This is according to an analyst for Moody’s Investor Service, a reputable international credit rating agency.
But Moody’s said in its annual report on The Bahamas which was released Monday that the country’s A3 investment grade credit ratings are based on low external debt, a competitive tourism sector, and prudent macroeconomic management.
While noting that the report was favourable, Minister of State for Finance James Smith said he did not agree with the agency’s conclusion that The Bahamas has subdued prospects for economic growth.
Minister Smith, in an interview with the Bahama Journal, said that the $600 million expansion of the Atlantis Paradise Island Resort, the five-star Emerald Bay Resort in Exuma, which is preparing to open in November, and a number of other projects are all providing substantial foreign direct investment.
He said this means that the economy will be significantly boosted in the coming months.
“So I think just given those events alone, my outlook for the tourist sector and the Bahamian economy as well will be a bit more positive than Moody’s,” said Minister Smith, who added that the agency was being naturally conservative in its approach.
Minister Smith pointed out that the performance of the Bahamian economy is largely dependent on the United States economy.
“The U.S. economy seemed to have bottomed out and turned around a bit,” he said. “So, consequently, that should be favourable news for tourism expenditure in The Bahamas.”
Thomas J. Byrne, the report’s author, told the Bahama Journal Monday that since Moody’s visited in late July, the economic situation may have changed a bit. Mr. Byrne also indicated that the rating agency’s conclusions were conservative.
“To give the [Bahamian] officials the benefit of the doubt, maybe over the past couple of months, the outlook has become a little more clearer, at least prospects for stronger growth,” said Mr. Byrne, speaking from his New York office. “If that’s the case, it means that there is probably a stronger rebound in tourism or better tourism performance than what we had expected, perhaps than what some people in the government had expected back in July.”
The country’s rating for foreign currency debt and bonds and its foreign currency country ceiling are A3; its rating for domestic bonds and debt is A3 and its offshore banking sector country ceilings for foreign currency bonds and bank deposits are Aaa, the report said.
The A3 ratings signify that there is a high level of confidence regarding the ability of the country to repay its debt, according to Governor of the Central Bank Julian Francis.
“This means that the prime minister can walk into any lending institution and say ‘Give me a couple hundred million dollars’ and they’d say, ‘You got it Mr. Christie,'” one analyst told the Bahama Journal while explaining the importance of the A3 ratings.
The government took advantage of this investment grade rating over the summer by floating a $200 million bond issue on the international market, which Minister Smith termed successful.
Officials said they raised the money to pay off a short-term loan and partly finance the new budget.
Last September, when Moody’s reconfirmed the country’s A3 rating, it ensured that it remained the only nation in the Western Hemisphere, other than the United States and Canada with an A rating.
At the time, former Minister of Finance Sir William Allen said that confirmation was a demonstration that the previous government had put in place “a fairly sound foundation for the economy going forward.”
Minister Smith said Monday that successive governments were responsible for the continued favourable ratings by Moody’s.
“It continues to demonstrate in spite of what we say among ourselves that The Bahamas has been the subject of fairly good economic administration,” he said.
In a statement released by the rating agency, Mr. Byrne said, “While the effects on the real economy of the shock that followed the September 11, 2001 terrorist attacks seem to have bottomed out, favourable budgetary trends have not yet been restored.”
He added, “The stable ratings outlooks are based on a relatively strong external position, although the economy faces challenges posed by the negative effects on the tourism sector of terrorism and geopolitical uncertainties.”
“The Bahamas: Global Credit Research” is a yearly update to the markets and is not a formal action to alter the country’s credit rating.
By Candia Dames, The Bahama Journal
