Zimbabwe Now Riskiest Country, Norway Safest Bet
Apparently 150,000% inflation is a riskier condition than war. Zimbabwe has captured the ignominious title of most risky nation, displacing Iraq. Meanwhile Norway, Sweden and Austria have moved ahead of Singapore since May 2007 as the safest financial bets, according to the Economist Intelligence Unit’s rankings.
The United States is not among the least risky countries, though Canada comes in at number 5.
The EIU says the ratings have improved steadily during the cyclical upswing in the global economy since 2003. However, the improving trend has been interrupted in recent months chiefly because of a deterioration in indicators relating to the banking sector. Losses due to exposure to US subprime mortgages explain only part of this deterioration.
More important has been the explosive growth in bank credit to the private sector in many countries, partly financed by foreign borrowing.
Inflation may also exert downward pressure on some emerging market currencies, even if monetary authorities respond by raising interest rates. In recent years inflation has tended to support currencies because it has implied higher interest rates. But in a more risk-averse climate, this may no longer be the case.
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