The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s deputy leader last night said Moody’s decision to maintain the Bahamas’ existing sovereign credit rating seemed “inconsistent” with its analysis, which repeated the structural concerns voiced by Standard & Poor’s (S&P).

K P Turnquest told Tribune Business that Moody’s appeared to have “weighed differently” its concerns over high levels of household debt, the official 12 per cent unemployment rate and labour market inflexibility.

All these were cited as long-standing structural weaknesses in the Bahamian economy that, together with the Baha Mar dispute, led to S&P’s decision last week to downgrade this nation’s sovereign creditworthiness to one notch above ‘junk’ status’.

However, Moody’s yesterday elected not to follow S&P’s lead, instead maintaining its ‘Baa2’ rating and ‘stable’ outlook on the Bahamas based on the rationale that this nation’s economic growth and fiscal consolidation prospects were improving anyway regardless of Baha Mar.

The credit rating agency effectively gave the Bahamas, and the warring Baha Mar parties, a temporary 12-month breathing space in which to sort themselves out, telling Tribune Business that the dispute over the $3.5 billion project would not “weigh on’ its assessment of this nation’s creditworthiness until the 2016 second half if it remained unfinished.

Mr Turnquest said Moody’s appeared to be “taking the long view and a ‘wait and see’ attitude” towards Baha Mar and this nation in general, whereas S&P had been more concerned about the immediate fallout from the battle between the developer and its Chinese partners.

He added, though, that there appeared to be a discrepancy between Moody’s decision to maintain the existing rating and raising the same structural weaknesses as S&P.

“That’s kind of inconsistent with what they’re saying,” Mr Turnquest told Tribune Business of the rating decision.

“They seem to be making the same statement that S&P was making, but have weighed it differently. I guess it’s a matter of interpretation. They’ve taken the view that they want to wait and see.”

He added: “At the end of the day, as far as I’m concerned, I hold to my previous view that we have some structural concerns that need to be addressed.

“Hopefully we see this Baha Mar situation resolved and the tourism numbers pick up as a result.

“Right now, I believe there’s no substantial improvement in the economy. Hopefully, the projects announced come to fruition, and it’ll turn, but for most Bahamians it’s still a rough period.”

Moody’s yesterday warned that Baha Mar’s opening could be delayed “indefinitely” via a series of legal appeals, given that the parties involved were likely to appeal all verdicts rendered by the Bahamas Supreme Court and Delaware Bankruptcy Court.

And it also highlighted the same structural weaknesses identified by S&P, saying: “Other important issues facing the Bahamas involve the labour market, household leverage (debt), and ease-of-doing business.

“With unemployment remaining relatively high, mainly due to structural considerations, and considering the debt overhang of households, private consumption and residential investment will likely remain depressed.

“The liberalisation of the labour market as well as measures aimed at fostering employment of youth, who suffer from higher unemployment rates, could provide some relief. The Government is also in talks with banks in order to seek ways to reduce non-performing loans and kick-start private credit again.”

Referring to the Bahamas’ consistent slump in the World Bank’s ‘Ease of Doing Business’ rankings, Moody’s added: “The Bahamas ranks 97th out 189 economies. While it has improved in terms of paying taxes (it went from 47th in 2014 to 31st), it still lags on starting a business (95th); dealing with construction permits (92nd); registering property (179th); getting credit (131st); and enforcing contracts (125th).”

Still, the Moody’s assessment matches almost perfectly the ‘wish list’ announced by the Ministry of Finance in the wake of the S&P downgrade, in which it urged that its VAT and fiscal consolidation achievements get more recognition than the Baha Mar impasse.

To the Christie administration, the Moody’s report and rating action are everything that S&P’s was not, something that was swiftly acknowledged last night.

“Moody’s expressed confidence that the Bahamas is on course to see a reduction in its debt burden over the near and medium-term,” the Ministry of Finance said in a statement last night.

“To the credit of the Government’s fiscal reform process and the improving economic outlook, the ratings agency’s assessment keeps the Bahamas appropriately paced amongst its international peers, notwithstanding the Baha Mar construction delay.

“The Ministry of Finance acknowledges that a deepening of the reforms, including persistence in expenditure discipline, would reduce the ongoing vulnerabilities highlighted by Moody’s. The Government, while being patient, will redouble its efforts to advance initiatives that boost private sector confidence and stimulate employment.”

Moody’s report thus dovetails almost perfectly with the Government’s assessment of the economy, Baha Mar and the fiscal position.

It is also in line with the views expressed by Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, who last week said S&P had paid too much attention to Baha Mar’s immediate term impact - something that had not been factored into the growth or fiscal numbers.