Moody’s expects 1.5% growth for Bermuda
Moody’s Investors Service expects Bermuda to achieve economic growth averaging 1.5 per cent between 2017 and 2021.
The ratings agency has also noted the Bermuda Government’s efforts to diversify the economy through financial technology, such as blockchain, and said that if it proved to be successful it would help diversify the economy and boost economic growth prospects.
Moody’s made those observations as it affirmed Bermuda’s A2 issuer ratings and its A2 senior unsecured bond ratings, with the outlook remaining stable.
Such ratings can be used by investors to gauge risk levels and creditworthiness. Other countries with A2 ratings include Ireland and Slovakia.
Moody’s expectation for the island’s economic growth up to 2021 is “driven by stronger activity in the tourism and construction sectors”. To give context to the 1.5 per cent figure, the island experienced an economic contraction that averaged -2.3 per cent between 2009 and 2016.
Moody’s expects the tourism sector to have a positive effect on the island’s economic picture as new hotel projects come online. St Regis in St George’s and the Caroline Bay development at Morgan’s Point are two major hotel projects under way.
The agency noted that the number of hotel properties on the island has fallen from 83 in 1990 to 42 in 2016, resulting in an almost halving of available hotel rooms to 2,334.
Moody’s noted that the $267 million airport redevelopment project started last year and expected to be completed in 2020, will contribute to economic growth during the next two years “and ultimately support tourism by increasing air passenger traffic.”
The agency referenced the efforts to develop new economic activity on the island through fintech, such as blockchain. In its assessment, it stated: “Bermuda would leverage its strong regulatory quality to become an incubator in this globally-developing new sector.
“The goal would be to follow the same experience that allowed Bermuda to develop the reinsurance sector in the 1980s. As these efforts are still in their nascent stage, the potential economic impact is difficult to assess. However, if successful, Moody’s considers that it would likely contribute to diversify the economy and boost medium term growth prospects.”
The second driver to Moody’s decision to affirm the island’s ratings is the “continuation of prudent fiscal policy” that should improve Bermuda’s debt position.
“Moody’s expects that the Progressive Labour Party administration will continue to pursue fiscal consolidation that was initiated by the One Bermuda Alliance government in 2013. Since that year, Bermuda’s debt-to-GDP ratio has remained broadly stable at about 40 per cent and in line with the ‘A’ category median, despite the challenging macroeconomic environment of the last few years,” it stated.
Moody’s mentioned the Government’s plan to reach a balanced budget within three years, and to achieve a fiscal surplus by the 2020/21 financial year. The agency said it believed this target is likely to be achieved “given the government’s efforts to rein in expenditure growth and boost revenue collections over the coming years”.
Using the baseline of Bermuda achieving a balanced budget in the coming years, Moody’s expects the island’s debt-to-GDP to improve, and said that view was backed by Government’s plan to pay down $180 million of debt in 2019 by using the Sinking Fund. However, Moody’s noted that even with this, Bermuda’s interest-to-revenue ratio will remain significantly above the level of its A-rated peers.
In a statement, David Burt said: “According to Moody’s, the key drivers for the rating affirmation are our economic strength, with improved medium-term growth prospects; the continuation of a prudent fiscal policy that will eventually improve our debt burden, and our strong institutions and robust and adaptive regulatory environment, which allows us to maintain a low susceptibility to events risks.
“The stable outlook reflects Moody’s view that Bermuda’s improving fiscal prospects are balanced by a still-recovering economy and a continued, albeit relatively low, susceptibility to shocks stemming from changes in policies in other countries that could materially impact our economic structure.”
The Premier added: “This Government’s focus on sound economic and fiscal policies, working collaboratively with traditional industry partners while introducing new financial legislation and exploring feasible options to diversify our economy is strengthening Bermuda. This translates to stronger financial growth which will mean more jobs and opportunities for Bermudians.”
Meanwhile, Jeanne Atherden, leader of the OBA, said Moody’s ratings affirmation “is continued confirmation that the OBA Government reset this country’s economic footing. The reality is that the solid economic and fiscal policies put in place by the OBA Government set the stage and laid the foundation for Bermuda’s economic recovery”.
She said the OBA hopes the Government will continue on this positive trajectory of building a stronger economy for Bermuda.
PLP backtracks on ‘land grabs’
Tributes paid to RBR soldier killed in crash
Drink-driver falls off his bike twice
Jetting into the island
Children as young as 11 exposed to porn
Social-media feud led to Steede murder
Online opportunity beckons for retailers
Three caught at breath-test checkpoints
Police name fatal crash victim
Dame Jennifer backs Mary Prince Day
William Zuill brand buckles up for success
Charity helps to reintegrate women prisoners
Hola from a digital nomad in Panama
Solar-power system is biggest in Hamilton
DigiCert completes $45m purchase of QuoVadis
Take Our Poll
- "Your new year's resolutions for 2019"
- Quit smoking
- Quit drinking/drink in moderation
- Do not drink and drive
- Lose weight
- Stop procrastinating
- Drive with greater care
- Total Votes: 2607
- Poll Archive