However, declining score trends for other countries, such as Bulgaria, Hungary and Romania, coupled with the uncertainties gripping Cyprus and Slovenia, indicate that the region’s investment opportunities are not without considerable risks.
Twelve of the region’s 18 countries (excluding CIS) saw their ECR scores downgraded during Q1 2013; 13 now have lower scores compared with a year ago and 14 are in comparison with 2010.
Central and Eastern Europe (CEE) as a whole has seen its average score fall by 0.7 points to just below 51 out of 100, a new low. A cumulative fall of 1.6 points compared with a year earlier has put the region on a collision course with the Middle East in terms of its average risk (see MENA Q1 results: Morocco challenges Gulf-based appeal).
The eurozone crisis is a key factor but not the only story explaining the score trends for CEE in Euromoney’s Country Risk Survey. Various domestic economic and political problems, ranging from worsening corruption to institutional risks and policymaking concerns, to name but a few, have continued to undermine investor safety in large parts of CEE during Q1 2013.
The Cypriot crisis has seen that country shed a record 5.9 points during the quarter, and plunge into the third of ECR’s five-tiered groups – the largest increase in risk of any CEE country.
However, ECR scores for CEE countries with medium-to-high levels of risk have also decreased.
Country risk experts are losing faith in tier-three Bulgaria as well as tier-four Hungary, Romania and Macedonia, and tier-five Montenegro. Contagion from Cyprus and the rest of the eurozone has led risk experts to question bank stability, depositor safety and economic recovery prospects elsewhere, in the light of weakened European market demand and lending constraints holding back corporate spending.
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