Credit Rating

A sovereign credit rating is an assessment of a country's ability and willingness to repay its debt. It provides investors with a standardized way to evaluate the risk of lending to a government and is an important reference when comparing countries, pricing government bonds and assessing the risk of sovereign default. Higher credit ratings generally indicate a lower perceived risk of default, while lower ratings indicate greater risk.

Sovereign creditworthiness is widely assessed by leading international credit rating agencies such as S&P Global Ratings, Moody's Ratings, Fitch Ratings and DBRS Morningstar. Their ratings are closely followed by investors, financial institutions and governments and are generally expressed using letter-based scales such as AAA, AA, A and BBB.

Trading Economics (TE) provides a different approach to assessing sovereign credit risk. Our credit rating assigns each country a numerical score from 0 to 100, where 100 represents the lowest perceived risk and 0 represents a very high likelihood of default.

We believe a numerical score is easier to understand and more useful when comparing multiple countries. Unlike a letter-based rating, a continuous score provides greater granularity and can highlight meaningful differences between countries that may otherwise fall within the same rating category.

Our approach is also fundamentally different from that of the traditional rating agencies. TE ratings are unsolicited and independent. Countries do not commission or pay us to provide a rating, allowing us to assess sovereign creditworthiness without the issuer relationship that exists in the traditional issuer-paid model.

Technically, TE ratings are generated using a forward-looking macroeconomic model that incorporates a broad range of leading economic indicators, financial-market data and other measures of economic and financial stability, with very limited analyst discretion. This systematic approach allows us to apply a consistent methodology across countries while reducing the role of subjective judgment.

TE ratings are therefore not intended simply to replicate the ratings of the traditional agencies. Rather, they provide a complementary measure of sovereign credit risk that is numerical, more granular, forward-looking and systematically derived. We believe these characteristics can make TE ratings particularly useful for comparing the relative creditworthiness of countries and identifying changes in sovereign risk over time. If you have any question please contact us.