Barbados not worried about credit rating downgrade

Governor of the Central Bank in Barbados, Dr MArion Williams noted that Standard and Poor’s quotes Barbados’ record of prudent policy making, suggesting that there is optimism about Barbados’ ability to withstand the difficult times and she said that view

BRIDGETOWN, Barbados, June 15, 2009 – The Governor of the Central Bank in Barbados says the downgrading of the country’s credit rating is nothing to lose sleep over.

The international ratings agency last week revised Barbados' long-term foreign currency sovereign credit rating from BBB+ down to BBB, as it forecast the country's economy would contract this year with a gradual recovery not expected until 2011.

But Dr Marion Williams says it still leaves Barbados squarely in investment grade category, an important factor in the international credit markets.

“The downgrade is not a desirable development, and suggests care going forward, but given the present global environment it is not worrisome, particularly since Barbados remains an investment grade sovereign,” she said.

“It may add some costs to any future market borrowing which we undertake and could exclude some investors whose investment guidelines prescribe BBB+ or higher, but this should not affect many investors, particularly in this environment.”

Dr Williams noted that Standard and Poor’s quotes Barbados’ record of prudent policy making, suggesting that there is optimism about Barbados’ ability to withstand the difficult times and she said that view was shared by the authorities and most investors.

“Barbados is fortunate that it entered this difficult period in a relatively strong position and the downgrade is not expected to undermine confidence in the economy, since it is occurring at a time when many countries around us are experiencing the same difficulties and the global economy is in recession,” she said, noting that other developing and developed countries have also had their credit rating downgraded in the past several months.

“However, it will be important going forward that we make the right decisions and act prudently, so as to minimize the impact of the recession and to position ourselves to capitalize on the upturn when it occurs,” Dr Williams added.

The Central Bank Governor said there had been positive signs, including a surplus on the current account of the balance of payments and a virtually unchanged fiscal deficit in the first quarter when compared to the corresponding period a year ago.

Standard and Poor’s statement on Barbados last week said it expected the economy to contract by 2.5 per cent this year, followed by a flat performance next year, before gradually recovering to a 2.5 per cent growth in 2011.

It added that debt levels were projected to rise to 86 per cent of GDP on a gross level and 46 per cent on a net level in 2009.

At the same time, it said the outlook for the country was stable, reflecting the company's expectations that the government's limited policy choices, especially in light of the peg on the Barbadian dollar and the country's already high debt levels, coupled with its commitment to address the debt situation, would result in the government tightening its fiscal accounts from 2010 onward.