INTERNATIONAL RATING AGENCY Standard & Poor’s (S&P) latest assessment of Barbados’ economy serves to reinforce the vital importance of achieving the fiscal targets contained in the Government’s revised Medium-Term Fiscal Strategy, says the Central Bank of Barbados.
The bank released this statement yesterday following S&P’s announcement that it had affirmed the island’s BBB-/A-3 local and foreign currency sovereign credit ratings, while revising its outlook from stable to negative.
“The economic outlook has worsened, because of the weakened performance of the industrial countries,” the bank statement explained.
“That means lower expectations of foreign exchange inflows for Barbados in the immediate future, even though targeted investments should lift foreign earnings down the road.
The Central Bank noted that Barbados had a high propensity to import and as a result, Government’s expenditure must be further contained to conserve foreign exchange.
“The S&P report concludes that the outlook for Barbados may stabilize, provided that Government achieves its fiscal consolidation targets,” the bank said.
S&P credit analyst Olga Kalinina said the revised outlook “reflects the risk of a downgrade, should the combination of lacklustre growth and the insufficient fiscal adjustment within the next 12 months indicate a higher debt burden or a rising debt service burden that impairs fiscal flexibility”.
She pointed to Government’s large fiscal deficits and rising debt burden, saying they were “not sustainable in the long term and present an increasing risk to the Government’s credit profile, especially in the context of the small, open and vulnerable economic structure”. (NB)
