The Tribune

The Bahamas will have “no one to blame but ourselves” if Moody’s follows through with its threat of a potential ‘junk’ downgrade, the Chamber of Commerce’s chief executive yesterday urging all political parties not to exploit the situation for “point scoring”.

Edison Sumner warned that the Bahamas needed to “work hard to get us out of these economic doldrums”, and the trend of successive cuts to its credit standing by both Moody’s and Standard & Poor’s (S&P).

With the former threatening another sovereign downgrade by end-August 2016, Mr Sumner said the ramifications meant the issue was not simply a matter for the Government, but all Bahamians, to address.

“It’s extremely concerning,” he told Tribune Business of Moody’s latest warning, which threatened to cut the Bahamas’ ‘Baa2’ rating by “one or more notches”.

“It’s not a surprise we’re there. It’s something we’ve got to work hard to get ourselves out of. We cannot see it as a Government of the Bahamas problem. It’s a Bahamas problem.

A two-notch cut would cost the Bahamas’ (and its Government) their investment grade rating, slashing this nation to ‘junk’ status, with all the implications that has for its borrowing costs and access, plus the ability to attract foreign investment.

Moody’s Friday announcement is also likely to have further dented an already-fragile confidence among the Bahamian business community, which is still struggling to recover from the blow delivered by the Baha Mar impasse.

With a general election less than one year away, Mr Sumner warned all political parties against a partisan response that seeks to turn the Moody’s situation to their advantage.

“One thing that we don’t want to see happen, as we enter the political season, is we don’t want to see this kicked about as a political football,” Mr Sumner told Tribune Business.

“We need every person working hard to find ways to get us out of this situation. If the Government has to also engage members of the Opposition and other political organisations to come together and find solutions, they’ve got to do it.

“Anyone not coming to the table with a solution is aiding the problem. We cannot use this news to score any kind of political points. It has to be a nationalistic and patriotic approach, not a partisan political one.”

Mr Sumner’s words, though, may be falling on ‘deaf ears’, as both the Free National Movement (FNM) and Democratic National Alliance (DNA) have already used the development to blast the Christie administration.

Both Moody’s and Standard & Poor’s (S&P) are due to visit the Bahamas this month to conduct their annual assessments of the Bahamian economy, and the strength of the Government’s growth and fiscal policies.

Whether Moody’s follows through with its downgrade threat depends heavily on how well the Government, and Bahamian private sector, are able to ‘sell’ the prospects of an improved fiscal performance and economic growth.

Should they fail to convince the New York-based credit rating agency that they will be able to deliver on these targets, a downgrade is likely to swiftly follow.

Asked how likely he thought this outcome, Mr Sumner told Tribune Business: “That will depend on the Bahamas’ response.

“Whether they go through or not with their threat to further downgrade depends entirely on how the Bahamas responds to this action. If they go through with this downgrade, we will have not one to blame but ourselves.

“We’ve said before that the challenges with these ratings are coming out of our own doings as a country.”

Mr Sumner pointed to the ‘ease of doing business’, energy policy and costs, and the ability of small and medium-sized enterprises to access credit as areas that continued to hinder economic growth and job creation.

“These cannot be addressed in silos,” he added.

“They must be addressed in a meaningful, collaborative approach between the Government and the private sector. This will drive home the message that there must always be collaboration between the two to make this economy what we need it to be.”

Mr Sumner further told Tribune Business: “We should be able to recover this economy, growing it out and getting it back on sounder footing, and becoming the envy of the region again.

“Even though we are where we are now, we’re still ahead of many countries in the region. But we can be doing a lot better, and doing a lot better means identifying areas of weakness.”

The Chamber chief executive said the Government would require “a tough skin” to listen to, and work with, the Bahamian private sector on the reforms vital to boosting growth and economic competitiveness.

“The Government has to be open to constructive criticism from the private sector,” Mr Sumner added, “as the only objective is to grow and make better our economy for our people.”

He said it was critical for the Government and private sector to collaborate before Moody’s and S&P arrived in Nassau, so the two sides could both identify areas of weakness for improvement, and explain how they would work together on the strategies and opportunities to build the Bahamian economy.

Moody’s placed the Bahamas “on review” for a potential downgrade due to both its unexpected economic contraction and further deterioration in the Government’s fiscal position.

Moody’s move appears to have been sparked by Prime Minister Perry Christie’s affirmation of official Department of Statistics data showing that the Bahamian economy contracted by 1.7 per cent in 2015, following a 0.5 per cent shrink in 2014.

This contrasted sharply with previous positive growth estimates by both the Government, itself and the International Monetary Fund (IMF), prompting Moody’s to determine that the Bahamas is “unlikely” to hit its 1.5 per cent GDP growth potential in the short-term.

Apart from its shock at the revised negative growth numbers, Moody’s ‘review’ also appears to have been sparked by concerns that the Christie administration’s consolidation plan has yet to arrest the growth in the $6.6 billion national debt and related ratios.

It pointed out that “debt accumulation” has continued to increase, with the Government’s direct debt-to-GDP ratio growing by five percentage points in two years to hit 65.2 per cent at the June 30 end to the 2015-2016 fiscal year.

And Moody’s also appears concerned that the Christie administration consistently fails to hit its Budget projections, and the adequacy and effectiveness of its policy responses to the Bahamas’ problems.