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Ukraine war, debt loads and inflation upset “country risk metrics”

107 countries have become riskier since December 2021, with Belarus, Russia and Ukraine among those downgraded the most, as per Euromoney’s first country risk survey of 2022.

Euromoney Country Risk survey is conducted quarterly by Euromoney magazine. The first quarter 2022 survey collated the views of more than 300 experts in economic, political and financial risk from public and private sectors. The results were compiled and aggregated, along with measures of capital access and sovereign debt statistics, to provide total risk scores and rankings for 174 countries worldwide.

Switzerland has retained its position as the least-riskiest country worldwide in the global risk rankings, just ahead of second-place Australia, with Finland, Denmark and Norway comprising the rest of the top-five. Russia has plunged 33 places in the global risk rankings to 107th, Ukraine is down by nine places to 116th and Belarus by six to 160th, according to Euromoney Country Risk global and regional risk tables.

The impact of international isolation and western sanctions on Russia because of its invasion of Ukraine meant that scores for all of Russia’s 15 country risk indicators have been slashed, as have most of those for Ukraine, which faces a severe economic contraction. Sri Lanka’s and Tunisia’s risk profiles have also worsened due to their raging economic and political crises.


Global economic and political pessimism

Most of the survey’s contributing experts have begun the year in an increasingly pessimistic mood with regard to global economic trade and growth prospects.

Monica Bertodatto, a public finance consultant in Germany focusing on Europe, commented, “Countries will suffer from higher import prices on a variety of energy, food and raw materials, a reduction in output in specific sectors, such as transport and tourism, and increased distress in supply chains and availability of products.”

“The Asian, European, Middle Eastern and US markets will be hit by similar shocks,” Bertodatto pointed out.

Among the 15 indicators that more than 300 experts are asked to assess each quarter, the government finances score has been downgraded for 95 countries, highlighting increased sovereign debt concerns, with the monetary policy/currency stability indicator – encapsulating inflation and interest rates – downgraded for 94 nations. The survey’s debt ratings have worsened for 84 countries, and capital access has tightened for 101.

According to the survey, not only are economic indicators downgraded, but also political risk factors, with the risks stemming from corruption, information access/transparency, institutions, regulations and policy, and government stability increasing for the majority of countries in the first quarter of 2022.

Political risk to reverberate across Europe

The survey’s risk scores have worsened notably for the UK, Germany, France and Italy. In the wake of the Russia-Ukraine conflict, the majority of countries in Western Europe have been marked down, increasing the risk of stagflation.

Contributing experts in the survey believe that the French economy is quite resilient because its dependence on Russian oil and gas is relatively low, its unemployment rate has been declining for six years, and the banking sector has remained robust. They reckon that the source of concern in France is political risk, the key issue being the second round of the presidential election duel on April 24.

The survey delineates that some Central and Eastern European countries struggling with the effects of the war in Ukraine, given rising inflation and the administrative, social and welfare problems associated with the refugee crisis, have seen a reversal in their improving risk score trends. Hungary, Poland, Croatia, Romania and Slovenia have been downgraded, but this is not so with Bulgaria, Czech Republic, Greece or Slovakia. These countries resisted increased risk due to their political stability and economic strength.

Contributors to the survey believe that the political risks will nevertheless reverberate across Europe as the war intensifies. There will be tensions created by a huge influx of refugees, already topping an estimated two million, if more travel further west.

North America not insulated from risk of global recession

According to the survey, the risk scores and rankings for the US and Canada also fell, with the US and Canada both down two places to 20th and 28th respectively.

With inflation in the US at its highest level in four decades and monetary policy tightening, the US is vulnerable to commodity price increases and any potential global economic downturn, affirmed experts in the survey.

Some contributors believe that the hard-fought unionization drives taking place at companies such as Amazon and Starbucks may spark optimism in other labour or union organizers in the months ahead. The resultant downgraded structural indicator for labour market/industrial relations in Euromoney’s survey reflects this possibility.

In Canada, inflation hit Canadians already struggling with gas, groceries and essentials, and experts remain gloomy about their economic outlook. The Russia-Ukraine war and tensions between NATO and Russia dominates the headlines – as Canada shares an Arctic border with Russia in the far north. Any armed conflict between NATO and Russia runs the risk of action in Canadian airspace and Arctic waterways.

