The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas is among the top four nations forecast to be hit hardest by rising sea levels, a rating agency warned yesterday, with up to 15 percent of annual GDP and 11 percent of its people in peril.

Moody’s, unveiling an assessment about the long-term threat to sovereign creditworthiness posed by climate change, drew on multiple studies to identify The Bahamas - as well as Vietnam, Egypt and Suriname - as the four countries most threatened by rising sea levels resulting from global warming.

Describing the outlook as a “material credit risk”, Moody’s also voiced concern that The Bahamas’ efforts to combat sea level rise “lack co-ordination” among government institutions and are made more complicated because much coastal, low-lying land is in the hands of private owners such as major resorts.

Drawing on a World Bank study, the credit rating agency - which currently has The Bahamas barely maintaining investment grade status, one notch above so-called “junk” - said only Vietnam and Suriname faced more severe economic consequences in a worst-case sea level rise scenario.

The Moody’s report, published as the Bahamas Business Outlook conference focused on resiliency in the face of climate change and natural disasters, disclosed projections that a one-metre sea level rise would submerge 11.6 percent of this nation’s total land mass.

This, in turn, would endanger 4.7 percent of annual economic output (Gross Domestic Product), given the tourism industry’s reliance on coastal sites, and 4.6 percent of the Bahamian population. However, the impact is much more extensive should sea levels rise three metres, as this would swallow 31 percent - or almost one-third - of all land in The Bahamas.

And the threat to the economy would also be three times’ greater, with 14.5 percent of GDP in jeopardy, along with the lives of 10.5 percent of the Bahamian people.

“Different studies yield similar results,” Moody’s warned. “Countries including Vietnam, The Bahamas, Egypt, Suriname and some in the Gulf are highlighted, with up to ten percent to 25 percent of the population or GDP exposed.

“The greatest inundation by proportion of land area would be in The Bahamas, followed by Vietnam and Qatar.... Taking a broader view of exposure by combining several indicators (GDP, population, land area, agricultural area, degree of urbanisation, wetlands), Vietnam, Egypt, Suriname and the Bahamas feature among the most exposed countries.

“In a scenario where sea level rise reaches three metres, Vietnam and Suriname are also the most exposed countries by economic output, followed by Benin and The Bahamas.” Other studies researched by Moody’s show that 100 percent of The Bahamas would be vulnerable to flooding and/or be submerged should sea levels rise by five metres.

And Climate Central’s 2015 research estimated that two-thirds of the Bahamian population would be affected should a “locked-in sea level rise” occur under a scenario where global temperatures increased on average by 3 degrees Celsius.

“If temperatures were to rise by three degrees Celsius (C), affected rated sovereigns would include Cayman Islands with 83 percent of the population submerged, Suriname (81 percent) and The Bahamas (67 percent),” Moody’s added.

“If warming were limited to two degrees Celsius, the most affected sovereigns would be similar, but the share of population below sea level would reduce by 2-18 percentage points.”

The Bahamas has already felt the brunt of climate change through Hurricane Dorian, which inflicted $3.4bn in losses and damage on Abaco and Grand Bahama, while also derailing the Government’s fiscal consolidation plan for at least three years by driving this year’s projected deficit to $677.5m and the national debt to $9.5bn over the medium term.

Moody’s reiterated that The Bahamas was especially vulnerable due to its reliance on tourism for at least 40 percent of annual GDP, as most of the plant and infrastructure for its largest industry and economic engine are located on the coast.

“Over time, coastal erosion or concerns about natural disasters may make some regions less attractive to tourists,” Moody’s warned. “For a number of small-island sovereigns, such as The Bahamas, Belize, Fiji or Maldives, tourism is a driver of economic activity, and a major source of export revenue and foreign exchange.

“Permanently lower growth may weaken a government’s fiscal strength. Moreover, government compensation for lost income through higher spending or tax moratoria would widen budget deficits and raise debt. Among the sovereigns exposed to sea level rise, fiscal strength is particularly weak in Egypt, The Bahamas, Belize, Suriname and Tunisia.

“While tourist inflows generally recover following natural disasters, the recovery period varies, and can be longer in the aftermath of more extreme events. In The Bahamas, storms or hurricanes have not hit key tourist destinations recently [apart from Abaco], but Hurricane Matthew in 2016 resulted in a slowdown in tourist inflows to Grand Bahama, which are yet to recover to pre-2016 levels.”

Moody’s also indicated that The Bahamas efforts to counter this threat to-date have been less than impressive, adding: “In The Bahamas, a regulatory framework is in place to curb the effects of sea level rise. However, a lack of co-ordination among institutions and a high degree of private ownership of coastal lands hamper these efforts.

“Sea level rise and related shocks pose material credit risk to Vietnam, Egypt, Suriname, The Bahamas and other small island sovereigns, including Maldives and Fiji. The pace of increase in the frequency and severity of natural disasters related to sea level rise and the effectiveness of adaptation measures will determine the extent of the credit constraints that these sovereigns face.”

Detailing the economic and social consequences of not acting, Moody’s added: “The economic and social repercussions of lost income, damage to assets, loss of life, health issues and forced migration from the sudden events related to sea level rise are immediate. The main credit channels for sovereigns are economic and fiscal strength.

“Vulnerability to extreme events related to sea level rise can also undermine investment, and heighten susceptibility to event risk, by hindering the ability of governments to borrow to rebuild, increasing losses for banks, raising external pressures, and/or amplifying political risk as populations come under stress. While one isolated shock related to sea level rise is unlikely to materially weaken a sovereign’s credit profile, repeated shocks could do.”