- PIIGS sovereign debt ratings continue to grab headlines, most specifically Greece (and, recently, Portugal), but not all news about government debt is bad.
Yesterday, Moody's Investor Service upgraded South Korean sovereign debt to A1 from A2.
Seven other countries have received upgrades thus far in 2010–many of which are much larger than Greece economically.
It seems like PIIGS are running amok in the financial press. Every day, myriad news sources report on failed debt offerings, spiking spreads, bailout packages, and even dreaded downgrades. Greek issues are frequently referenced–with tense hand-wringing–as we've discussed here recently. PIIGS references have become so common perhaps Oxford should consider it a word and plug it into the dictionary.
Today we propose a new acronym–SKIMJOSTS. Hopefully, it'll garner just as much attention as those pesky PIIGS. Sure, it doesn't roll off the tongue any easier than an Icelandic volcano (just try to pronounce Eyajafjallajokull), but it tells an important underreported story. SKIMJOSTS stands for South Korea, Indonesia, Morocco, Jamaica, Oman, Saudi Arabia, Turkey, and South Africa. The common thread? All are countries that have seen their sovereign debt upgraded in 2010. Moody's Investor Service yesterday decided to up its rating on South Korea's debt from A2 to A1–the highest ever. In January, Greece's economically larger neighbor Turkey received a similar vote of confidence from ratings agencies as did Saudi Arabia in February. But even though South Korea, Turkey, and Saudi Arabia have economies far larger than Greece ($800, $593, and $380 billion, respectively, versus $338 billion for Greece*), Greece continues to receive far more attention. While the other countries noted above vary in size, the upgrade theme holds.
So if credit rating agency opinions of PIIGS countries are significant (questionable, in our view), why not SKIMJOSTS? Many more countries have been upgraded in 2010 than downgraded. Yet worries about the PIIGS portending a debt downgrade contagion abound, while talk of an upgrade contagion is notably absent. The upgrades to the debt of the SKIMJOSTS are one stone in a mountain of unheralded positives that have come with emergence from global recession. While SKIMJOSTS may not yet receive as many headlines, these developments do reflect meaningful recovery for the global economy–and amount to cheaper borrowing costs for the nations impacted. So let's counter the crowd with SKIMJOSTS—a clumsy acronym that may help put PIIGS back in their pen.
*International Monetary Fund