Apr 2009 Financial News

Outlook slides

Apr 09, 2009

BARBADOS' ECONOMIC OUTLOOK has been revised from "stable' to "negative' by Standard & Poor's (S&P).

And while the international rating agency maintained the country's high grade of BBB+/A-2 for foreign currency and A-/A-2 on its local currency, S&P issued a sobering warning about a possible downgrade if the country's foreign reserves dropped more "than projected".

The Washington-based agency said the confidence it had in Barbados' currency reflected the island's "social cohesion and political stability". The surpluses of the National Insurance Scheme were also identified as a positive for the economy.

However, S&P warned Barbados that a downgrade would be on the cards if the economic deterioration strained the island's strong "social cohesion" or if there was "fiscal deterioration" from efforts to resolve the CLICO issue took longer or were more "severe than anticipated".

S&P analyst Olga Kalininia, who monitors the economy, said in a statement: "The negative [economic] outlook on Barbados reflects the growing imbalances that the inconsistent fiscal and monetary policy mix has caused."

Kalininia said the island's growing fiscal deficits and the planned increase in government spending in an effort to stimulate the economy would put pressure on the island's efforts to maintain its "currency peg" to the US dollar.

"This fiscal deterioration reflects dismal growth in revenues in 2008 amid a slowing economy," the S&P statement noted.

Projecting 2009 to be even more challenging than 2008 with lower tax revenues expected for Government, the agency said it foresaw "net government debt will increase to 44 per cent of gross domestic product, up from 41 per cent in 2008".


Source:
Geralyn Edward
Nation News
Thursday April 9, 2009

http://www.nationnews.com/news/local/unstable-future-FRONT-PAGE-LEAD