The Tribune

By KHRISNA VIRGIL

Deputy Chief Reporter

kvirgil@tribunemedia.net

STATE Finance Minister Michael Halkitis yesterday insisted that the government remains optimistic about the Bahamas’ economic future, despite Moody’s Investor Service downgrading this country’s sovereign credit rating one notch, from Baa2 to Baa3.

While the rating agency lowered the bond and issue rating of the government, Mr Halkitis said the Christie administration was happy that it maintained the current investment grade and was given a stable outlook.

The minister said barring any serious economic crisis, the government now has anywhere from 18 to 24 months before Moody’s takes any further action and can make the needed improvements.

“Baha Mar and other developments will have a chance to contribute to the economy,” Mr Halkitis told The Tribune, “plus we get more time for our revenue and expenditure reforms to show more results.

“So we regret the downgrade, but we see that there are also positive results.”

Meanwhile, former Cabinet minister Alfred Sears, QC, who has also announced his intention to challenge Prime Minister Perry Christie in the Progressive Liberal Party’s upcoming convention, said the Bahamas now has an opportunity to change its economic strategy.

“What we must not do is wring our hands and say ‘Oh, this is bad,’” Mr Sears said. “We should seize this moment and make the kind of structural changes that will put our national development on a more sustainable path.

“Apart from the obvious need for fiscal restraint, what Moody’s ratings downgrade demonstrates most clearly is the need for a rational diversification policy, a robust growth strategy with specific targets and transparent and efficient governance practices.”

He said projected GDP growth of under 2 per cent is insufficient to meet the country’s employment needs and generate economic growth.

“It is time to change this unsustainable path. Let us pursue a growth strategy to expand productive sectors, empower Bahamians to own capital and produce sustainable and balanced national development,” Mr Sears said.

The proposals put forward by Mr Sears, include an aggressive increase in Bahamian ownership and entrepreneurship, through incentives and private/public partnerships, in all sectors of Bahamian economy. In fact, Mr Sears said his proposals would diversify the economy by increasing contribution of agriculture, maritime, marine, technology and innovation hubs and cultural sectors, each by 10 per cent to GDP over the next 10 years.

Addressing the weakness Moody’s noted in the tourism product, Mr Sears proposed implementation of structured private/public promotions of medical, heritage, entertainment, sports and cultural tourism, with an emphasis on boutique and bed and breakfast Bahamian owned hotels to improve the tourism product for both foreign and domestic tourists.

Apart from avoiding ‘junk’ status, the Christie administration can take positives from Moody’s decision to upgrade its outlook on this nation’s economic and fiscal prospects to ‘stable’.

According to Tribune Business, this implies that the Bahamas faces no prospect of a further Moody’s downgrade in the short to medium term, with the rating agency saying it expected both the $6.778 billion national debt and economic growth to “stabilise” within the next two years.

Moody’s, in an upbeat assessment of The Bahamas’ immediate prospects, said it expected this nation’s economic growth prospects to “strengthen” between now and 2018, returning to levels close to its 1 to 1.5 per cent.