Port-of-Spain-based, regional credit rating agency, CariCRIS, yesterday reaffirmed the ratings of CariBBB+ (Foreign Currency Rating) and CariA- (Local Currency Rating) on its regional rating scale and bbAAA on its Barbados National Scale of the debt issue (notional) of the size of US$300 million of the Government of Barbados.
In a statement, CariCRIS said the ratings indicate that the level of creditworthiness of this obligation, adjudged in relation to other obligations in the Caribbean is adequate.
“The reaffirmation of the ratings is being driven by the small recovery in the economy year-to-date and the slight narrowing in the fiscal deficit. However, the external position and the high level of debt to GDP are still of concern. The economy reported marginal economic growth of 0.3 per cent for the first nine months of 2015 arising from strong performance in the tourism sector,” said CariCRIS.
The rating agency said it expects the mild economic improvement to continue for the rest of 2015 and into 2016, hinged on the timely commencement of investment projects. There was also improvement in the fiscal accounts with the deficit narrowing to 2.8 per cent of GDP for the half year ended September 2015 from the 3.4 per cent reported in the prior year’s corresponding period.
The gross public debt in Barbados stood at 108.6 per cent of GDP as at September 2015, which the rating agency described as “high but stable.”
CariCRIS expects an increasing debt to GDP burden as the government seeks financing for its fiscal deficits. An overall external deficit of 1.2 per cemt of GDP was reported for the 9 months to September 2015 as compared to 5.3% per centof GDP in the corresponding period of the previous year. Foreign reserves continued to fall, decreasing by 8.3 per cent to US $976.7 million although import cover remained stable at 3.6 months as a result of the reduction in imports.
The rating agency said the non- tradable sector contributes on average 80.3 per cent of GDP, with financial and other services accounting for the largest component at 21.6 per cent. Other major sectors driving economic activity are tourism (11.1 per cent), distribution (20.5 per cent), transportation (10.8 per cent) and construction (5.7 per cent).
The unemployment rate was at 12 per cent as at September 20151. The private sector presence in the economy is not as significant as some of its Caribbean counterparts as the government accounts for roughly 40 per cent of employment and gross capital formation.