Moody’s Investor Services has officially downgraded The Bahamas a single notch from BAA2 to BAA3.
Earlier this year, the New York-based credit rating company threatened that the country could face a fresh credit rating downgrade due to two consecutive years of a recession.
Moody’s has changed the outlook for The Bahamas to stable; the risk ceilings for The Bahamas’ long-term and short-term financial obligations has also been lowered.
State Minister for Finance Michael Halkitis last month said the government remained optimistic; although the Wall Street rating company announced that The Bahamas was being placed “on review” for a potential downgrade due to the government’s failing fiscal position and the country’s unexpected economic reduction.
The minister noted however that the company was concerned about revisions to the economic growth numbers that were released by the Department of Statistics recently.
In lieu of the downgrade, the government is “disappointed” the country’s credit risk will remain in an investment grade.
“Although the government is disappointed in this decision, the country’s credit risk remains investment grade, and the rating agency, by its stable outlook assessment, acknowledges that the economic developments underway stand to enhance the resilience of the Bahamian economy,” the Ministry of Finance said in a press release.
“While it is unfortunate that the mega Baha Mar project’s opening has been unduly delayed, the path to its completion is now established, and its opening will secure meaningful employment opportunities, alongside a higher level of capital injection than originally anticipated.
“Fiscal sustainability and debt reduction remain high on the government’s policy agenda, and are being supported by deliberate measures to modernize and enhance revenue administration and control expenditures.”
The government’s believes that, “economic fundamentals still support a strong creditworthiness assessment and, based on its proactive approach to addressing existing policy concerns”.
It also added that it is confident that this outcome will be temporary and improvement will secured in “short order”.
Data released by the Department of Statistics showed that “constant price” GDP contracted by 1.66 per cent last year however the international credit rating agencies along with the International Monetary Fund (IMF) said that the Bahamian economy expanded around one per cent last year.
Recently the IMF warned the Christie led administration that they are too optimistic with their budget projections.
The latest report warned that our deficit will be around $100 million higher than the forecasted projections by the PLP for the 2015-2016 fiscal year.
Executive directors of the IMF highlighted that the need for The Bahamas to improve its fiscal consolidation and competitiveness, reduce unemployment and raise potential growth.