As per the survey, Mexico has risen five places to 82nd, with the president remaining popular and the economy strengthening.

Latin America and Caribbean volatility

With the US Federal Reserve (Fed) tightening monetary policy, and economic growth slowing in North America, prospects for some of the other countries across the Americas have dimmed, according to the survey.

Political risks weigh in as an important factor. Chile is down four places to 33rd, with a shift to more left-wing politics and policies. Costa Rica, Guyana, Bolivia, Nicaragua, El Salvador, Argentina, Venezuela and Brazil have become riskier too.

Brazil is not only struggling with rising inflation, but also the deterioration of its political risk indicators that include corruption, institutions, policymaking and government stability.

Ecuador has moved up 13 places in the global risk rankings, the most of any country surveyed this time, to 73rd, with its economy recovering and high confidence being reposed in their centre-right president.

The prospects for the Caribbean region have become dimmer, with almost all of the countries downgraded. The survey’s findings indicate that Jamaica’s economy was adversely impacted by the COVID-19 pandemic, and recovery was put back by fiscal constraints, inflation and the resulting rise in borrowing rates. Should the global economy nosedive, the revival of the tourism-dependent economy of Jamaica will be at risk.

Asian economies’ scores have slumped

China, battling its biggest COVID wave yet, is likely to feel the full-blown financial impact from its severe lockdown policy enforced in several Chinese cities. This will add to global supply disruptions and adversely impact China’s economic outlook. In addition, the ongoing Chinese real-estate downturn and deleveraging, the rise in global energy and commodity prices as a result of the Russia-Ukraine war, and the strong possibility of a slowdown in China's exports this year have all resulted in the risk score for China being downgraded.

Hongkong and Singapore have also been downgraded because of stringent social restrictions and border control enforcement to stop the spread of the pandemic. These restrictions have dampened economic activity and increased political risks, according to the survey.

The scores for several other countries in Asia have slumped due to the downgraded economic growth prospects for China and other trading partners, along with inflationary issues and monetary policy tightening by the Fed affecting capital flows. These include Japan, South Korea, Malaysia, Taiwan, Thailand, Bhutan, Mongolia, Myanmar and Nepal.  

India’s score is down because its GDP growth is expected to slow down, even as it confronts inflationary pressures and grapples with growing unemployment rates. The risk for Pakistan has increased as it faces a political crisis amid inflation woes. However, Indonesia, the largest country in Southeast Asia, has become a safer destination because of its political calm and the windfall revenue stream from higher natural resources prices, the survey reveals.

Middle East and North Africa (MENA) a mixed picture

The country risk scores have improved for Bahrain, Kuwait, Oman, Qatar and Saudi Arabia. Rising oil prices, an easing of pandemic restrictions and relative political calm have bolstered most of the Gulf oil-producing nations, as per the survey.

Israel has shown improvement in their score spurred by strong economic growth. However, scores for Iran, Lebanon, Jordan and war-torn Yemen have worsened, along with Egypt, Libya, Morocco and Tunisia.

Sub-Saharan Africa resilience

Galvanized by the commodity bounce, several countries in Sub-Saharan Africa have seen more positive scores. Angola, Botswana, Cameroon, Guinea, Kenya, Rwanda, Senegal and Tanzania are among the countries upgraded.

Downgraded scores for Burkina Faso, Côte d’Ivoire, Ethiopia, Ghana, Nigeria, Somalia, South Africa, Sudan and Zimbabwe highlight risk factors such as tightened capital access, rising import prices, domestic political tensions, conflicts and military coups that investors must be cognizant of and carefully on a country-by-country basis.


Almost all of the lowest-scoring (highest risk) countries in the world have become even riskier since 2021, as have most of the world’s large emerging markets, including Brazil, China, India, Nigeria and South Africa to varying degrees.

The Ukraine war, regional political conflicts, supply disruptions, rising inflation and debt loads are all bound to upset global risk metrics and decelerate global economic trade and growth over the coming year, as per the survey’s contributing experts. 2022 is expected to be another difficult year for many countries worldwide, making it particularly tricky for investors balancing potential returns with an appropriate degree of caution.

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