The Bahamas has a one-in-three chance of being downgraded following Standard & Poor’s (S&P) revised outlook of the economy from stable to negative.
Dr. Lisa Schineller, managing director of Sovereign Ratings and economist for Latin America, told Guardian Business from New York that Wall Street is looking for “signals” that the government can and will place a cap on debt. She acknowledged that there appears to be little that The Bahamas can do in the near term to change course. Instead, the rating agency anticipates a “time lag” before a true correction can be made.
“We expect improvement as the roadworks fall off, but beyond that, it still leaves the deficit at higher levels,” Schineller explained. “The negative outlook means there is at least a one-in-three chance there could be a downgrade. The risk is more towards the downside. We’re waiting for some sort of result.”
Noting it could take two or three years before a true rebound is experienced, the S&P analyst felt tax reform “seems to be the key issue”. The dialogue is only just beginning, however, and putting together the white paper, generating discussion and implementing the reforms is likely a “multi-year process”.
S&P revised the country’s outlook from stable to negative last week. The report urged government to create proactive policies to reduce debt. Latest figures peg the fiscal deficit at $550 million. Government debt is forecast at $4.607 billion, or 54.57 percent of GDP.
