Moody’s downgrades The Bahamas credit rating to BAA1

(Reuters) – Moody’s Investors Service on Friday downgraded its sovereign credit rating for the Bahamas by one notch to BAA1, leaving the Caribbean nation in the lower end of investment grade, citing limited economic growth prospects.

The credit outlook remains negative, Moody’s said in a statement.

“The economy contracted at an average rate of 0.8 percent annually between 2007 and 2011 and Moody’s expect the post-crisis recovery to remain fragile,” the firm said.

“Tourism, offshore financial services, and construction sectors – the main drivers of economic activity – continue to face downside risks, exacerbated by an uncertain recovery in the United States, the Bahamas’ main tourism market,” Moody’s said.

Standard & Poor’s rates Bahamas one notch lower at BBB with a negative outlook. The island nation is not rated by Fitch Ratings.

Moody’s cited a deterioration in the government’s balance sheet that has occurred over the past five years. It also highlighted rising government expenditures and an increasing role of the state in the overall economy.

his fiscal stimulus program is yet to yield growth dividends and unemployment remains close to 15 per cent, depressing domestic demand,” the firm said.