Yesterday’s credit rating downgrade by Moody’s Investors Service has not surprised Minister of Finance and Economic Affairs Chris Sinckler.
And despite advice from the United States-based rating agency that Government needed to take further action to prevent the economy falling back into recession or having the rating lowered further, Sinckler said the administration intended to “stay the course on our fiscal consolidation programme”.
He also urged Barbadians to help Government in its quest to “seek to improve our levels of productivity, and move ahead hastily with our programme for restructuring the Barbados economy”.
In a ratings opinion released last evening in New York, Moody’s downgraded the island’s foreign and local currency bond ratings from Baa3 to Ba, commonly called junk and considered below investment grade, and ascribed a negative outlook.
It cited Barbados’ “continuing lacklustre economic performance” and “ongoing deterioration in the government’s debt metrics”.
In his response, however, Sinckler said the action was expected and took the positives from the analysis, including Moody’s view that “the worst of the economy and fiscal deterioration is behind Barbados”.
The minister said the downgrade, which follows a similar one from Standard and Poor’s in July, was “altogether likely”.
“Naturally, the continued weak global economic recovery, particularly among our largest trading partners in the USA, UK and most of CARICOM, has worked to compound the negativity of an already difficult economic situation, which heavily undermined Barbados’ prospects for a speedy recovery in growth,” he stated.
“And, in spite of what we have heard, and will continue to hear, the knock-on effects of this environment on our fiscal and economic situation remain clear and unmistakable.”
In addition to the view that the worse was behind Barbados, Sinckler deduced five main things from the Moody’s downgrade.
These included that “Barbados’ prospects for short term high growth levels will remain challenged because of the weaknesses in our major trading partner economies”; “these challenges are likely to affect our capacity for faster fiscal consolidation, notwithstanding the fact that efforts to strengthen our fiscal position have been successful thus far”; and “government must stay the course on its fiscal consolidation programme, strengthening it wherever possible, rather abandoning it”.
The official said the ratings action also suggested “that to attempt to introduce pro-cyclical fiscal measures (tax eases) to stimulate domestically driven growth will reverse the gains made so far by the country to turn around the situation and make matters much worse fiscally and economically”; and “that our foreign reserves levels remain adequate to satisfy our current and immediate future needs”. (SC)