Waltham, MA, 5 January 2006 - Global Insight, the world's leading company for economic and financial analysis and forecasting, today released its first comprehensive global survey of all sovereign risk changes, revealing causes, trends and future prospects for country debt. According to Global Insight's Fourth Quarter Sovereign Risk Review covering July through November 2006, the total number of upgrades continued to outpace downgrades by 5 to 1, extending the positive pattern of the last six years. Generally improving country credit fundamentals helped support emerging market bond markets. This is a turn-around from this past spring, when investor withdrawals were sparked by rising interest rate concerns.
Global Insight's Sovereign Risk Service provides the most complete coverage available from any source, covering 203 countries. Our expert team analyzes each nation's credit-worthiness by assessing the country's financial position, economic outlook and the political environment.
Asia leads global upgrades through strengthened exports and finances, a trend exemplified by China's foreign exchange reserves surpassing $1 trillion. Other key upgrades have been triggered by Vietnam joining the WTO, India's continued two-way globalization and Indonesia's further debt reduction. Macau's prominence as China's only gambling 'Las Vegas' and progress in East Timor's oil project also contributed to Asia's rating improvement.
However, the survey also noted a number of countries at financial risk. In retaliation for the expulsion of alleged spies, Russia clamped down hard on Georgia through a trade squeeze, which could endanger the financial and political survival of this young Western-oriented democracy. Until it is clear that these new risks can be mitigated, Global Insight has placed the country on 'Negative Outlook'.
Jan Randolph, Head of Sovereign Risk at Global Insight, stated, "Moscow will withdraw energy subsidies in step with its neighbours' moves towards the European Union and NATO, testing Western support-and especially the availability of any emergency financing."
In the Middle East, the situation in Lebanon remains precarious. While emergency aid from Saudi Arabia bolstered the banking system and foreign exchange reserves, the economy's infrastructure was severely battered by military hostilities with Israel. Repair costs will run into billions of dollars. The political situation remains tumultuous and the survival of the pro-West Lebanese government hangs in the balance under pressure from Hezbollah and Syria.
Earlier in the year, the election of a Hamas government in the Palestinian Authority led to the withdrawal of crucial European Union transfer funding to the public budget and suspension of Israeli customs revenues. Public sector salaries did not get paid, protests emerged on the street, and public debt arrears grew, all of which resulted in a rating downgrade by Global Insight. Nevertheless, these politics-driven downgrades were more than matched by the number of sovereign rating upgrades elsewhere in the Middle East. All the main energy exporters, with the exception of Iran, improved their credit worthiness. Energy exporters now represent the second most important official source of funding the U.S. current account deficit after Asia.
Other countries on credit watch include possible overheating economies in Eastern Europe, where aggressive bank lending has been prevalent. Two Baltic countries were denied euro single currency membership on rising inflation, while Slovenia managed to slip through on the financial evidence alone.
Global Insight's 'Sovereign Risk Review Q4' is part of its newly-expanded Sovereign Risk Service. The Sovereign Risk Review Q4 is now available to clients and covers 203 countries around the world. For more information on the service, please visit: www.globalinsight.com/sovereignrisk.
Jan Randolph, Head of Sovereign Risk, Intern'l, Global Insight
UK +44.79.4198.3105 (firstname.lastname@example.org)
Farid Abolfathi, Mng Dir. Global Country Risk, Global Insight
US +1.781. 301.0108 (email@example.com)
Catarina Walsh, Int'l Media Relations, Global Insight
UK +44.20.7452.5183 (firstname.lastname@example.org)
Jim Dorsey, NA Media Relations, Global Insight
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About Global Insight
Global Insight, Inc. (http://www.globalinsight.com/) is a privately held company that brought together the two most respected economic information companies in the world, DRI and WEFA. Global Insight provides the most comprehensive economic and financial information available on countries, regions and industries, using a unique combination of expertise, models, data and software within a common analytical framework to support planning and decision-making. Through the world's first same-day analysis and risk assessment service, Global Insight provides immediate insightful analysis of market conditions and key events around the world, covering economic, political, and operational factors. The company has over 3,800 clients in industry, finance, and government with revenues in excess of $95 million, over 600 employees and 23 offices in 13 countries covering North and South America, Europe, Africa, the Middle East, and Asia.
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