THE RECOVERY Barbados is witnessing in tourism is unlikely to be enough to positively influence its credit rating from Moody’s any time soon.
According to the influential agency based in the United States, continuing weak credit metrics across the region means that “a tourism-led recovery will have only a limited impact on ratings – or rating outlooks – over the next two to three years”.
Moody’s acknowledged that “the recovery of the tourism industry that is taking hold in the Caribbean is a credit positive development for most countries in the region . . . as they generally rely on tourism for both economic growth and foreign currency earnings”.
It added, however, that the major hurdle was challenges to credit quality, which included high government debt and interest burdens, limited fiscal flexibility, and large balance of payments deficits. So that while it concluded that “Caribbean tourism recovery supports growth dynamics”, Moody’s believed this “has limited impact on sovereign creditworthiness”.
Moody’s associate analyst Petar Atanasov pointed to Barbados, The Bahamas and St Vincent and the Grenadines as three countries where stay-over visitors “are yet to return to the levels achieved before the global financial crisis” and said this had contributed to “a weaker recovery”.
Atanasov said the trio had all lost market share since 2007, reflecting a structural erosion of competitiveness in their tourism sectors.
“The loss of market share of The Bahamas and Barbados, two traditional tourism powerhouses, can be traced to their high cost structures and the relative decline of the higher end boutique segment they have historically catered to,” he said.
Moody’s also predicted that “underlying credit weaknesses will continue to constrain the ratings of many Caribbean sovereigns for the foreseeable future”, despite the fact that it “expects GDP growth to accelerate across the region in 2015-16”.
“Even though rising levels of visitors should ‘lift all boats’ in the region, differences across countries are evident. These differences denote intra-regional divergence that could have important implications for sovereign credit trajectories,” Atanasov said.
The countries doing best in tourism compared to their peak years preceding 2009 were the Dominican Republic, Belize, Cayman Islands, Cuba, Jamaica and St Maarten. (SC)
