Euromoney Country Risk Survey Results Q1 2014 | Seite 3

Country Risk:

Euromoney’s Country Risk Survey Q1 2014 Results:
Ukraine & CEE update

Bad quarter for EMs
Capital outflows spurred by the tapering of the Fed’s bond-purchase programme put riskier EMs – harbouring larger fiscal
and external balances, and struggling to retain investor confidence – into a slide, with their currencies in a tailspin.
Scores for India, Indonesia, South Africa and Turkey all fell along with many other destinations, as experts questioned the
safety of investing in Brics, Mints and other EM groupings.
China, bucking the trend, saw its score improve, with policy stimulus supporting its growth prospects. However, its score
remains lower than in 2010, with the world’s most populous nation still failing to convince experts it can climb higher in the
global rankings – it is still lodged within the third of ECR’s five tiered categories symbolizing medium risks commensurate
with a BB+ to A- rating.
Alicia García-Herrero, ECR expert and chief economist for EMs at BBVA, attributes this to “growing indebtedness on the
part of the corporates and the public sector, with the main immediate risk lying within a banking system saddled with bad
debts and in need of a large recapitalization package”.
India’s travails are equally symbolic of a failure to fully admonish heightened risk perceptions. Its 0.7 point fall in Q1
continues a longer-term trend decline that has seen the country shed more than eight points since 2010 and remain
close to the bottom of tier three.
The government has made some progress in ameliorating the fiscal and current-account deficits, which economist and
ECR expert Madan Sabnavis at Credit Analysis & Research expects to continue, while also noting that “economic growth
is low and investment declining”.
Moreover, India’s monetary policy will remain tight to quench inflation, which, as Sabnavis explains, “is more due to the
extraneous forces of supply improving rather than any f undamental change in the structures”.
Elsewhere, Turkey’s political problems have begun to weigh more heavily on its risk profile, with the sovereign sliding
three places. Indonesia has also slipped.
EM
 safety
 ques,oned
 (scores
 out
 of
 100)

Source:
 Euromoney
 Country
 Risk

60

58

56

54

52

India

Indonesia

S.Africa

Turkey

50

48

Q4'11
  Q1'12
  Q2'12
  Q3'12
  Q4'12
  Q1'13
  Q2'13
  Q3'13
  Q4'13
  Q1'14

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