Credit rating, outlook and debt ratio

Another round of sell-off in stockmarkets in the US, Europe and Asia. The level of economic and financial uncertainty is high worldwide. Standard and Poor’s and its credit rating system is becoming a household term these days.

Yesterday, we got some good data from WSJ online edition. You may see the full table with chart here, http://graphicsweb.wsj.com/documents/DebtGDP_1104/index.php.

We created 2 separate tables from the original WSJ graphics. Table 1 is for the big economies of North America and Europe, below.

Of the 7 economies here, 3 have negative outlook – Italy, US and Spain – meaning another downgrade is possible as certain fundamental problems remain unaddressed.

Table 2 is on the rich and emerging economies in the Asia-Pacific, below.

Although Japan and New Zealand have AA credit ratings, only them have negative outlook as of now. The Philippines has a high debt/GDP ratio of 47 percent this year, although the IMF thinks this ratio is going to decline in the next few years. They should be assuming that the denominator, GDP, should be rising faster than the rise in government debt.

Finally, here is a chart also from the same WSJ graphics. We selected the biggest economies in their respective continents — US for North America, Germany for Europe, and China for Asia.

Germany and China are projected to have a declining debt/GDP ratio, although China’s ratio is far too low compared to the 2 other economies.

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