S&P lowers Barbados credit rating
BRIDGETOWN, Barbados (CMC) - The ratings agency, Standard & Poor’s (S&P) has revised downwards the long-term rating for Barbados - the second downgrade in four months.
Late Wednesday, the United States-based credit rating agency announced that it had moved the island’s rating from BB+ to BB- in response to a persistent current account deficit and a high fiscal deficit.
“The downgrade reflects the mounting external pressures associated with a persistent current account deficit and external financing challenges, as well as the ongoing high fiscal deficit largely because of a substantial fall in government revenues as a result of the weak economy,” the agency said
According to S&P due to the large fiscal deficits, it is expected that the net general government debt burden will rise to above 70 per cent of Gross Domestic Product (GDP) in fiscal 2013 (ending March 2014) from 67 per cent in fiscal 2012 and 60 per cent in fiscal 2011.
In reacting to the news, former president of the Economic Society, Ryan Straughn, said the latest rating has not come as a surprise and suggested that the writing had been on the wall for some time since Government did not go ahead with the expenditure cuts announced by the Minister of Finance in the August 2013 Budget.
Straughn, who met with a visiting team from S&P two weeks ago, warned that tough decisions now had to be made and he called on Government to “bite the bullet and make the necessary cuts now”.
While Finance Minister Chris Sinckler had not reacted to the news up to late Wednesday, a senior Government economist was quoted in local media as saying “This is certainly not good news for us. It will obviously make it more difficult for us to borrow, which is the most significant part for us, given our recent efforts to go to the international capital market.”
In July, S&P revised the outlook on its long-term rating for Barbados to negative from stable.