HAMILTON, Bermuda, Thursday April 27, 2017 – International ratings agency Standard & Poor’s (S&P) signaled yesterday that the Bermuda economy was on the right track, maintaining the island’s sovereign credit rating at A+.
Declaring that Bermuda’s six-year long economic contraction has come to an end, S&P “projected positive economic growth over the next two years”, which it said could help the Government to return to fiscal balance by fiscal year 2017 or 2018.
“For 2016 and 2017, we expect real growth of 2.0% and 3.0%, respectively. Growth should come from the construction and tourism sectors. GDP [Gross Domestic Product] per capita should be about US$98,300, up 4% from 2015. We expect per capita trend growth of about 1% for the 2016-2019 period.
“GDP growth will help the territory return to fiscal balance,” the report said.
S&P noted that the growth prospects stand in sharp contrast to indicators between 2008-2014 when the island’s real GDP growth declined by 19 per cent and nominal GDP by eight per cent.
“According to our estimates, real GDP increased about 0.4% in 2015 and nominal GDP 3.5%, the highest annual nominal growth rate since 2008. The return of positive real GDP growth ends six years of consecutive annual declines: From 2008 to 2014, real GDP declined 19% and nominal GDP 8%.
S&P also affirmed its A-1 short-term rating on Bermuda with a stable outlook.
It lowered its transfer and convertibility assessment on Bermuda to AA+ from AAA, but added that this had no impact on the sovereign credit rating.
“The ratings reflect Bermuda’s status as a net external creditor, its moderate and improving fiscal deficits and low debt burden, effective and predictable policy-making, high GDP per capita, and lack of monetary flexibility,” the S&P commentary stated.
The New York-based international rating agency endorsed efforts by the current government to reduce its expenditure, noting that it had recorded a three per cent reduction in general government (GG) spending in the past fiscal year.
S&P was also not unduly concerned by Bermuda’s national debt, reporting that it had been steadily declining since last year and the downward trend was likely to continue.
It stressed that maintaining a low debt level was important to providing fiscal flexibility.
Bermuda’s Finance Minister and Deputy Premier Bob Richards has welcomed the upbeat report, saying it was in line with his ministry’s projections.
“This report is further evidence that our policies are bearing fruit. With our practical and measured approach, the future of Bermuda is looking much brighter for all,” he said.