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CariCRIS lowers Bdos credit rating
Caribbean Information and Credit Rating Services Limited (CariCRIS) has lowered by two notches its ratings on the debt issue of the size of USD $300 million of the Government of Barbados to CariA- on its regional scale from CariA+ and CariAA- respectively. In a release yesterday the agency said the downgrade was driven by the “below expectations performance of economic growth, fiscal containment and the external position”.
“In its March 2013 report, CariCRIS had expected meagre economic growth of 0.5 per cent to one per cent in 2013. For the nine months to September 2013, the economy is estimated to have contracted by 0.7 per cent period-on-period, with little chance for any significant turnaround by year end,” the release said.
“Both the tradables and non-tradables sectors declined. Within tradables, tourism’s value added fell two per cent. The decline in tourism was due to a 6.2 per cent decrease in long-stay arrivals for the nine month period to September 2013. The fiscal deficit widened more than expected in the first six months of the fiscal year.”
In its March 2013 report, CariCRIS had projected the 2013/14 overall fiscal deficit was projected at 5-7 per cent of GDP. With half the fiscal year gone, the overall fiscal deficit at September 2013 was estimated at 9.5 per cent of GDP. The agency said this larger than expected fiscal deterioration was mainly the result of a sharp fall in current revenue to 23.7 per cent of GDP from 28.3 percent in 2012/13.
“The largest tax category, indirect taxes, fell 4.8 per cent for the first six months to September 2013 as compared to the similar period in the previous year. As at September 2013, General Government Gross Debt increased to 108.1 per cent of GDP from 99.9 per cent as at December 2012. This is well above CariCRIS’ March 2013 projection of 97-102 per cent by year-end 2013.
“The external account has also experienced significant decline. For the first time in over five years, the overall external balance has been negative at -5.1 per cent of GDP, well below CariCRIS’ March 2013 projection of an overall surplus of 3-5% of GDP for the year. The steeply worsening external position is the result of sustained high imports, falling exports and declining foreign direct investments,” the agency said.
CariCRIS said the ratings on Barbados are supported by its long history of strong governance and political stability reflecting mature institutions and broad policy stability. “Monetary and exchange rate stability underpinned by a long-standing, fixed exchange-rate regime, as well as excellent human development indicators, reflected in high per capita income and high standards of education and health care, are also key rating strengths.
“Also supporting the rating is the relative diversity of its revenue sources which offers government some amount of financial flexibility,” the agency said.
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