The latest downgrade of Barbados is yet another dark cloud over the local investment climate, leaving very little hope in the business community that the economy will emerge from the doldrums anytime soon, according to a top business executive.
President of the Barbados Chamber of Commerce and Industry (BCCI) Eddy Abed told Barbados TODAY the private sector was now extremely concerned about the situation facing the country and he feared that it would not improve anytime soon, given that the next general election is due within months.
International ratings agency S&P Global today lowered its long-term local credit rating on Barbados to CCC from CCC+, with a negative outlook.
The New York-headquartered institution said in a report the negative outlook reflected the potential for a downgrade over the next 12 months should Government fail to advance measures to significantly lower its fiscal deficit, strengthen its external liquidity, and reverse its falling reserves.
The report also pointed to the risks posed to the sustainability of the 2:1 peg to the US dollar.
“The negative outlook reflects the risk of a downgrade given difficulty turning around fiscal policy, with parliamentary elections in 2018, a possible domestic debt exchange that could be default under our criteria, and prospects for a balance of payment crisis,” S&P said.
In a swift reaction this evening, Abed said the private sector had long been warning Government of the need to stabilize the economy and find one of the “cheapest” sources of international funding to address its debt situation, which he said could come from the International Monetary Fund (IMF).
“Frankly, I don’t think there is much that we can do between now and election. So the outlook to me is extremely pessimistic. The concerns are just being amplified as to what we were told before . . . and the worst part of all this is that the outlook remains negative. “There is nothing positive about this rating that any of the citizens and businessmen in this country can say that we have something to look forward to,” Abed told Barbados TODAY.
“Government has been reluctant in approaching the IMF. Sadly, we are paying the price for it because our foreign reserves are extremely woeful and the prospects going forward don’t seem at all to be positive, so much so the ratings agency has said that the expectations are negative.”
Abed also expressed concern that unless Government deals with high debt, the low foreign reserves, the high deficit and the difficulty conducting business here, the island would continue to be downgraded.
Charging that there was “an extreme calm” in the investment climate in Barbados due a lack of urgency on the part of Government, the BCCI head said the situation was now “extremely concerning for businesses”, especially because no policies could be implemented between now and the election, due by the middle of next year.
He warned that it was simply “not business as usual” in Barbados.
“For all the good intention, for all the promises, there is very little that seems to be going on and I think most people are holding their breath and waiting to see. It is a question of confidence. It is a question of return on investments. People will not invest unless there is some sense that they will get a return, and this nasty question of devaluation has raised its head again by the current downgrade,” Abed said.
“So this further, in my mind, adds dark cloud over the investment climate. It is a reality. So I am absolutely concerned. I don’t think that we have done enough in lieu of the downgrades we have had in the past, in the warnings we have had in the past, in the mouthing of the private sector and the unions to let’s do what is necessary. The Government has been reluctant and extremely sluggish to adopt a lot of these new policies and I think we are paying the price of it,” he said.