Country investment risk ratings

These days many organisations like banks and private equity companies are looking for safe investment opportunities. When investment decisions are made the financial situation in countries are often also taken into account. Many banks publish financial stability reports that provide an overview of the financial situation / market in the country. The variables that are used in these reports vary markedly and a comparison of countries is therefore often difficult. Some rating companies like Moody's and Standard & Poor's also provide ratings on countries. Gadannecz and Jayaram provide an overview of measures on financial stability for countries in their article in IFC Bulletin No.31. You can also find more or risk, debt and country ratings on the blog "On Financial Databases".

The Economist Intelligence Unit (EIU) provides a Risk series that can be used as a guide for the general risk of a specific country. These ratings can be used to decide on investing in the financial markets or for direct investments in those economies. The values for the risk ratings are derived from measuring the risk associated with 4 aspects of the country – political, economic policy, economic structure, and liquidity. The overall risk rating is measured on a scale from 0 to 100 where 0 denotes the least or no risk and 100 the most risk possible.

The EIU risk series is available in Datastream under the Data Category "Economics". Be sure to search for International sources by marking this option under the section Datasets. Combine this with the text Risk in the name of the series.

The search result will be a list of monthly, Quarterly , or semi-annual series of the EIU. NB: after selecting the series you do not need to select a Data Type. Datastream automatically give the series data as the default. Example search screen:

Below is an example of the risk rating series for Latvia, Hungary, the Czech Republic and Poland.

Author information: LinkedIn

01:06 PM - 10 November 2010