The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Current and future economic activity will be “insufficient” to cut the Bahamian employment rate below 10 per cent, a major Canadian bank believes, although it expects this nation to withstand last week’s Standard & Poor’s (S&P) downgrade.

CIBC World Markets, in its 2015 second quarter assessment of the Bahamas, said it was sticking to the “more bullish argument” it made in assessing this nation’s economic prospects last year.

Written before S&P downgraded the Bahamas’ sovereign creditworthiness to one notch above ‘junk’ status, CIBC’s analysis made clear it had already factored in such a development following the rating agency’s warning on July 2.

The report, obtained by Tribune Business, echoed the more positive tone struck this week by Moody’s, which weighted its assessment more on the improved GDP growth and fiscal numbers that the Bahamas was producing without Baha Mar.

In blasting S&P’s report, and downgrade, Prime Minister Perry Christie also cited the CIBC World Markets report as an example of what the Government has been hoping for from the rating agencies.

He said CIBC had determined that Bahamian economic growth would be aided by the continuing US recovery and increased tourism inflows, while Value-Added Tax (VAT) and spending restraint had assisted the fiscal position.

Yet, while similar in nature to Moody’s analysis, the CIBC report did not paint a completely rosy picture for the Bahamas, noting that as a result of the Baha Mar delay “current and expected economic activity is likely to remain insufficient to reduce unemployment below 10 per cent”.

Yet, echoing the Prime Minister’s words, it added: “The Bahamas continues to put in decent growth numbers but faces a challenge with the Chapter 11 bankruptcy of the Baha Mar resort project.

“Although the delayed opening of Baha Mar will inhibit growth in the short-term, economic recovery away from the project continues. Tourism has already picked up and should continue to grow, although at a slower pace than with the resort in place.”

CIBC also backed the Government’s revenue reforms and spending controls, adding that they “underlie the more bullish argument” made about the Bahamas’ economic prospects in 2014.

It also rated the Bahamas’ 6.95 per cent and 5.75 per cent bonds, due to mature in 2029 and 2024 respectively, as potential investments that merited a close look.

While confident that “the Bahamas will still perform even with a downgrade”, CIBC conceded that the Bahamas’ total national debt excluding contingent liabilities had increased by 8.6 per cent to $5.56 billion in the 12 months to end-May 2015.

The Bahamas’ total external debt had risen by a similar amount, 8.2 per cent, over the same period to reach $1.612 billion.