What factors does Standard and Poor’s analyze in finding out the credit rating it assigns a sovereign government?
In rating a sovereign government, S&P’s analysis centers on an assessment of the degree of political risk and economic risk. In assessing political risk, S & P examines the constancy of the political system, the social environment, and international relations along with other the countries. Factors examine in assessing economic risk comprise the sovereign’s external financial position, balance of payments flexibility, management of the economy, economic structure and growth and economic prospects. The rating assigned sovereign is specifically important because it typically represents the ceiling for ratings S&P will assign an obligation of entity domiciled inside that country.