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Credit rating holds, but warning issued

by Barbados Today
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Caribbean Information and Credit Rating Services Limited (CariCRIS) has reaffirmed Barbados’ credit rating of CariBB for local currency and CariBB- for foreign currency. The regional rating agency has also assigned a stable outlook for the country’s economy.

In a news release this weekend, CariCRIS, which is headquartered in Trinidad and Tobago, said the sovereign rating reflected the island’s fiscal consolidation, which continues despite COVID-19 pressures; comfortable and growing gross international reserves; good financial sector stability indicators; and strong tourism fundamentals that suggest a good rebound post-COVID-19.

Despite this, CariCRIS explained that its rating for Barbados was tempered by the still high, though declining debt-to-GDP ratio, and the fact that the economy continues on a low growth path, while unemployment remains high.

“Our decision to maintain a stable outlook on the ratings is based on: (1) projected continuation of fiscal consolidation and debt reduction in line with IMF targets despite some COVID-19 related deterioration in economic activity in 2020, and (2) good economic growth is expected in 2021 to reverse the severe decline in economic activity in 2020,” the agency said in a release.

According to CariCRIS, some of the factors that could lead to an improved rating included a decrease in the island’s total public debt to a rate below 100 per cent of GDP, and a fiscal surplus of above three per cent of GDP which is sustained for more than two consecutive years.

Conversely, the credit rating agency said if Barbados’ foreign reserves import cover fell below 12 weeks, or if there were to be more delays in the construction of tourism-related projects scheduled for 2021, the credit rating could be lowered.

In addition, CariCRIS warned that if there was a material derailment in the Barbados Economic Recovery and Transformation (BERT) which is being supported by the International Monetary Fund, the sovereign rating could be impacted in a negative way. (IMC1)

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