A new assessment of countries and their likelihood of defaulting on their sovereign debt, developed by Blackrock, says Hungary is more likely to meet its debt obligations than Egypt, Portugal or Greece, but is much less likely than Croatia, Thailand or Chile.
This month Blackrock, the world's largest asset manager, released its new Sovereign Risk Index, according to which, Hungary, 6th from the bottom, is one of the ten countries most likely to default. Led by Greece, the list also includes Italy, Portugal, Turkey, Argentina, Spain, Ireland, Egypt and Venezuela.
On the other side of the spectrum are countries least likely to default on their sovereign debt, with Norway leading the group, followed by Sweden, Switzerland and Finland, Australia, Canada and Denmark.
When explaining the need for such index, Blackrock highlighted the fact that some market participants have gravitated toward simple measures of credit quality, such as the government debt/gross domestic product ratio, to guide their investment decisions.
However, these measures only tell part of the story, says the Blackrock Investment Institute in its publication. There are other factors, such as reserve-currency status or trend growth rates, which are equally important in assessing the vulnerability of debt to a credit event.
The index is based on four broad categories: fiscal space, external finance position, financial sector health and willingness to pay, weighting 40%, 20%, 10% and 30% of the measurements respectively.