Strong Finance Industry Performance To Boost Bahamas Economy

by Amanda Banks, Tax-News.com, London

03 April 2006

Standard & Poor’s has affirmed its 'A-' long-term and 'A-2' short-term Sovereign Credit Ratings on The Commonwealth of The Bahamas, and has predicted that the strong performance of the finance and tourism sectors will bode well for the Bahamian economy in the future.

According to S&P, the outlook on the long-term ratings remains stable, with indications that this could be changed to “positive” should the government manage to contain fiscal pressures, and if foreign direct investment remains high.

The recent ratings reflect the Bahamas' macroeconomic stability, prudent fiscal policies, and steady monetary stance, S&P credit analyst Olga Kalinina stated.

Moreover, the country's fixed exchange-rate regime, in effect since 1973, ensures low inflation, while generally prudent fiscal management has led to only moderate accumulation of government debt, she added.

Debt is estimated at 24% of GDP on a net basis in 2006, compared to 20% for the 'A' median.

Kalinina noted that: "The stable ratings also reflect the island's politically stable environment and high standard of living (compared to its peers), as well as the public sector's low and declining external debt."

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