Romania ranks 55th in the Euler Hermes and Allianz’s 2020 country risk index

Each quarter, Euler Hermes assesses the evolution of country risk. In order to have a more precise and complete vision, the world leader in credit insurance has this year added environmental, societal and governance (ESG) risks to its analyses. This decision makes perfect sense in today’s context as the Covid-19 pandemic has a major negative impact on economies around the world. Concerns of recovery are growing, and suggest a possible resurgence of social risk in many countries.

In this context, Euler Hermes and Allianz present their Social Risk Index (SRI). This indicator identifies which countries are particularly vulnerable to systemic social risks (social discontent, demonstrations and protests), these having an impact on the political orientation and policymaking of a country, its companies and its ability to generate and attract investment. The SRI measures underlying strengths and weaknesses, ranking countries on a scale from 0 (highest social risk) to 100 (lowest social risk). As the Covid-19 pandemic pushes the global economy into the worst recession since WWII, we identify which countries are particularly at risk of escalating social discontent.

Denmark, Finland and Sweden make the top three of the SRI 2020, exhibiting the lowest levels of social risk. Germany is placed 5th and France 9th.

Romania is in the middle of the ranking, on , on 55th place, falling four places compared to 2015.

Nigeria, Venezuela and Angola are the most at risk to social unrest in our sample. Venezuela and Angola have also experienced some of the largest deteriorations over the past five years.

Advanced Economies (AEs) are generally less vulnerable to social unrest than Emerging Markets (EMs), with Greece (rank 35) and Italy (30th) placed lowest among all AEs.

Slovenia (rank 15), Estonia (17th) and Qatar (21st) are the best-ranked EMs.

On a regional basis for EMs, economies from Emerging Europe are placed best on average, while Africa and Latin America exhibit the highest risk of social unrest in the near future.

New Dimensions of Social Risk

Social and political risk were already on the rise in a number of countries and regions well before the outbreak of the Covid-19 pandemic. In some cases, this was not surprising. In Venezuela, for example, long-lasting political and economic mismanagement had resulted in mass anti-government protests for several years. Iran had also seen anti-regime rallies before. And in Argentina, a textbook Emerging Markets (EMs) crisis led to a rapidly and painfully unravelling of macroeconomic imbalances, which aggravated already difficult social conditions. However, the wave of strong and durable anti-government demonstrations in Hong Kong, Lebanon and across Latin America (notably in Ecuador, Chile, Bolivia and Columbia) in the second half of 2019 was sudden and unexpected. In particular, the intensity of unrest in high-income EMs such as Chile and Hong Kong surprised markets. Moreover, anti-government protests also appeared to have increased in Advanced Economies (AEs). In particular, the Yellows Vests movement against fiscal austerity in France that began in late 2018 caught a lot of attention and sparked copycats in several other countries. Overall, this suggests that not only the overall level of economic wealth in a country but also the distribution of that wealth, changes in the level of welfare, as well as subjective perceptions of the country’s government and institutions, play a role with regard to social risk.

Most of the 2019 protest movements continued into early 2020 until the Covid-19 pandemic struck, resulting in especially strict lockdown measures that have largely starved them off for some time. But as stage two of the Covid-19 crisis – the gradual opening of national economies – has begun, there is a significant likelihood that protests in both EMs and AEs arise anew. Moreover, social discontent and unrest may be aggravated and could also spread to other countries that have been politically calm in recent years as a result of the impacts of the Covid-19 crisis. People who have given their governments the benefit of the doubt in phase one of the crisis (full or partial lockdowns to ‘flatten the curve’) may now become unsatisfied with the preparedness of authorities or the pace of de-confinement as the economic pain is growing. A generally poor health situation, increasing unemployment and poverty, rising prices (especially for food) as well as a weak government response to the crisis due to mismanagement or lack of fiscal resources may add to already existing social risks.

In the course of May, there have been protests and demonstrations around the world against government responses to the ongoing pandemic, and these protests have also drawn opposition from those who think the lockdowns have been justified. For the moment, these protests mostly appear to represent ‘social noise’ rather than severe social unrest. However, it cannot be ruled out that this noise develops into more serious and lasting protests, or that it occurs in countries that have been calm for now.

The focus of the analysis will be on 102 selected economies, including all AEs and the larger EMs. We have also calculated the Social Risk Index backwards for the year 2015 to analyze the change over the past five years per country and identify the potential for rising social discontent that could trigger unrest even in wealthier countries.

All AEs are ranked among the best 35 out of the 102 selected economies in our analysis. Denmark is leading the league with a SRI score of 82.5 out of a maximum of 100, followed by its Nordic neighbors Finland and Sweden. Germany is ranked fifth (with a SRI of 76.5) and France ninth (74.2). The latter may surprise some readers against the backdrop of the Yellow Vests movement in 2018-2019. But while these protests appear to be covered in our analysis by the sub-indicator ‘Trust in Government’, for which France scores only 45.9, they do not seem to have significantly changed the policy direction or business investment decisions in the country. Overall, systemic social risk continues to be low in France, according to our assessment, as most sub-indicators of the SRI have remained strong or even improved over the past five years.

At the opposite end in the group of AEs, Greece is placed 35th, thus exhibiting the highest vulnerability to social unrest among AEs. However, its SRI score of 61.4 reflects an improvement of +6.2 points from five years ago when the country was still in the midst of its sovereign debt crisis which caused widespread social discontent at the time. Similarly, the SRI of Italy, where public discontent was also prevailing at the height of the Eurozone crisis, has improved by +2.0 points to 63.9 currently, placing the country 30th. In both countries, the improvement was in part due to stronger real GDP per capita growth in the last three years and better employment conditions. As these factors will deteriorate in the wake of Covid-19, the SRI for both is likely to decline somewhat in the next year but should not fall below the 2015 levels, also because local and EU fiscal stimulus should mitigate the adverse effects on the economies.

