Since November 2007 the international economic environment has deteriorated. As a result questions have been raised about the sustainability of growth in developing countries and the deterioration in their risk profile, notably credit risk, which had been tending to improve in recent years. The conclusions of this study? GDP growth in emerging countries should slow only moderately this year because their economic situation has strengthened since the beginning of the decade. They have relatively well absorbed the shock of international financial turmoil since the summer 2007. Nevertheless, credit risk may increase in numerous developing countries owing to a number of factors including international investors reduced enthusiasm, the effects of the credit boom during 2006-07, the likely slowdown in growth, or ultimately severe corrections in speculative bubbles. All these trends prompt the forecasting of a halt to the improvement in country risk, but not a trend reversal, with increased credit risk or even socio-political risk, on the one hand, offset by consolidation of the reduction in sovereign risks, non-transfer risk and the financial crisis, on the other hand. Click the link in the left Related Focus box to read more.

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