Moody’s Investors Service is reviewing its credit ratings on Barbados’ foreign- and local-currency bonds for possible downgrade amid mounting government debt, predicting the Caribbean island’s ability to cover its debt will worsen in coming years.

The nation’s local-currency rating is A3, four notches above junk territory, while its foreign-currency rating is Baa2, two notches above junk.

Tourism is critical to the country, making up 16% of its economic activity, according to the World Travel & Tourism Council. But the recession has reduced business and leisure travel.

Moody’s senior analyst Alessandra Alecci noted that Barbados’ credit metrics have been deteriorating in recent years, starting even before the beginning of the global downturn. Since 2000 the nation’s public debt has more than doubled, and by the end of next year may exceed 100% of its economic output, compared with 65% in 1999.

However, Moody’s says it has no concerns about the government’s ability to finance its short-term needs and noted it has faced worse economic downturns without compromising its long-standing commitment to maintain its currency peg.

Last month Standard & Poor’s Ratings Services also took a more pessimistic view on the country, changing its ratings outlook to negative from stable, citing the government’s budget gap, which including off-budget spending widened to 6.6% of GDP last year from 3.8% a year earlier amid the global downturn.

From the Wall Street Journal
See also ‘Standard & Poor’s: Barbados economic outlook negative,
US dollar peg in jeopardy’

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Antillean · Bridgetown, Barbados

The Antillean is a pan-Caribbean nonprofit media outlet, covering news, features and opinions on social issues in the Caribbean region and the wider Americas. Our mission is to encourage conversation on, and enhance the visibility of, social currencies within the hemisphere – issues which are often underreported in the mainstream media.

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