Regional rating agency downgrades Barbados

CariCRIS has lowered its credit ratings for The Government of Barbados.

Caribbean Information and Credit Rating Services Limited (CariCRIS) has lowered by one notch its ratings on the debt issue of the size of USD300 million of the Government of Barbados (GOB) to CariBBB (Foreign Currency Rating) and CariBBB+ (Local Currency Rating) on its regional scale from CariBBB+ and CariA- respectively.

A negative outlook has also been assigned to the ratings.

These ratings indicate that the level of creditworthiness of this obligation, in relation to other obligations in the Caribbean is adequate.

In the statement issued on Monday, the Port-of-Spain based agency said that the downward adjustment of Barbados’ ratings and the negative outlook assigned are driven by concerns over the continued high fiscal deficit and increasing debt burden, which is being financed by the printing of money, creating a challenge for maintaining the fixed exchange rate.

It also attributed the downgrade to the delay in several tourism-related foreign direct investments (FDI) projects which may temper economic growth.

One top banker recently noted that several tourism construction projects remained at a standstill, namely Hyatt, Sam Lord’s Castle and Four Seasons. CEO and Managing Director of Republic Bank (Barbados) Ltd. was cautious about making any predictions for 2017, telling the media last Friday that he was approaching the year with “managed enthusiasm”.

The rating agency however noted that for the nine months to September 2016, Barbados’ economy continued on its growth path that had started in 2014, with a relatively solid year-on-year increase of 1.3%; real GDP growth of 1.4 per cent is forecast for full-year 2016.

CariCRIS expects real GDP growth of the order of 1.7 per cent in 2017, based on continued strong performance in tourism, supported by an anticipated 11 per cent increase in airline capacity from the USA and Canada.

According to CariCRIS, “Fiscal consolidation has been a top priority for the Government of Barbados but not enough progress has been made thus far. “

“While the primary balance has been in surplus for the last two fiscal years and continues to be so in this fiscal year, the large debt and interest burdens have become intractable, pushing deficits and exacerbating the problem.

“Additionally, the fixed exchange rate is under threat of revaluation due to the printing of money to finance the fiscal deficit while the continued delay in tourism-related FDIs such as the luxury Hyatt hotel may create a challenge for accelerating much-needed growth.”

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