Standard & Poor’s plays Grinch to The Ba­hamas with Christ­mas Down­grade

The Star (St. Lucia) - - REGIONAL -

The Ba­hamas has found it­self on the “naughty list” of in­ter­na­tional credit rat­ings agency Standard & Poor’s (S&P), which de­liv­ered the un­wanted gift of a ma­jor down­grade yes­ter­day.

The coun­try’s cred­it­wor­thi­ness is now deemed “junk” as the New York-based rat­ings firm low­ered its sov­er­eign credit rat­ing from BBB-/A-3 to BB+/B.

In a re­port rais­ing the red flag about the spi­ral­ing fis­cal deficit, high un­em­ploy­ment and low growth, S&P warned that the coun­try was at risk for a fur­ther down­grade.

Ac­cord­ing to the rat­ings agency, the Ba­hamian econ­omy will only grow by 0.3 per cent this year, down from the 1.2 growth pro­jected back in April.

It cau­tioned: “. . . lower growth trend will chal­lenge the gov­ern­ment’s abil­ity to meet its fis­cal pro­jec­tions, likely re­sult­ing in ris­ing debt.”

It added: “The ero­sion of the Ba­hamas’ cred­it­wor­thi­ness re­flects these grow­ing vul­ner­a­bil­i­ties within a con­text of a weak ex­ter­nal po­si­tion with grow­ing lev­els of ex­ter­nal debt, dou­ble-digit un­em­ploy­ment, high non­per­form­ing loans in the banking sys­tem, and high house­hold in­debt­ed­ness.”

S&P also jus­ti­fied the down­grade against the back­drop of de­te­ri­o­rat­ing gov­ern­ment rev­enue, de­spite the in­tro­duc­tion of the Value Added Tax (VAT).

The re­port im­me­di­ately drew a strong re­buke from the gov­ern­ment.

“S&P had turned a blind eye to ini­tia­tives cur­rently un­der­way to stim­u­late eco­nomic ac­tiv­ity and boost rev­enue.

“The Gov­ern­ment . . . is of the view that S&P’s de­ci­sion does not give ap­pro­pri­ate weight to im­por­tant de­vel­op­ments on the ground, nor the Ba­hamas’ strong com­mit­ment to ad­dress its eco­nomic and fis­cal chal­lenges,” a gov­ern­ment state­ment said.

Point­ing to the much an­tic­i­pated US$3.5 mil­lion Baha Mar project, the gov­ern­ment added, “The Ba­hamas’ shortto medium-term prospects for plac­ing the econ­omy on a stronger growth tra­jec­tory are more en­cour­ag­ing than they have been since the re­cent eco­nomic and fi­nan­cial cri­sis.”

Fi­nan­cial an­a­lysts warn that the down­grade would likely re­sult in gov­ern­ment pay­ing more to ser­vice its debt, among other things.

Op­po­si­tion Leader Loretta Turner-Butler is also ex­pect­ing neg­a­tive fall­out. She said the re­port was ev­i­dence that the eco­nomic poli­cies of the Perry Christie ad­min­is­tra­tion had failed.

“This is not a good Christ­mas. We’ve ob­vi­ously gone over that precipice that I’ve been talk­ing about for some time,” she told the Tri­bune.

Chief ex­ec­u­tive of­fi­cer of the Ba­hamas Cham­ber of Com­merce and the Em­ploy­ers’ Con­fed­er­a­tion, Edi­son Sum­mer, de­scribed the down­grade as a rude awak­en­ing for the coun­try.

“It has to be seen as a real wake up call. It’s not good news for any­body,“he stressed.

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