It is necessary to somehow evaluate the state of affairs in the state. You can judge purchasing power impartially, or consider a specific option for a particular case and be interested in what provides importance. For example, the probability of returning a debt. And from this point of interest provides a credit rating and research to establish it.
What is credit score and research?
Credit ratings are the opinions of individual foreign and Russian rating agencies on the financial stability and creditworthiness of the financial sector of individual states within their limits and internationally. To establish what value should be assigned, special studies are carried out, the purpose of which is to find out the economic situation within the country, to assess the amount of debts to be paid and the likelihood of their payment if they are issued at the time of the study. Creditworthiness is a parameter that evaluates the likelihood of repayment of debts if you give a loan right now. Moreover, it is worth saying that ratings are practiced not only in relation to individual states, but also to large companies. Therefore, creditworthiness is a concept that applies not only to individual countries, but also to privatecompanies.
Who exhibits it?
They are compiled and issued by individual rating agencies that monitor the situation in the country. They can observe either through the media and government statistics, or by combining them with the reports of their representatives. For example, some bureaus interact with a number of users of various companies (through surveys), as the Better Business Bureau does, others try to limit themselves exclusively to the largest organizations.
Why are they needed?
Why are these ratings needed? The fact is that they provide information to potential investors about the domestic state and the state of affairs. Based on their opinion, many businessmen and companies decide whether to invest in a given state or organization.
Credit rating system
What kind of credit rating systems exist? There are quite a few of them and they are indicated in Latin. In general, there is a fairly large variety of rating scales that use small letters, pluses and minuses, but only the main “backbone” will be considered within the framework of the article:
- AAA rating. Max level. This country is assumed to be the borrower with the highest level of creditworthiness. The financial situation is assessed as good and stable for a long time. Stateperforms its duties on time and is extremely low dependent on external factors of anthropogenic origin. Possible risks are minimal, the probability of default is close to zero.
- AA rating. Very high level of creditworthiness. This category includes states that have a stable economic condition for a long time. Such countries are also weakly dependent on negative changes in the global economy and have a low level of credit risks.
- Rating A. High level of creditworthiness. The economic condition of states from this category is assessed as good at this point in time. All obligations are fulfilled in due time. At the same time, countries have a low dependence on the negative changes that occur in the global economy. The level of credit risks is assessed as low.
- BBB rating. Relatively high level of creditworthiness. This rating indicates that the economic situation of the country is quite good. It can fulfill its obligations in a timely manner and in full. At the same time, the state is moderately dependent on negative changes in the world market. Probability of exposure to credit risk is moderate.
- BB rating. Satisfactory level of creditworthiness. These letters in the rating denote states whose economic situation can be assessed as acceptable. They fully and timely fulfill their obligations and are moderately dependent on negative changes in the global economic market, but with negative changes in the global economy, delays are possible. Credit risks are assessed as acceptable.
- Rating B. Low level of creditworthiness. The economic situation of this category of states is characterized as unstable, and the possibility of timely repayment of debts largely depends on the international situation. Credit risks in such countries are above average.
- CCC rating. Low level of creditworthiness. This includes states with an unsatisfactory economic situation. Their ability to meet their obligations is highly dependent on changes in the macroeconomic environment. The level of credit risks is considered high. There is also a significant possibility that commitments will not be fulfilled in full or on time.
- CC rating. Very low creditworthiness. The financial condition of countries that are included in this category is unsatisfactory. Their ability to fulfill their obligations is largely determined by changes in the external economic environment, and credit risks are very high. The probability of a default being announced is very high.
- Rating C. Unsatisfactory level of creditworthiness. The economies of countries in this category are in extremely poor condition and have extremely high risks. As a rule, countries that have a pre-default state are entered here.
- Rating D. Default. This includes countries that cannot service their obligations and, most likely, bankruptcy proceedings will be launched there. It is necessary to distinguish between these two indicators, because a default is simply a refusal to pay itsdebts, theoretically it can be announced by the state, which can pay everything.
Let's say a word about Russia
Because each agency has its own rating scale, there are no identical opinions. But in general, Russia's rating is BBB or BB. Not the best option, but not the most hopeless either. So, the BBB rating indicates the presence of certain problems. But even in the expert community there is no unity. Thus, Russia's rating is now at such a level that it can be upgraded if the country is oriented towards the development of science and the introduction of new technologies. And then the BBB rating will be upgraded to A. If this is not done, then we will face a gradual fall.
Conclusion
As you can see, such seemingly simple letters can tell a lot. Behind them is the work of many people who collect and analyze the necessary information. And let's hope that the BBB rating assigned to Russia by many agencies at the moment will change to the best one.
