The US-based rating agency,
Moody's also changed the outlook to negative following a review that commenced on
In a statement, Moody's said the key drivers behind the rating action were the large shock caused by the coronavirus (COVID-19) crisis will weigh significantly on economic and fiscal strength over the medium term as well as the funding conditions will become more constrained for the government because of larger financing needs.
'The negative outlook reflects Moody's expectation that given the severity of the coronavirus shock, the government's credit profile will continue to be exposed to downside risks related to the recovery of the tourism sector.
'This could weigh on a consolidation process that Moody's currently expects will begin in earnest in fiscal 2021/22. Additionally, given its higher borrowing requirements for fiscal 2020/21, the government could face more pronounced liquidity challenges than currently expected,' Moody's said in a statement.
Moody's the short-term foreign-currency bond ceiling was lowered to Prime-3 from Prime-2, whereas the short-term foreign-currency deposit ceiling was lowered to Not Prime from Prime-3. The
'The long-term foreign-currency bond ceilings for
'The main driver for the downgrade is the significant negative effect the coronavirus outbreak will have on The
It said tourism's direct contribution to Bahamian gross domestic product (GDP) is close to 20 per cent of the total, while its indirect contribution through other sectors represents another estimated 20 per cent of GDP.
'As a consequence of the outbreak, the country closed its borders in late March, which essentially halted the flow of tourists through the second quarter of 2020. The government imposed additional restrictions on movements on the local population to control the spread of the disease, which will also have a negative impact on overall economic activity.
'Over the past few weeks, the government has gradually lifted some of those restrictions, and the tourism sector is slated to reopen on
Moody's said it expects a loss of over 50 per cent of tourism flows in 2020 relative to 2019, which would lead to a GDP contraction of about 16 to 20 per cent.
Moody's said it believes that the recovery of the global tourism sector is exposed to potential changes to consumer behaviour following the coronavirus outbreak. The performance of the sector will also depend on the speed of the recovery of the airlines industry and ability to service tourist destinations such as The
'That said, a recovery in 2021 to 60 to 70 per cent of 2019 tourism flows could lead to a GDP expansion of over 10 per cent in The
Moody's said the large GDP contraction in 2020 will weigh on the fiscal accounts through the fiscal year that ends in
'In the 2020/21 budget that was presented in May, the government estimated a fiscal deficit that would exceed 11% of GDP - the highest in its history. The large fiscal shortfall reflects a significant loss in revenue, increased capital expenditures to support the economic recovery and reconstruction efforts following the damage caused by Hurricane Dorian in September 2019.'
Under Moody's baseline scenario, The
'Additionally, the government's debt affordability will deteriorate as a consequence of higher interest payments and the loss of revenue, which will push the interest-to-revenue ratio to 22.6% in 2020/21 from 13.5% in 2018/19, although Moody's expects the ratio to decline somewhat in subsequent years as government revenue recovers.
'Overall, The
© Pakistan Press International, source