NEW YORK, Sept 29 – In its annual report on the Bahamas, Moody’s Investors Service says the Caribbean country’s investment-grade credit ratings are based on low external debt, a competitive tourism sector, and prudent macroeconomic management. The country’s issuer rating for foreign currency debt and bonds and its foreign currency country ceiling are A3, its issuer rating for domestic bonds and debt is A3, and its off-shore banking sector country ceilings for foreign currency bonds and bank deposits are Aaa.
“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,” says Moody’s sovereign analyst Thomas J. Byrne, author of the report.
The country’s strong economic integration with the United States is another positive factor. The ratings are constrained by the country’s narrow economic base, its limited financial flexibility, and its vulnerability to external developments, including the potential for serious hurricane damage, says the Moody’s report. “While the effects on the real economy of the shock that followed the Sept. 11, 2001 terrorist attacks seem to have bottomed out, favorable budgetary trends have not yet been restored,” says Mr. Byrne. “The government faces the task of containing larger fiscal deficits at a time of uncertain tourism prospects and subdued prospects for economic growth.” The budget deficit is projected to narrow to about two percent of GDP in 2003/04, the analyst says. Moody’s future credit assessment of the Bahamas will be influenced by the government’s response to the new international financial regulatory regime, and its ability to manage economic liberalization while seeking World Trade Organization membership, says the report.
In response to international pressure, the Bahamas’ constructive legislative and regulatory actions prompted its removal from a blacklist of jurisdictions prone to money laundering. The country has also been removed from the list of non-cooperating tax havens by the Organization of Economic Cooperation and Development because of the local authorities’ commitment to exchange information on a bilateral, non-discriminatory basis with other governments. The rating agency’s report, “The Bahamas: Global Credit Research,” is a yearly update to the markets and is not a formal action to alter the credit rating of the issuer.
