U.S. Strength Not Sufficient to Offset Global Weakness
The average rating in Institutional Investor’s semiannual Country Credit survey, which asks economists and risk analysts to rank creditworthiness on a scale of zero to 100, falls to 44.1, down 0.7 points from the previous survey, in September. Declines were broadly based, reflecting widespread concerns about the prospects for growth. The results chime with the more sober forecast last month from the International Monetary Fund, which downgraded its projection for global growth this year by 0.3 percentage points, to 3.5 percent.
The survey decline is all the more notable considering that it comes at a time of sharply lower oil prices, which analysts believe should be positive, on balance, for the world economy. “It’s like a global tax cut for energy importers,” says Gabriel Stein, London-based director of asset management services at Oxford Economics in the U.K.
One of the few bright spots is the U.S. The country’s credit rating rises 0.8 points, to 93.8, enabling the country to climb one notch to fifth place among the 179 countries in the survey. With the country moving closer to energy independence and the economy gaining greater momentum lately, there is mounting agreement with Federal Reserve Board chair Janet Yellen that the economic expansion is “solid.” “I’d hardly say the U.S. economy is off to the races,” says John Nugeé, a consultant and former central bank official in the U.K. and Hong Kong, “but the U.S. is the least bad in a pretty poor world.”
The hope is that the U.S. will be the locomotive of old, as a strong dollar leads to a substantial increase in imports. But foreign investors continue to shift funds to the U.S. because “investors’ risk appetites are going down, and the U.S. is perceived as a safe haven,” says Marcel Fratzscher, president of the German Institute for Economic Research in Berlin and an adviser to the German Ministry of Economic Affairs and Energy.
The resurgence of the U.S. economy suggests the Federal Reserve will begin tightening sooner rather than later. Some 94.6 percent of respondents surveyed predict the Fed will start raising interest rates in 2015, with 25.7 percent saying this will happen in the first half of the year and 68.9 percent saying it will begin in the second half. Six months ago, 81.5 percent of respondents saw the Fed tightening in 2015. “When tightening comes, it will suck even more funds out of other countries, particularly the emerging markets,” says an economist at a New York bank.
To view the current ranks and scores of all countries evaluated, click on Global Rankings in the navigation table at right.
To see how each country fares in its particular geographic region, click on Regional Rankings, then choose from among the eight selections: Africa (Sub-Saharan), Asia-Pacific/Far East, Asia-Pacific/South & East, Eastern Europe/Central Asia, Latin America/Caribbean, Middle East/North Africa, North America and Western Europe.
For information on how this ranking was compiled, click on Methodology.
How This Ranking Was Compiled
Institutional Investor’s Country Credit ratings 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 weighted participants’ responses according to their institutions’ global exposure. Names of respondents are kept strictly confidential.
The March 2015 Country Credit survey was conducted by Senior Research Editor Jane B. Kenney.