BRIDGETOWN, Barbados, Saturday December 22, 2012 – The Barbados government says it is not surprised at the decision of the US-based Moody’s Investors Service to downgrade the island’s credit rating to Ba1, into junk territory.
Finance Minister Chris Sinckler said that it was generally expected that since Standard and Poor’s had made their adjustment to the country’s credit rating some months ago, it was altogether likely that Moody’s would align their rating accordingly.
“Naturally, the continued weak global economic recovery, particularly among our largest trading partners in the USA, UK and most of CARICOM (Caribbean Community), has worked to compound the negativity of an already difficult economic situation, which heavily undermined Barbados' prospects for a speedy recovery in growth.
“And, inspite of what we have heard, and will continue to hear, the knock-on effects of this environment on our fiscal and economic situation remain clear and unmistakable” he added.
Moody's rating also carries a negative outlook, with the agency saying that Barbados’ economic prospects remain weak.
"Moody's believes that the country's growth prospects remain very limited due to its deteriorating competitiveness and declining productivity coupled with heavy dependence on tourism, particularly from the United Kingdom and the United States," Moody's said in a statement
Sinckler said that while Barbados would reflect on Moody’s overall ratings opinion, he said there were several positives that could be gleaned from the report.
“The worst of the economy and fiscal deterioration is behind Barbados; Barbados' prospects for short term high growth levels will remain challenged because of the weaknesses in our major trading partner economies (and) these challenges are likely to affect our capacity for faster fiscal consolidation, notwithstanding the fact that efforts to strengthen our fiscal position have been successful thus far,” he said.
Sinclker said that the government must stay the course on its fiscal consolidation programme, strengthening it wherever possible, rather abandoning it and that “to attempt to introduce pro-cyclical fiscal measures (tax eases) to stimulate domestically driven growth will reverse the gains made so far by the country to turn around the situation and make matters much worse fiscally and economically”.
He said the foreign reserves levels remain adequate to satisfy current and immediate future needs and reiterated the need for Barbados to “continue to stay the course on our fiscal consolidation programme, seek to improve our levels of productivity, and move ahead hastily with our programme for restructuring the Barbados economy”. (CMC) Click here to receive free news bulletins via email from Caribbean360. (View sample)