10 Iulie 2009
Top 10 countries at the highest sovereign default risk
The turmoil generated by financial crisis has created macroeconomic problems and every country across the globe is feeling the pinch of the recession. Find out what are the countries most prone to sovereign default, a ranking compiled by financial markets monitoring company, CMA.
10. Bulgaria
Bulgaria is also the poorest member of the European Union and now experiences its first recession in 11 years. The state is considering a financing package from International Monetary Fund. Bulgaria had an annual economic growth of almost 6% over the last years, and now it faces wide current account gap and high sovereign debt.
9. California
The State of California faces a probability of default of 27.75% and a CDS spread of 363.32 basis points. California is thus replacing Romania in CMA ranking. Earlier this month, Romania had a sovereign default risk of 25.4% and a 5-year CDS spread of 390 bp. Although CDS spread were higher for Romania, the probability of defaulting on their sovereign debt took precedence in the ranking.
8. Lithuania
International Monetary Fund said recently that Lithuania’s economy would drop in 2009 by more than expected so far and saluted state’s decision to keep national currency – Litas - pegged to euro.
The central bank of Lithuania estimated a contraction of the GDP by 15.6% this year, while the minister of Finance said there was the risk of 18.2% contraction of the Gross Domestic Product.
7. Kazakhstan
Three of Kazakhstan’s major banks agreed in October last year a partial nationalization, due to financial crisis.
Banks in Kazakhstan are deemed as extremely exposed to credit crisis, local equity markets being on ice.
6. Dubai
The five-year credit default swap spread is at 550.36 basis points.
5. Latvia
Latvia ranks first in a list of eight EU states that could experience a failure of repaying debts, according to Royal Bank of Scotland.
The Minister of Finance of the country, Einars Repse said the deficit could climb to 11.6% of GDP this year, even in the event of a 10% drop in state expenditures.
4. Iceland
After forecasts indicated a 10.6% contraction of Gross Domestic Product in 2009, the state announced earlier in June that is handling talks with Russia for an additional loan.
3. Venezuela
Venezuela is facing high inflation rates that could zoom to 28% and has a currency exchange rate pegged to dollar of 2.15 bolivar/dollar, as in the black market, the American currency is sold at 6 bolivars.
In an attempt to reduce the dependence to United States, Venezuela concluded a loan contract of 4 billion dollars with China to finance infrastructure projects.
2. Ukraine
With a 20% drop in GDP, Ukraine is dealing with a sovereign default risk of 67.18% and CDS spread of 1,769.31 basis points.
1. Argentina
Argentina’s economy, the second largest in South America increased by 6.8% in first quarter, the lowest rate since 2002 dragged down by agriculture and construction.