Press Releases
CariCRIS lowers its credit ratings for Government of Barbados
Issue Ratings[1] (For notional debt size of USD 300 million or equivalent)
CariAA (Regional Scale Foreign Currency)
CariAA+ (Regional Scale Local Currency)
bbAAA (Barbados National Scale)
Caribbean Information and Credit Rating Services Limited (CariCRIS) has lowered its ratings on the debt issue (notional) of the size of USD 300 million of the Government of Barbados to CariAA (Foreign Currency Rating) and CariAA+ (Local Currency Rating) on its regional scale from CariAA+ (Foreign Currency Rating) and CariAAA (Local Currency Rating) . The ratings indicate that the level of creditworthiness of this obligation, adjudged in relation to other obligations in the Caribbean [2] is high.
The downgrade reflects the severe impact of the global recession on the macroeconomic performance of Barbados resulting in contracting economic activity, a widening fiscal deficit, increasing public sector debt levels and a deteriorating current account contributing to a balance of payment deficit. From average real GDP growth of 3.9% in the previous four years growth slowed to 0.7% in 2008 and the economy is expected to contract by 3% in 2009. The key industries driving growth, tourism and financial services, have experienced significant slowdown resulting from the recession in its key source markets, United Kingdom (UK), United States of America (USA) and Canada. The fiscal deficit has more than doubled since 2004, climbing to 5.9% in 2008, the largest in the last decade. As a result, public sector debt (inclusive of contingent liabilities) has climbed to unprecedented levels, reaching 113.4% of GDP in 2008 from 93.4% in 2004 and is projected to increase further to around 120% by end-2009. The external position weakened as the current account deficit more than doubled to 10.4% of GDP in 2008 and FDI inflows waned. Consequently external reserves fell by US $101.1 million reducing import cover to a low of 3.3 months.
The ratings on Barbados reflect its long history of strong governance and political stability manifested in the quality of its underlying institutions: political, legal and economic as well as its monetary and exchange rate stability underpinned by a long-standing, fixed exchange-rate regime. Excellent human development indicators, reflected in high per capita income and high standards of education and health care, are a key rating strength. Also supporting the rating is the diversity of its revenue sources which offers government a fair amount of financial flexibility. These strengths are tempered by a general easing of the fiscal stance in recent times which has led to growth in the overall fiscal deficit, rising public sector debt levels and increasing debt-servicing costs. In addition, there has been increasing pressure on the external sector leading to persistent deficits, low and declining reserves and deterioration in its external liquidity position. Not dissimilar to many of its Caribbean neighbours, Barbados has a small open economy with limited resources and few growth prospects outside of tourism and financial services.
About the Sovereign: Barbados is the most easterly island in the Caribbean chain and is part of the Lesser Antilles. It lies approximately 160.9 kilometres (kms) to the east of its nearest neighbour, St. Vincent and the Grenadines and is approximately 463 kms north-east of the South American mainland. The island is approximately 34 kms long and 23 kms wide with an area of 431 square kilometers.
The population of Barbados is estimated to be 275,300 (December 31, 2008) making it one of the most densely populated countries in the world, with an average population density of 639 persons per square km. The majority of the population are of African descent (90%), the remaining are Caucasian (4%) and people of Asian and mixed descent (6%).
Barbados has transformed itself from a low income economy dependent upon sugar production into an upper middle-income economy based on tourism. Barbados’ long history of strong democratic and legal institutions, minimal crime and a stable political culture has made it an attractive investment destination for offshore businesses.
NOTE: Dr. Marion Williams was the Governor of the Central Bank of Barbados and a Director on the Board of CariCRIS until her resignation on October 31, 2009. Governor Williams did not participate in the rating process and the rating decision.
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Please visit www.caricris.com for the detailed rating rationale on the Government of Barbados
Or contact:
Arjoon Harripaul Sherry Ann Persad
Head-Ratings Senior Rating Analyst
Tel: 868-627-8879 Ext. 227 Tel: 868-627-8879 Ext. 228
Note
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[1] The sovereign has no immediate plans of issuing this debt; as such the debt size is only indicative of a possible future debt issue.
[2] The term Caribbean as used here covers the following countries: Bahamas, Barbados, Belize, Costa Rica, Dominican Republic, Guyana, Haiti, Jamaica, Panama, Suriname, Trinidad and Tobago and the following countries in the OECS: Anguilla, Antigua & Barbuda, Dominica, Grenada, Montserrat, St. Kitts & Nevis, Saint Lucia and St. Vincent & the Grenadines. Refer www.caricris.com for a more detailed explanation on CariCRIS ratings and rating definitions.
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