#BTEditorial – Fitch vote of confidence in Barbados

It is a good feeling for Barbadians to have this country’s credit rating receive a positive endorsement from FitchRatings, one of the world’s leading credit rating agencies. The affirmation is the kind of good news our economy requires at this time, even though the country is not out of the woods and it is still challenged on many fronts.

Not long ago, ratings downgrades had become par for the course, with a former Prime Minister going so far as to suggest, Barbadians should not lose sleep over the downgrades.

In November 2017, while addressing party faithful, PM Freundel Stuart dismissed the downgrades by international rating agencies, insisting that “Barbados as a country cannot be downgraded”.

With the country facing its umpteenth downgrade, Stuart in his defiant style for which many citizens took umbrage, said Barbados “remained strong and continues to produce world class individuals”. This, while then opposition leader Mia Mottley made another of her many calls back then for general elections to be called.

Mottley is now Prime Minister and the comparison between the two leaders could not be more stark. Of course, we know how important credit ratings are and we should definitely be concerned about them.

One only has to cite the Sagicor Financial decision to redomicile in Bermuda because Barbados’ low sovereign rating was threatening that company’s access to reasonable financing rates and undermining its own corporate rating as an insurance and financial services company.

The matter of leadership of the country during the periods of economic shocks, as well as the decision of Government to enter another programme with the International Monetary Fund (IMF), seemed to have factored highly in FitchRatings’ decision to assign a Long-Term Foreign-Currency, Issuer Default Rating (IDR) of ‘B’ with a “stable” rating outlook.

In outlining the reasons for the rating, the New York-based agency placed much emphasis on the recent IMF staff-level agreement which opens up access to the Resilience and Sustainability Trust. They said the accompanying Extended Fund Facility programme, which could be described as BERT 2.0, would underpin the expected reforms and alleviate the aggravating factors of possible financing constraints.

The one dominant economic engine on which the hope of a major economic turnaround is based is that of tourism. We saw how fickle this sector can be in the face of international shocks, and so we are all keeping our eyes on what is happening in the British economy, as the industrial nation meanders through a most tumultuously embarrassing political upheaval.

While the ruling Conservative Party members try to sort themselves out and decide who will take the seemingly revolving seat at No 10 Downing Street, countries like ours that depend heavily on British tourists  are jittery and hoping for some stability for the pound sterling which went into free fall.

The analysts at Fitch have pointed to a recovery of the economy, though they remind us it was slower than initially forecast.The rating agency is also optimistic about the new high-end hotel capacity expected to be ready early in the new year. The IMF is suggesting 10.5 per cent growth in the local economy by the end of 2022, while Fitch puts forward a slightly more conservative estimate of nine per cent.

The caveat to these predictions on the Barbados economy is the possibility of recession in key source markets the United States of America and the United Kingdom that “pose downside risks”.

The current administration is obviously pleased with the affirmation and vote of confidence by Fitch. But even amidst any urge to backslap, Ryan Straughn, Minister in the Ministry of Finance, acknowledges there are still some curve balls that could present a degree of turbulence to the plan, but generally, he is confident in the administration’s ability to manage the process.

“We believe that once we can stay the course and we can complete the reform efforts under the Barbados Economic Recovery and Transformation Programme 2022, then this Government would be able to see the country through very tough times, and therefore, we ask Barbadians to stay the course,” Straughn stated.

With public workers’ salary negotiations in progress, there will be an expectation that Government is in a much better position to offer public sector employees an increase. It is expected that labour will use the very same positive data touted by government to advance their arguments for an upward movement in their remuneration.