Gulf sovereigns climb 'most risky' list in Q1

Unrest hits cost of MENA debt insurance, Dubai one of few entities to improve
Gulf sovereigns climb 'most risky' list in Q1
RISKY SOVEREIGNS: Unrest in the Middle East has taken its toll on the Gulf sovereigns, with most countries suffering from a higher cost of debt insurance in the first quarter (Getty Images - for illustrative purposes only)
By Ed Attwood
Sun 10 Apr 2011 12:43 PM

Unrest in the Middle East has taken its toll on the Gulf sovereigns, with most countries suffering from a higher cost of debt insurance in the first quarter, according to research by CMA.  

Saudi Arabia, which ranked in the top 10 “least risky” sovereigns in the last quarter of 2010, fell all the way to 39th place. The kingdom was the second worst performer in the quarter, behind Bahrain.

Saudi Arabia has a 10 percent chance of default in the next five years, down from the 5.2 percent recorded in final-quarter 201.

Hampered by local unrest and ratings agencies downgrades, Bahrain is now the eleventh most risky sovereign in the world, according to CMA, with the kingdom seeing a 74.1 percent rise in basis points over the quarter. 

Dubai is still ranked in the top 10 most risky sovereigns – in seventh place – although its likelihood of default over the next five years actually decreased from 25.5 percent to 24.7 percent, making it one of the few entities to improve in a tough time for the region.

The emirate is joined in the top 10 by Lebanon, Iraq and Egypt.

Of the five worst performers during the first quarter, four were Middle Eastern. Bahrain, Saudi Arabia, Tunisia and Egypt were joined by Japan, which suffered a devastating earthquake and tsunami during the period.

However, CMA said that the changes could be positive, “illustrated by Egypt which hit a high of 420 basis points at the height of the tension, but rallied back almost to the widening level of 300 basis points, ending the quarter at 339 basis points”.

“Except for Bahrain, the initial rise was followed by a relatively stable period in March, albeit at higher levels from the start of the quarter, perhaps signalling that resolutions will not be long, drawn-out affairs affecting the long-term prospects for the economy.”

At the other end of the scale, Abu Dhabi is ranked as the least risky sovereign in the MENA region, in 24th place worldwide. CMA said that the emirate has a 7.5 percent chance of defaulting over the next five years, slightly down from the 6.5 percent recorded in the last quarter of 2011.

Abu Dhabi is followed by Qatar in 26th place, which has a 7.6 percent chance of default.

The CMA data showed that the world’s most risky sovereigns were Greece, Venezuela and Ireland, while the least risky were Norway, Sweden and Finland.

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