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CariCRIS gives high rating

Dawne Parris

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Barbados has kept its “high creditworthiness” rating from the Caribbean Information and Credit Rating Services Limited (CariCRIS), despite Government debt being put at just above junk status by Standard & Poors (S&P) last November.
However, like S&P, CariCRIS warned that preserving that level of creditworthiness was highly dependent on the Government’s success at fiscal consolidation and stabilization of the public debt to a sustainable level.
“The risks are tilted to the downside and a slower than expected fiscal consolidation could lead to a downward adjustment of the ratings,” it said in a statement issued last Wednesday.
CariCRIS reaffirmed its ratings of the Government of Barbados of CariAA- (Foreign Currency Rating) and CariAA (Local Currency Rating) on its regional scale, based on a notional debt issue of US$300 million.
“The ratings indicate that the level of creditworthiness of this obligation, adjudged in relation to other obligations in the Caribbean is high,” it said.
“The reaffirmation of Barbados’ ratings is based on the return to some measure of stability in its macroeconomic performance in 2011 as evidenced by positive growth in real gross domestic product (GDP) and a narrowing of the fiscal deficit.”
Real GDP grew by one per cent in the nine months to September 2011 relative to 0.2 per cent in the corresponding period of 2010, while the fiscal deficit narrowed to 5.3 per cent of GDP from 9.6 per cent for the same period in 2010.  
CariCRIS projects a marginal narrowing of the fiscal deficit over 2011, resulting from the uptick in economic activity. Unemployment levels, which seemed to have stabilized around 11 per cent in the last 12 months, are also expected to fall to around nine to ten per cent.  
The ratings agency said the expected resumption of the Four Seasons project and the commencement of The Merricks Resort Show Village and H Barbados boutique hotel (formerly Allamanda Beach Hotel) in 2012 should provide a much needed boost to economic activity as well as to foreign direct investment (FDI) inflows.
However, it noted that the near term growth prospects remained challenging as economic recovery of any significance was not likely until late 2012/13.  
“CariCRIS expects a parsimonious approach to fiscal management supported by the revenue generating initiatives announced in the last two budgets and tighter expenditure controls,” the statement said.
“Nevertheless, the fiscal situation is likely to remain tenuous in the near term in the face of a weak macroeconomic environment in Barbados and the lethargic recovery of its key markets.”
CariCRIS added that it had taken note of the authorities’ commitment to fiscal consolidation and debt reduction with the development of a medium term fiscal strategy which has been reassessed to reflect the longer than expected recessionary conditions.  
Meantime, the external current account deficit increased marginally to nine per cent of GDP, partially reflecting the upward trend in food and commodity prices. These higher import prices also impacted the inflation rate which up to July 2011 was estimated at seven per cent compared to 5.3 per cent in September 2010.  
CariCRIS put the macroeconomic outlook for 2012 at moderately positive with growth in output projected to be around one to two per cent – in keeping with the Central Bank of Barbados’ project of growth “not much better than one per cent”.
However, it said that was contingent on the recovery of Barbados’ main tourism markets as well as the improved performance of the other key sectors driving growth: construction and financial services.