bases its rosy outlook on offshore business and, yes, even tourism.

In a sign of confidence in the new PLP Government and the economy, Standard & Poor's (S&P) has affirmed Bermuda's stable double-A long-term foreign currency sovereign credit rating.

The rating is given with a stable outlook, as S&P doesn't expect the Government to make major changes that could drastically affect the economy.

The stable rating is important in that it lowers the cost of Government borrowing on the overseas markets.

S&P also assigned short-term foreign and local currency ratings of `A-1' plus and a double `A' long-term local currency sovereign credit rating on Bermuda.

S&P bases its stable outlook on the expectation that offshore business, and to a lesser extent tourism, will continue to grow supported by Government policies. "The PLP which recently formed a Government for the first time, has become more centrist in recent years, articulating its commitment to maintain a regulatory and tax environment conducive to attracting international business,'' S&P stated.

The rating agency noted that the PLP's first budget, to be given on February 19, is expected to "emphasise cautious public finance management, albeit with more emphasis on education.'' The agency noted changes in immigration practice are likely.

"As long as the competitive advantages of conducting business in Bermuda are preserved and the Government does not stray from its track record of fiscal prudence, a downward revision of the ratings is unlikely.'' A revision upward is also unlikely given the Island's small "relatively undiversified'' economy which leaves the Island vulnerable to external shocks, such as tax, regulatory, and other developments in competing jurisdictions, S&P stated.

The credit ratings reflect Bermuda's achievements in the international sector, a strong fiscal position, a net external creditor position, and stable monetary management.

"Modest deficits'' and a debt burden of less than ten percent of gross domestic product were positive factors in S&P's rating assignment.

Government's long-term debt burden as at March 31, 1998 was $161 million, or 6.9 percent of gross domestic product.

"The diversification of offshore business from captive insurers to a broader range of insurance and financial management products has been impressive, but both offshore business and tourism face continued challenges in maintaining and building shares in these competitive markets,'' S&P continued. And in an aside S&P noted the domestic banking sector reported non-performing loans have increased to 6.2 percent of lending at mid-1998, suggesting "that asset quality may be weaker than reported.''