The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas will not be “out of the woods” should it escape Moody’s threatened downgrade, the Chamber’s chairman warning yesterday that the country will face continued “scrutiny” on a revolving six-month cycle.

Gowon Bowe told Tribune Business that while Moody’s gave no intention of its likely action following meetings with the Government and private sector last week, a downgrade would be avoided if it bought into the Bahamas’ message that progress is being made.

However, he warned that the Bahamas “should not kid itself” into believing it was ‘scott free’ if Moody’s elected not to downgrade the Government’s creditworthiness.

Mr Bowe emphasised that the nation was set to face continued regular scrutiny both from it and its fellow credit rating agency, Standard & Poor’s (S&P), plus the International Monetary Fund (IMF), with all wanting to see “tangible progress” from the Bahamas in improving its economic growth numbers and fiscal position.

Recalling last week’s meetings with Moody’s, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman said: “The message was: ‘If we’re moving forward, shouldn’t we be given some credit for that, although we’ll still be under scrutiny’.

“If they [Moody’s] subscribe to that and the positives, then we should be OK and confirmed at the current rating.”

Moody’s has threatened to downgrade the Bahamas’ existing ‘Baa2’ sovereign creditworthiness by “one or more notches”, a move that could cost this nation its ‘investment grade’ status by dropping its debt to ‘junk’ quality.

The New York-based rating agency cited weaker than expected GDP growth numbers, recent revisions to which had shown the Bahamian economy to be in recession for the past two years, as the main rationale for placing the Bahamas under review.

It added that the continued increase in the $6.8 billion national debt, albeit at a slower rate, coupled with concerns about the effectiveness and credibility of Government policy, had also prompted its action.

Mr Bowe, though, warned the Government, private sector and Bahamian people against complacency should last week’s visit to Nassau succeed in persuading Moody’s against a credit rating downgrade.

“We should not kid ourselves, as this will be reviewed every six months,” he told Tribune Business of the rating agencies. “We still have structural concerns that were raised, and we shouldn’t dismiss that.”

“They’re going to want to see tangible progress on the ease of doing business, growth prospects being realised by the Government facilitating expansion, and the fiscal numbers given by the Government not being revised on a consistent basis.

“We shouldn’t believe we’re out of the woods, even if the rating is confirmed at this point,” Mr Bowe continued.

“This is an exercise that will be undertaken every six months, where we have to answer questions, demonstrate positive movement, at least two times a year.”

Both Moody’s and S&P have the Bahamas on a six-month review cycle, producing their assessments of its economy, fiscal health and creditworthiness in February and August of each year.

Mr Bowe, though, said that “depending on how they stagger this”, the Bahamas may have to demonstrate it was performing more frequently - possibly even on a quarterly basis - to both the rating agencies and IMF.

He added that Moody’s meetings with both the Government and the private sector had provided “a very clear indication” of the issues the rating agency was focusing on.

Besides the economy’s immediate past ‘negative growth’ issues, and near-term prospects, Moody’s was also focused on revisions to the fiscal numbers and what the Bahamas was doing to improve its ‘ease of doing business’.

Describing the meetings as “a dual exchange” between the two sides, Mr Bowe said the ratings agency gained “a greater appreciation” for how the Department of Statistics had calculated the growth numbers.

The Chamber chief argued that ‘real GDP’, which the Department had measured as ‘negative’ or ‘contracting’ in 2014 and 2015, was a measurement that only economists zero in on.

“It’s really about what the marketplace is seeing and feeling,” Mr Bowe told Tribune Business. “Certainly, we’re not experiencing growth at the rate we want, but persons do not feel they are moving backwards.”

He added that the private sector also confirmed Moody’s perception that the Bahamas’ growth prospects did not depend entirely on the $3.5 billion Baha Mar project.

“We dispelled that,” Mr Bowe said. “They didn’t think so, and we confirmed we didn’t see it that way. Baha Mar had a lot of impact in the construction phase and will bring some employment, but long-term growth is not going to be centred on that.”

He said Moody’s had been informed of the “uptick” in container throughput volumes through the Arawak Cay port, which was a positive sign that Bahamians and businesses were spending money on imports.

“What has to be focused on is: Are we moving in the right direction, or staying stagnant as we try to get on the right path [the National Development Plan],” Mr Bowe added.

“It’s safe to say we’re moving forward, but not at the pace to put us into the easy zone. There’s a lot of work to be done.”

The Chamber chairman emphasised that the private sector “weren’t trying to paint a rosy picture” for Moody’s, and acknowledged that the business community had its part to play in improving the ‘ease of doing business’.

“There are positive indicators in the works; we just have to bring them to fruition,” Mr Bowe told Tribune Business.