The world is doing well. Euromoney's rankings show that the risk score of the average country has climbed rapidily: from 43.56 in March 1993 to 50.72 in March 1996. Of all our subdivisions, only North America (which excludes Mexico) has gone down.
The big winner is transition Europe ; its average has jumped from 25.27to 41.48 in the past three years. Much of this can be put down to increased reporting to the IMF and World Bank, but the developing world also looks like it's having an extremely good run.
As the charts on page 116 show, there is a close correlation between Euromoney's ratings and capital flows. The IMF recently concluded that "country credit ratings... have influenced both the flow of capital to developing countries and the risk premiums associated with the flows". As private lending and investment to developing countries increase, country credit worthiness will play a larger part in determining capital flows. The IMF paper, published in January 1996, goes as far as suggesting that developing countries adopt policies that help to restore their credit ratings as part of their economic stabilization programmes.
The best improvements in Euromoney's country risk rankings in the past three years have been in central and eastern Europe, which account for 12 of the top 20 climbers.