Sunday , 14 April 2024

Sovereign Credit Risk: Where Does Your Country Rank Among These 50 Countries?

Drawing on a pool of more than 30 measures spanning financial data, surveysrisk and political insights, the BlackRock Sovereign Risk Index (BSRI) [see below] provides investors with a framework for tracking sovereign credit risk in 50 countries.

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The BSRI breaks down the data into four main categories that each count toward a country’s final BSRI score and ranking: Fiscal Space (40%), Willingness to Pay (30%), External Finance Position (20%) and Financial Sector Health (10%).

How it Works

  • Fiscal Space—This category assesses if the fiscal dynamics of a particular country are on a sustainable path. It estimates how close a country is to breaking through a level of debt that will cause it to default (i.e., the concept of proximity to distress), and how large of an adjustment is necessary in order to achieve an appropriate debt/GDP level in the future (i.e., the concept of distance from stability).
  • External Finance Position—The factors in this category measure how leveraged a country might be to macroeconomic trade and policy shocks outside of its control.
  • Financial Sector Health—This category considers the degree to which the financial sector of a country poses a threat to its creditworthiness, were the sector were to be nationalized, and estimates the likelihood that the financial sector may require nationalization.
  • Willingness to Pay—In this category we group factors which gauge if a country displays qualitative cultural and institutional traits that suggest both ability and willingness to pay off real debts.

BRSI country rankings by quintile

Top ten 11-20 21-30 31-40 Bottom ten
1 Norway 11 Australia 21 Israel 31 India 41 Nigeria
2 Singapore 12 Netherlands 22 Malaysia 32 Indonesia 42 Croatia
3 Switzerland 13 U.S. 23 Philippines 33 China 43 Slovenia
4 Sweden 14 South Korea 24 Thailand 34 Turkey 44 Italy
5 Taiwan 15 Czech Republic 25 Japan 35 Colombia 45 Argentina
6 New Zealand 16 Austria 26 Belgium 36 South Africa 46 Portugal
7 Denmark 17 Ireland 27 Peru 37 Spain 47 Ukraine
8 Canada 18 Chile 28 Russia 38 Mexico 48 Egypt
9 Germany 19 Poland 29 France 39 Brazil 49 Greece
10 Finland 20 U.K. 30 Slovakia 40 Hungary 50 Venezuela