The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Chamber of Commerce’s chief executive yesterday said responsibility for avoiding a further credit rating downgrade “falls squarely in the Bahamas’ lap”, as he accused Moody’s of having long planned its latest action.

Edison Sumner told Tribune Business that private sector executives who met with Moody’s, following the early July announcement of its Bahamas rating review, felt its representatives were merely visiting this nation as “a courtesy”.

He himself gained the impression that Moody’s had already decided to “go through with the planned downgrade” of the Government’s creditworthiness, regardless of what it discovered on its Bahamas visit.

“The move from Moody’s, though it was disappointing, was not unexpected,” Mr Sumner told Tribune Business. “In our last meeting with them, we got the impression from them that they were not going to shift any from their intent to provide another downgrade for the country.

“By the time they came to see us, we believe they had written their report already, and we believe their visit to the Bahamas was more of a courtesy.”

He added: “We tried to speak to some of the positives for the country and stay their hand, and show them why it would not be a prudent thing to continue to downgrade our sovereign credit rating.

“We left that meeting with the impression that notwithstanding our efforts, they had made their minds up.

Moody’s downgraded the Bahamas’ sovereign credit rating from ‘Baa2’ to ‘Baa3’ on Monday, leaving this nation hovering precariously one notch above so-called ‘junk bond’ status.

It based its action on a combination of the Bahamas’ consistently low GDP growth rates, which had left it with ‘weak economic strength’, and the continued increase in the $6.778 billion national debt despite the Government’s fiscal consolidation initiative.

However, this nation was able to maintain its ‘investment grade’ status despite the downgrade, while Moody’s indicated that further cuts are unlikely in the short to medium-term by upgrading the Bahamas’ outlook to ‘stable’.

Still, this nation is now just one notch away from ‘junk’ status with both Moody’s and its fellow rating agency, Standard & Poor’s (S&P), which has this nation in a six-24 month window where there remains a ‘one-in-three’ chance of another downgrade.

Mr Sumner said the Government and private sector needed to respond proactively in addressing the economy’s structural weaknesses if the Bahamian economy was to avoid a ‘junk’ downgrade by either rating agency.

“This ball now falls squarely in the lap of the Bahamas to respond properly, and show we’ve got a plan of action that can be effective and positive and get us out of where we are now,” he told Tribune Business, “and take us to another level where the private sector and the Government can build upon it to create a vibrant economy for all of us.

“It’s how the Bahamas chooses to respond to it [the downgrade]. We can be defensive and say it should not have happened, but the more valuable response is to say we know what the key economic weaknesses are, that we have put policies and procedures in place to address those challenges, and have a real plan of action to get the country out of the situation it is in.”

Mr Sumner said the ‘medicine’ required included tackling the Government’s continual deficit spending; reducing unemployment and increasing job opportunities; improving the investment climate to attract “more qualified” foreign investors; boosting skill and productivity levels in the labour force; enhancing the ‘ease of doing business’; stimulating entrepreneurship and small business creation; and improving transparency and accountability in government.

“We can see we have work to do,” conceded the Chamber chief executive, as he renewed calls for greater collaboration between the Government and private sector to address these issues and devise solutions.

He added that if such a partnership could be established, and progress in addressing the economy’s structural challenges made, this - combined with recently-announced progress at Baha Mar - should ensure more favourable assessments from Moody’s and S&P the next time.

“I’m sure that when they do their assessments again, there will be a more positive outcome coming from them,” Mr Sumner told Tribune Business.

“I’m quite sure that when Moody’s and S&P do their assessments of the credit rating in the next three to six months, they’re going to take developments at Baha Mar into account and offer a more positive opinion on the outlook.”

Mr Sumner, though, reiterated that Baha Mar was “not the only story in the country and we need to look beyond that”.

Recalling that the Chamber had felt it was unwise to “put all the eggs of the Bahamian economy into one basket”, he added that Moody’s improved outlook on this nation’s prospect backed his belief that it had “hit the bottom of the economic barrel and is on the bounce to recovery”.

“The position of Moody’s report holds true the statement I made several weeks ago that the economy has hit the bottom of the barrel, and is on the bounce,” Mr Sumner said.

“The fact they’ve given a stable outlook means they see the economy of the Bahamas as being on the rebound as well. But it may take a while for many of us on the ground to feel it.”