piigs to smaller offshore centres such as Cyprus, Slovenia and, to a lesser extent, Malta, as the crisis mutated in 2013.

ECR expert and independent consultant Norbert Gaillard says: “Additional debt restructuring in Cyprus is likely in the short/medium term. The debt-to-GDP ratio for 2014 should be twice its 2010 level [130.5% vs 61.3%].

“In December 2013, we also learnt that the Slovenian banking system needed around €5 billion, implying a non-negligible risk of default in the short term.”

ECR contributor Constantin Gurdgiev, a professor at Trinity College, Dublin, notes that the euro area continued to suffer from “acute leadership deficit”.

“Shifting from the risk-management mode that underpinned relatively rapid and robust rhetorical responses to the crisis in 2012 to a navel-gazing mode, with few of the policy proposals tabled in 2012 in response to the crises either implemented or fully structured in 2013,” he says.

Spain is in danger of becoming the seventh member to join the triple-digit club this year, with France not far behind if its fiscal situation is not dealt with appropriately. Latvia, the newest member of the euro club, seems oblivious to all this; its score rose sharply last year on the back of strong growth and a balanced budget.

Overall, the region’s risk score remained stable as increased risks in some countries were counter-balanced by improving scores elsewhere, notably in a few of the smaller frontier markets, such as Macau (rising 12 places in Q4), alongside medium-risk Vietnam (on a gradual long-term upward trend) and high-risk Myanmar, catching-up as reforms are introduced.

In Asia, China climbed one place in the rankings (to 38th) as concerns about its waning growth and financial system risks were outweighed by the increased political stability, forceful approach to rooting out corruption and bold reforms set out under the leadership of Xi Jinping.

By contrast, India’s falling score saw it slump four places lower during the year, while Indonesia fell three places to 67th, as Asia’s risk experts attention focused on those countries that were most affected by US monetary tapering in 2013.

More than 400 economists and other experts from a range of financial and other institutions take part in Euromoney’s Country Risk Survey. They evaluate the risks faced by international investors in more than 180 markets, scoring countries across a range of political, economic and structural criteria. These are added to values for capital access, credit ratings and debt indicators, and aggregated each quarter to provide a total risk score.

For the full global results of the ECR Survey, please visit

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