Sovereign creditworthiness has risen modestly, and
theres much to be modest about.
Consider the economy. Stanley Fischer, the vice chair of the
U.S. Federal Reserve Board, noted in a recent speech in
Stockholm that economic activity around the world has been
disappointing. As he pointed out, again and again
economists and policymakers have had to explain from
midyear on why the global growth rate has been lower than
predicted as little as two quarters back.
That pattern seems likely to persist, many analysts say.
I cant look anywhere and say they are a shoo-in for
growth and prosperity, says Jon Alterman, senior vice
president and Zbigniew Brzezinski Chair in Global Security and
Geostrategy at the Center for Strategic and International
Studies in Washington. It feels like countries are poised
for growth, but I dont see anybody for whom its
guaranteed or strongly likely.
That tepid outlook is reflected in our latest Country Credit
survey, Institutional Investors exclusive
semiannual ranking of global creditworthiness. The average
sovereign credit rating edges up to 44.8 on a scale of zero to
100, according to economists and risk analysts surveyed, up 0.6
points over the past six months and up just 0.2 points from a
The U.S. economy is finally gaining
traction, says David Dollar, a senior fellow at the
Brookings Institution in Washington and former
U.S. Treasury official. But, he adds, things have
only improved a little bit in Europe and Japan, and the
developing world is a mixed bag. You can see why survey
participants are not excited.
Indeed, just as the U.S. growth rate seemed to be
accelerating smartly this summer, news came from Europe that
Germanys growth had stalled in the second quarter and
Italy had slipped back into recession. China, which has
increasingly played the role of global locomotive in recent
years, has reached the middle-income country stage, where
you cant grow at 10 percent no one has ever done
that, says Dollar. So 7 percent is the new 10
The economy isnt the only drag on ratings.
Geopolitical developments have put a notable damper on the
outlook in some regions.
In Eastern Europe, President Vladimir Putin seems intent on
expanding Russias influence, judging by the
countrys annexation of Crimea and its support for
separatists in eastern Ukraine. Many analysts fear a decline in
trade and investment in the region, as the European Union and
the U.S. have imposed economic sanctions on Russia,
drawing retaliation from the Kremlin reminiscent of the
tit-for-tat exchanges of the cold war.