Financial Market Brief 8 July 2016
Following the downgrade of the Bahamas’ local and foreign credit rating to BBB-/A-3 from BBB/A-2 on August 25, 2015, Standard and Poor’s (S&P) stated that there was a greater than one-in-three chance that it could cut the rating again within the next six to twenty-four months if the country’s short and long term economic vulnerabilities deteriorate further. They cited the following: the economic shock of the delay in the opening of Baha Mar and the related ongoing legal challenges; inefficiencies in the energy sector; the relatively high unemployment rate; elevated public sector debt and external debt, and the weak local economy. On August 31, 2015, Moody’s brought ‘a ray of hope’ to the country, when in contrast to the S&P’s downgrade it upheld the Baa2 credit rating and maintained the country’s stable outlook. However, less than one year later, Moody’s assessments changed when on July 1st, 2016 the rating agency placed the government of the Bahamas’ Baa2 bond and issuer rating on a review for downgrade. Judging from its report, this changed stance was due primarily to a revision in the country’s economic growth numbers by the Department of Statistics. Initially, the department reported that the Bahamian economy grew by 1.02% in 2014 and the government projected an economic growth rate of 1.5% for 2015. To the amazement of many, including Moody’s, the country’s economic growth rate was revised downward to negative 0.52% in 2014 and negative 1.66% in 2015. Moody’s has stated that the impending review action signifies that the country’s credit rating is likely to move down by one or more notches. The Bahamas is at risk of being downgraded to junk bond status if Moody’s moves its rating down two or more notches and if S&P does the same following its assessment. Weekly_Market_Recap_July_8_2016 Click here for full Weekly Market Recap

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