S&P affirms Barbados rating with negative outlook

The international ratings agency Standard & Poor’s (S&P) today affirmed its ‘BB-’long-term and ‘B’ short-term sovereign credit rating of Barbados, while stating that its outlook on the island remains negative.

In a statement this evening, S&P said the ratings on Barbados reflect its large fiscal deficits and high debt burden, as well as its limited fiscal flexibility and a decade of weak economic growth.

However, it noted that the country has a stable, predictable, and mature political system, which benefits from consensus on major economic and social issues, including support from the private sector and trade unions for the Government’s ongoing fiscal and structural adjustment programme.

“We are affirming our ‘BB-/B’ sovereign credit ratings on Barbados,” S&P said.

It also explained that its negative outlook reflects “the potential for a downgrade if the Government fails to meet its fiscal adjustment targets or if there are signs the economy may fail to grow next year”.

S&P noted that the island’s economic fundamentals remain weak, with average annual real GDP growth of just 0.3 per cent during 2010-2013, which is slightly negative on a per capita basis.

“We expect no growth in 2014 and a slow recovery in 2015-2016 based on a pickup in tourism and construction (in both the private and public sectors). The Government’s fiscal adjustment strategy, announced in December 2013, will constrain domestic demand, raising the importance of stimulating private investment (especially in tourism projects) to achieve the projected higher GDP growth averaging 1.5 per cent to 2 per cent over the next several years. With a slow recovery and public sector layoffs, unemployment will likely remain high, after reaching 11.7 per cent in 2013,” S&P noted.

The ratings agency is also projecting that Government’s debt burden will rise to above 80 per cent of GDP in fiscal 2014 (ending March 2015) from 75 per cent in fiscal 2013 and 67 per cent in fiscal 2012.

In terms of the current shortfall, it noted that, including National Insurance Scheme (NIS) surpluses, the deficit rose to 9.7 per cent of GDP in fiscal 2013 from 6.2 per cent in fiscal 2012.

However, S&P expects the overall deficit to fall “to nearly seven per cent in fiscal 2014 as a result of the Government’s fiscal consolidation plan, and further to 4.4 per cent in 2015”, even though it said “risks remain from the sluggish outlook for the country’s main economic sectors, especially in the context of the fiscal adjustment programme already underway, high unemployment, and mounting spending pressures”.

External pressures remain as well.

However, S&P expects the Barbados dollar peg to hold — a key assumption underpinning Barbados’ creditworthiness.


5 Responses to S&P affirms Barbados rating with negative outlook

  1. Martin Greene
    Martin Greene August 9, 2014 at 1:16 am

    Don’t worry. Check who owns S & P. The same people who own the FED. The banks!

  2. E.Wilkinson August 9, 2014 at 7:58 am

    It is time for citizens of Barbados to come together and support the government and help rebuild the country. Citizen unrest, political dis-unity and crime creates harm for countries; not S & P ratings. It is time for Barbadians to recognise the blessings they received everyday, pay attention what is happening around the world and their neighbours. Until the economies of North America and Europe stabilises and begin to recover; islands such as Barbados with limited resources will suffer. Remember your motto Pride and Industry and help the current government rebuild the country. Stop criticising everything that they are doing and support them in their efforts to keep the stability of the country. Since 1966 the leadership of the country have built it’s human capital by providing it’s citizens with free education; it is time for you to give back. It is for times such as these that you were educated.

  3. Patrick Blackman August 9, 2014 at 11:26 am

    S&P is a criminal organization who’s ratings can be bought so why are we placing so much credit in this organization in determining the economic outlook for the country. Yes their rating can determine the interest rate we pay for borrowing on the open market but it is the governor of the central we should be listening to. Barbados needs to significantly cut its import bill grow more food at home, make hotel industry be 90% bajan on menus

  4. Wily Coyote August 9, 2014 at 12:10 pm

    S&P is being quite conservative and optimistic.

  5. Brimstone August 9, 2014 at 3:16 pm

    S&P and the IMF are needed in Barbados. We have a situation where the government has constantly failed to act and/or react to the changing environment in the global market place and the nation is suffering for it. They have no idea of what to do and wont listen to those who know, this is a cocktail for disaster.

    Under the IMF, the civil service would be restructured and most of the dead weight at the top would be removed, freeing up a vast amount of revenue. (too bad for some political odd balls) A lean, clean highly proficient agency would emerge.

    Restructuring to ensure a speedy processing of incorporation, licenses and many other ancillary services, inclusive of planning permissions from Town & Country Planning (which is in need of clinical surgery to function with full transparency) would assist foreign investors and locals in doing business with confidence.

    All tax concessions should cease and the large amounts owed to BWA, VAT, and the IRS by business institutions should be paid within 90 days or government shoul acquire an aggregate control of the business, dependent on the amount owed and the nature of the business. VAT should also be designed to target the middle and upper end of the society, whose consumption is greater than the lower end.

    Personal allowances under taxation needs a drastic overhaul, so too does mortgage interest. Both these items need a certified cap which should bear relevance to the amount that can be reasonably borne by the lower middle class, all residual amounts should be collectable revenue for the government. These allowances cost government approximately $2.3 Bil/annum.

    There should be a 250% luxury tax on all products which can be grown locally. We need to resurrect the indigenous products in agriculture and the return of black belly sheep, which was our trade brand. Also for good measure, we need to revitalize the fashion industry which had created thousands of jobs in the 70’s and 80’s, and can surely be replicated now.

    These items are very much achievable, but all the society do is TALK. Since the IMF will forcefully enact these items without remorse, then they will succeed and S&P will surely issue the rating we deserve.

    Our society/politicians are mere talk. Our mediocre standards are clearly seen, when staff under perform and cause locally owned businesses to fail, which are then bought by foreign interest, and the same staff then HAVE TO PERFORM to save their jobs and so make the institutions profitable. BNB ==== RBTT.

    The IMF and S&P medicine may be bitter like Buckley’s, but it WORKS. We need to work and not talk. God help us !!!!!!!!


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