Emerging Economies Improve Amid Global Slowdown Despite talk of a U.S. recession and a worldwide economic slowdown, global creditworthiness actually improved in the past six months as strong gains by resilient emerging-markets economies offset backsliding in industrialized countries, according to Institutional Investor’s exclusive semi-annual Country Credit survey.
The strongest gains come in Latin America, where Brazil sees its rating climb after its debt gained investment-grade status earlier this year. The Middle East and North Africa also advance smartly, led by the oil-rich United Arab Emirates and a surge in confidence in Iraq, which posts the biggest gain in the survey.
By contrast the credit ratings of virtually all the developed countries of North America, Western Europe and Asia show declines, reflecting the continued fallout from the global credit crisis.
Can this divergence continue? Many analysts have their doubts. “Most self-respecting international observers feel that this talk of decoupling is overdone,” says Chris Thomsen, a managing director and head of country risk at Wachovia Securities in Charlotte, North Carolina.
How the Ratings Are Compiled The Country Credit ratings developed by Institutional Investor are based on information provided by senior economists and sovereign-risk analysts at leading global banks and money management and securities firms. The respondents have graded each country on a scale of zero to 100, with 100 representing the least likelihood of default. We also asked participants to rank ten political, economic and financial indicators in order of their importance for each region and for selected countries. Participants' responses were weighted according to their institutions' assets. Names of respondents are kept strictly confidential.
The September 2008 Country Credit survey was conducted by II staff under the guidance of Assistant Managing Editor Sathya Rajavelu and Senior Editor Jane B. Kenney.