Today’s downgrade of the Barbados economy by international credit ratings agency Standard & Poor’s (S&P) came as no surprise to the private sector, according to the non-profit organization charged with advancing the interests of the business community.
Still, business leaders said they were disappointed it had come to this, especially since the remedies prescribed by S&P were the very ones that the private sector had repeatedly recommended.
“This downgrade was not surprising as the metrics used to measure the economy – the deficit and debt as a percentage of gross domestic product – were all worse than before. What is concerning is that the outlook is negative and the remedial action required by the rating agency has been opined by the private sector for a very long time,” President of the Barbados Chamber of Commerce and Industry (BCCI) Eddy Abed told Barbados TODAY soon after S&P announced this afternoon that it had downgraded Barbados’ long-term foreign and local currency sovereign credit ratings from ‘B-’ to ‘CCC+’ and the short-term foreign and local currency sovereign credit ratings to ‘C’ from ‘B’.
S&P also issued a negative outlook for the island, while warning that the sustainability of the Barbados dollar was now under threat, amid Government’s continued reliance on the Central Bank to finance its deficit.
It also explained that its negative outlook reflected its view that Government was either unable or unwilling to take timely steps to redress the situation.
“Increased reliance on Central Bank financing of the still-high government deficit and the fall in international reserves reflect heightened challenges for policy implementation, the sustainability of the peg to the US dollar, and underpin expected weaker growth prospects in Barbados,” S&P said in its overview.
Earlier today, Abed joined other private sector partners, the labour movement and Government in a meeting of the tripartite Social Partnership at which they discussed both the deficit and the low level of foreign exchange.
The business executive said the BCCI was optimistic that there would be a turnaround of the economy if all the partners worked closely to immediately implement the required corrective measures.
However, he said “it will require sacrifices from all citizens for the greater good”.
Meanwhile chairman of the Barbados Private Sector Association Charles Herbert described the latest downgrade as disappointing.
Referring to today’s meeting of the Social Partnership – the first for the year, Herbert said there was consensus among the partners that urgent action was needed to shore up falling foreign reserves and curb the persistently high fiscal deficit.
The social partners agreed to form two sub-committees – one to address the decline in foreign exchange reserves and the other the address the fiscal deficit.
“Coming out of the meeting we are disappointed to hear of the further downgrade to Barbados, but we think that even if we knew then, the action that we took at today’s meeting would be the same, and in fact this is timely action to create the confidence that would change the [rating] at the next review,” an optimistic Herbert said.
It was on Monday that Minister of Finance Chris Sinckler held a news conference at which he gave the assurance that the country was not facing a “doomsday” scenario, and the dollar was not under threat.
Sinckler could not be reached for comment today, however, the Ministry of Finance released a statement through the Barbados Government Information Service stating the downgrade was expected.
Today’s downgrade was the 18th since the DLP assumed office in 2008, a trend economist and Opposition Barbados Labour Party (BLP) candidate Ryan Straughn said was “bordering on ridiculous” and proof of the failure of the Freundel Stuart administration’s economic policy.
“The current administration has continued to disregard the warnings that the fiscal policies that they have been pursuing are not benefiting Barbados. This particular downgrade coming at this time . . . really underscores the importance that we need to get this thing corrected and corrected in a serious way,” Straughn told Barbados TODAY.
Straughn said Sinckler ought to have known of the pending downgrade when he held the news conference on Monday, and he should have advised the Barbadian public that it was coming.
In any event, he said, even if Sinckler had not known on Monday, he certainly ought to have had the information before today’s meeting of the Social Partnership.
“The issue for me here is how do you expect people to have any confidence in you if you keep withholding information from people?
“It is disgusting that people would have left that meeting today not hearing from the Government itself that we were indeed downgraded this afternoon but had to come hear it from a press release or the media. That is something that is fundamental. If we are going to have a tripartite system it has to work in the interest of the people,” Straughn insisted.