Ongoing surveillance of Bermuda, visits to the Island to speak with Government representatives and figures from the private sector, all played a part in the latest assessment of the Island by Standard & Poor's.

It led to the ratings outlook forecast for Bermuda being lowered from 'positive' to 'stable' by one of the world's debt rating agencies last Friday.

The Island's "AA" long-term credit rating remains unchanged and is one of the highest in the world, on a par with Japan and above Italy.

However, it is home-grown factors that have dragged Bermuda back from the threshold of stepping up to the next echelon of high-flyers.

Criticism of The Royal Gazette's report privately circulated by Cheryl Packwood, CEO of the Bermuda International Business Association, for "not understanding global economics" and macro-economics has also been shown as misguided by the lead analyst.

S&P's Toronto-based Nikola Swann said the agency deliberately tried to avoid ratings being moved as a result of macro-economics and instead aimed to "see through" macro-economic factors.

He said: "The fact that we are going into a cycle in 2008 where it looks like growth is going to be lower in the US and, as a result, in Bermuda, that by itself is not going to influence our ratings. We are trying to avoid ratings moving with macro-economics and instead focus on structural factors that could go beyond that."

Lack of transparency within parts of Government, including overdue audits, election promises that will impact the public purse such as free public transport and enhanced health care for seniors, and increasing social polarisation were all cited in S&P's report as factors causing concern.

S&P rates 117 countries and territories, and Bermuda remains amongst the top ones, said Mr. Swann. "A positive outlook is always better, but you have to keep in mind 'AA' stable is very high within our global scale," he said, adding Bermuda Government's debt is rated two notches lower that that of the US Treasury.

As a country, Bermuda's rating matches Japan and is ahead of the likes of Italy and Portugal.

Countries above Bermuda with 'AAA' ratings include the US, UK, Ireland, and rival offshore jurisdiction Isle of Man. Another of Bermuda's rivals Cayman Islands is not amongst the S&P's listings.

Mr. Swann said S&P's surveillance of Bermuda – and of other countries – is ongoing and constant and could result in a new assessment at any time.

Asked how Bermuda might move back to a 'positive' outlook, he said: "It would be a question of fiscal performance and if there was less social polarisation than there appears to be now and an increase in Government transparency."