The U.S. is ranked 23rd with a SRI of 66.4. Our assessment reveals some weaknesses in labor force participation (62% of the working age population), income inequality, public social spending and trust in government. In contrast, the country scores well on political stability, government effectiveness, corruption perception, per capita growth and the low share of merchandise imports in GDP (15%), which together with the strong USD provides for a low risk of imported inflation.

“With containment measures, social movements have logically diminished despite us seeing some ‘social noise’ in multiple countries. But the Covid-19 epidemic has, in our view, increased social inequality. The financial impact is very negative for many households and businesses around the world, which could lead to a new wave of social discontent. We can therefore fear a significant reinforcement of social risk in many countries this year, “analyzes Ana Boata, Director of Macroeconomic Research at Euler Hermes.

Emerging Europe

On a regional basis, overall social risk is relatively low in Emerging Europe. Twelve out of 18 countries in our sample have a SRI above 50 and nine of them are even above 60, placing them on par with many AEs. These nine countries are all EU member states (Slovenia, Estonia, Czechia, Croatia, Slovakia, Poland, Lithuania, Latvia, Hungary), reflecting that EU membership requires a substantial improvement in political and institutional frameworks. However, our assessment also indicates that Hungary and Poland have experienced a slight increase in social risk over the past five years. This is in line with the fact that democratic institutions have been somewhat weakened in these two countries over the past decade and there have also been public protests against these developments. Yet, while visible, these protests are not supported by majorities in the populations and are thus unlikely to have a significant impact in the medium term.

One EU country in the region, Romania, has a SRI of just below 50, along with Azerbaijan, Bosnia and Herzegovina, Kazakhstan and Russia. The country most vulnerable to social unrest in the region is Turkey with a SRI of just 38.8 and rank 87 in 2020, exhibiting a marked deterioration by -5.2 points since 2015 and now showing a clear distance from the rest of the region. The weakest factors contributing to Turkey’s SRI are the continued currency depreciation, which raises the costs of imported consumer goods, a low labor force participation (53% of the working age population), political instability and income inequality.

Getting back to Romania, the position in the second half of the ranking – even if at the beginning of the section – is not flattering. Indeed, if we looked back in 2015 it would have taken the last position – the 51st place of the first section – a place now occupied by Ukraine.

Of course, the last remark raises some questions in view of the long-haul armed conflict in which the neighboring country has been involved with Russia and which is still quite far from over.

Also, the being neighbours in the ranking only with countries outside the Union, either in Europe or in Asia, can raise a number of questions.

However, on closer analysis we notice the wide range of factors included in the calculation of indicators and especially the deterioration of many of them (with the notable exception of GDP / capita growth compared to a number of decreases in macroeconomic indicators) .

The frequent street protests of 2017-2018 culminating with the moment of August 10 and the reasons behind them but also the relative political instability in recent years have also contributed to the awarding of unfavorable ratings for the more political and social factors.

In the context of the Covid-19 pandemic, however, the ranking may undergo abrupt changes if social discontent manifests itself with very different intensities between countries or if new events with major impact occur. The way in which both the local economy and society as a whole will respond to the new challenges generated by the current crisis will significantly influence the ranking in the years to come.

“Currently, Romania is positioned in the second part of the ranking, on 55th place, falling four places compared to 2015. Looking back at that year, Romania would have occupied the last position of the ranking, respectively the 51st place of the first half , a place now occupied by Ukraine. The street protests of 2017-2018, the political instability in recent years and the wide range of factors included in the calculation of indicators, but also the trend of their deterioration, have contributed to the attribution of unfavorable ratings for political and social factors. In the context of the current pandemic, the ranking may undergo major changes. It all depends on how both the local economy and society as a whole will respond to the new trials generated by the current crisis”, said Mihai Chipirliu, CFA, Head of Risk Analysis Euler Hermes Romania.



Indicators and methodology of the Allianz Social Risk Index (SRI)

  1. Real GDP per capita growth trend: We compare the average annual growth in the last three years to the average growth prior to that since 2000. This approach reflects that the potential for social unrest can also rise in high-income EMs (such as Chile or in the GCC) and AEs if the (relatively high) level of economic welfare is deteriorating or being perceived to deteriorate.
  2. Labor force participation: The higher the share of the labor force in the working-age population, the lower the potential for discontent. This indicator is better than the unemployment rate, which is measured very inconsistently across countries.
  3. Income inequality measured by the GINI index.
  4. Public social spending on education, health and social protection, which reflects the importance of social policies and networks in a given country.
  5. Political stability and absence/presence of violence, reflects together with
  6. Government effectiveness and
  7. Corruption perception how effective a government is perceived at doing its job.
  8. Trust in government indicates the share of people that trust their national government.
  9. Vulnerable employment is made up of own-account workers and contributing family workers who are less likely to have social security coverage and to benefit from other forms of social protection.
  10. Imports of goods as % of GDP reflects together with
  11. Currency depreciation the scope for imported inflation, notably for foodstuffs, which is a typical trigger for social discontent.
  12. Fiscal revenue as % of GDP captures a government’s capability to respond with fiscal stimulus to crises.


To make the data comparable across indicators, each of them was rescaled from 0 to 100 with 0 denoting the highest risk and 100 the lowest. Then the SRI was calculated as the average of the sub-indicators, thus also ranging between 0 and 100.

2020Allianzcountry riskCOVID-19crisiseconomieseuler hermesEurozonegovernanceindexinvestmentlockdownpandemicpoliticalrecoveryriskromania55thsocialSocial Risk Index (SRI)
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