Brighter Global Credit Picture Coming

Sovereign risk analysts participating in Institutional Investor magazine's semiannual Country Credit survey see a better credit picture than they did six months ago. Participants awarded the 173 countries in the II survey an average credit rating of 42.7 on a scale of 100, up 1.1 point over the global average of 41.6 measured six months ago and 3.1 points higher than the September 2003 global average of 39.6. The results suggest that the world investment climate is on the rebound after the global recession brought on by the bursting Internet bubble, ballooning budget deficits and the economic strains of war and terrorism. Nonetheless, analysts are concerned about the risk to global creditworthiness presented by rising U.S. interest rates, global terrorism and oil prices, among other issues.

In the latest edition of the survey, released today, the three countries posting the largest gains over six months each rose by 6.0 points: Higher oil prices helped Iran climb to 42.0; a stabilizing Bosnia & Herzegovina rose to 28.2; and its neighbor Serbia & Montenegro, flush with foreign exchange reserves, hit 24.9. Declining the most over six months were the Dominican Republic, down by 7.0 points, to 26.3; Grenada, off by 5.2 points, to 37.6, after gaining 8.9 six months ago; and Kiribati, which fell by 4.3 points to 19.5.

This edition of the biannual survey marks the 25th anniversary of Institutional Investor magazine's Country Credit ratings. Every six months since September 1979, II has asked sovereign credit analysts at banks and investment institutions to rate the creditworthiness of countries around the world. Over the last 25 years, Institutional Investor Country Credit ratings have gained a following among economists and government officials. Most recently, the U.S. government selected the Country Credit ratings as one of its indicators determining the suitability of countries hoping for its Millennium Challenge Account economic aid program.

Switzerland and Luxembourg once again boast the highest credit scores of the countries rated in the survey; the United States rises one notch to third place.