The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas’ 27 per cent gross foreign direct investment (FDI) ratio led the entire Latin American and Caribbean region in 2012, a Wall Street rating agency yesterday ranking this nation as one of only two projected to achieve above average economic growth in 2012.

Despite its fiscal woes, Moody’s, in a report on all Latin American and Caribbean sovereign credit ratings, found that the Bahamas’ gross investment ratio of 27 per cent of GDP led all-comers in 2012.

Giving an indication of just how strong a performance this was, Moody’s said: “From 2009 to 2011, the median investment ratio in Latin America and the Caribbean was 21 per cent of GDP compared to 25 per cent in Asia.

“Just two countries in the region - Panama and Ecuador - exceeded Asia’s median, and just barely, with average investment ratios of 26 per cent of GDP from 2009 to 2011. Panama is the only country in the region reporting Asia-like growth rates over the past decade.”

Elsewhere, Moody’s said the Bahamas and Paraguay were the only two nations in the region set to “grow significantly above trend” in 2013.

The Bahamas is projected to generate GDP growth of 2.5 per cent this year, up from 2 per cent in 2012.

“No country is projected to report annual rates of more than 1.5 per cent with the exception of the Bahamas, which will report growth of some 2.5 per cent, and potentially Trinidad and Tobago - though, as noted earlier, it will remain below trend,” Moody’s said of Caribbean economies in 2013.

“The downgrade of the Bahamas to Baa1 from A3 (negative outlook) in December 2012 left the A- category vacant of any Latin American or Caribbean sovereign credits.”

While encouraging for the Bahamas in one sense, Moody’s report noted that the Government still had much work to do on the fiscal side.

Noting just how severe the deterioration in the debt-to-GDP and fiscal deficit ratios had been since 2008-2009, the Wall Street credit rating agency said the Bahamas’ fiscal balance had worsened by more than 4 per cent of GDP between 2008-2012.

This was the third worst performance in Latin America and the Caribbean, while its fiscal deficit - projected at 6.3 per cent for 2012-2013, and 6.4 per cent for next year - was the fourth worst in the region.

The Bahamas debt-to-GDP ratio had increased by 20 percentage points between 2008-2012, the third largest rise in the region, placing it as fourth highest and just below 60 per cent.

Moody’s added that the Bahamas’ foreign currency debt was equivalent to 20 per cent of GDP.

In addition, the Bahamas current account deficit of -15 per cent of GDP, and net foreign direct investment (FDI) equivalent to 10 per cent of GDP, gave the country a -5 per cent FDI and current account balance.

The Bahamas’ external reserves, while they had grown by an amount equivalent to 4 per cent of GDP since 2012, were among the lowest in Latin America and the Caribbean at 10 per cent of GDP.

Moody’s added: “In the Caribbean, just three out of seven countries - Bermuda, Cayman Islands and St. Vincent and the Grenadines - will have deficits below 4 per cent of GDP.

“The median government deficit in the Caribbean is projected to rise to 4.9 per cent of GDP from 4.4 per cent in 2012, compared to a decrease in the median deficit for the rest of the region to 2.2 per cent of GDP from 2.4 per cent in 2012.”

The Bahamas is far in excess of these medians, showing how much work has to be done.