Government says S&P’s analysis broadly in line with its assessment of macroeconomic conditions

Government says S&P’s analysis broadly in line with its assessment of macroeconomic conditions

NASSAU, BAHAMAS — The Ministry of Finance said yesterday that Standard & Poor’s latest full analysis report on The Bahamas was broadly in line with the government’s assessment of macroeconomic conditions, which continue to be underpinned by strong tourism gains alongside steady foreign investment inflows.

The Ministry of Finance in a statement noted that S&P’s analysis recognized the country’s economic recovery, ongoing fiscal consolidation and diversification in funding sources.

“In the report, S&P underscores that “The Bahamas’ economic recovery during 2022 was robust, with GDP growth estimated at 14.4 percent,” the statement read.

“This performance was notably driven by a recovering tourism sector, which registered seven million visitors during 2022 and over five million in the first half of 2023 compared to 2.1 million in 2021. Looking ahead, S&P expects ‘the growth momentum to continue through 2023, backed by continued recovery from the pandemic’ with a strong pipeline of new tourist arrivals from the US and other foreign investment projects over the coming years.”

It continued: “As mentioned by S&P, ‘the growing economy continues to support the reduction of the government’s fiscal deficits to levels more consistent with those seen pre-pandemic.’ Government revenues increased nearly 12 percent during FY2022/23 and a fiscal deficit of 4.6 percent of GDP is expected for the same period. Additionally, S&P highlights the government’s tax collection and property tax reassessment efforts as positive levers for fiscal performance over the next few years.”

S&P underscored in its analysis that external financing risks remain elevated for The Bahamas, but a large domestic financial sector and multilateral external funding should mitigate this risk. The government’s $300 million bond payment due in January 2024 is expected to be sourced through the international bank market, underpinned by multilateral credit enhancements as well as direct multilateral lending.  

The ratings agency said that its stable outlook for The Bahamas reflects the view that economic growth will support government revenues and help contain government expenditures, leading to smaller fiscal deficits over the next 12 months.

Gross debt to GDP is expected to continue to decline, reaching 75.4 percent by the end of 2024 from 89.9 percent in 2020.

The analysis was not a rating action and the Bahamas’ rating remains at B+/stable as assigned by S&P on November 12, 2021.