From Barbados Today

International credit ratings agency Moody’s is reporting that an accelerating economic recovery in the Caribbean should lead to an improvement in the credit quality of regional governments. However, it pointed to increasing debt pressures in the case of Barbados and neighbouring St Vincent and the Grenadines.

Moody’s Investors Services, in its Sovereign Outlook report headlined “Caribbean Sovereign Credit Quality Supported by Recovery in Tourism, Low Oil Prices”, said median growth in the region was 1.5 per cent in 2014 and should accelerate to two per cent this year.

“In addition, government debt, which rose following the financial crisis, is slowly stabilizing or, in some cases, declining, putting average sovereign debt metrics on par with those in Latin America,” the report said.

It went on: “Debt ratios are stabilizing in Belize, the Bahamas, the Dominican Republic, Cuba, Bermuda, Saint Maarten and Trinidad. However, debt pressures are increasing in Barbados and St. Vincent, while they are easing in the Cayman Islands. Nevertheless, the overall stabilization in debt levels in the region will help support current rating levels over the next 12-18 months.

“The pickup in the tourism industry is credit positive for the Bahamas (Baa2 stable), Barbados (B3 negative), Belize (Caa2, stable), Bermuda (A1 stable), Cayman Islands (Aa3, stable), Jamaica (Caa3 positive), St. Maarten (Baa1 stable), St. Vincent and the Grenadines (B3 negative), because their economies depend heavily on tourism.”

Moody’s said the tourism recovery largely reflected improving economic conditions in the US and would continue to depend on the strength of the recoveries in the US and the UK through 2016.

“Although the rebound in tourism will help all Caribbean nations that rely on this industry, the individual credit effects will reflect each country’s dependence on this industry,” said Gabriel Torres, a Moody’s Vice President and Senior Credit Officer.

Barbados, Belize, the Bahamas and St. Maarten are most dependent on tourism.

Moody’s said lower oil prices had also helped to spur tourist growth, with fuel costs for airlines dropping significantly in 2014, and were expected to continue their decline in 2015. The decline in oil prices was also seen as supporting domestic demand and consumer spending by easing current and expected inflation levels.

“However, lower oil prices are credit negative for Trinidad & Tobago,” Moody’s said. “The sharp drop in energy prices will significantly reduce government revenues, the current account surplus and foreign direct investment flows,”

It noted that while Belize was a net oil-importing country, the decline in its petroleum production would have a significant negative effect on government finance.

For more on this story go to: http://www.barbadostoday.bb/2015/05/30/moodys-still-concerned-about-barbados-debt/

IMAGE: www.ahigler.com