Barbados: Another downgrade from Moody’s as economy continues to struggle

Barbados has received yet another downgrade from Moody’s Investors Service.

Moody’s Investors Service has downgraded the Barbados government bond rating from Ba1 to Ba3, citing poor economic growth and rising fiscal deficits.

Moody’s also pointed to the rising costs of funding and the increasing reliance on short-term funding, citing the island-nation’s “continued anemic economic performance”; a decline in the government’s financial strength, due to persistently large fiscal deficits and rising debt levels; the decline in the government’s debt profile as a result of the significant increase in domestic short-term borrowings over the past 2 years; and the fall in foreign exchange reserves by more than 30 percent between January and September this year to US$505 million for its two-notch downgrade.

The country’s credit outlook remained negative – according to Moody’s.

The ratings agency added that Barbados’s rating would face further downward pressure in the event that the Freundel Stuart administration is unable to achieve its fiscal consolidation targets, or if growth continues to underperformand debt ratios continue to rise as a result.

“Moody’s could downgrade the rating further if international reserves continue to decline and/or the government continues to rely heavily on short-term debt and Central Bank financing,” it said.

Moody’s also adjusted Barbados’s local-currency bond and deposit ceilings to Baa3, its long-term foreign-currency bond ceiling to Ba1, its short-term foreign-currency bond ceiling to Not-Prime, and its foreign-currency deposit ceiling to B1.

This is the third downgrade for Barbados in a month, following on the heels of Standard & Poor’s on November 20 and the Caribbean Information and Credit Rating Services (CariCRIS) earlier this week. -(CMC)