The numbers behind the ratings
How do you rate sovereign creditworthiness?
By Economist.com
How do you rate sovereign creditworthiness?
BRITAIN lost the top credit rating from Moody’s on February 22nd, but Standard & Poor’s and Fitch, the two other main ratings agencies, have yet to make the same move. As the table below shows, the firms often have different ratings for the same country; France still gets top marks from Fitch but not from the other two. The assessment of a country’s creditworthiness is an art, not a science; a government’s willingness to pay may be just as important as its ability to do so. It is not hard to see why Australia, with a debt-to-GDP ratio of 27.1% and a small current deficit, is rated triple-A by all three agencies. But Japan, with debt of 237% of GDP, and a huge current deficit is rated more highly than Turkey. It is partly down to a country’s history of meeting its obligations and partly down to the nature of its creditors; almost all of Japan’s government debt is owned by its own citizens.
The table below shows how the credit ratings of Moody's, Fitch and Standard & Poor’s correspond with each other.
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