Caribbean Region Could Again See Growth This Year

Caribbean governments – it is tourism that is fueling economic growth in the region.

News Americas, NEW YORK, NY, Fri. May 22, 2015: Economic growth across the Caribbean is expected to continue, accelerating from 1.5 percent in 2014 to 2.0 percent this year, according to Moody’s.

The Moody’s Investors Service report “Sovereign Outlook — Caribbean: Sovereign Credit Quality Supported by Recovery in Tourism, Low Oil Prices,” said growth in the Caribbean will accelerate as a result of the recovering tourism industry and sustained low oil prices, helping the credit quality of the sovereigns in the region stabilize following negative pressure in 2014.

Moody’s also said government debt across the region is slowly stabilizing or in some cases declining, putting average sovereign debt metrics on par with those in Latin America.

Debt ratios are stabilizing in Belize, the Bahamas, the Dominican Republic, Cuba, Bermuda, Saint Maarten and Trinidad, the report said. However, debt pressures are increasing in Barbados and St. Vincent, while they are easing in the Cayman Islands.

The pickup in the tourism industry is credit positive for the Bahamas (Baa2 stable), Barbados (B3 negative), Belize (Caa2, stable), Bermuda (A1 stable), Cayman Islands (Aa3, stable), Jamaica (Caa3 positive), St. Maarten (Baa1 stable), St. Vincent and the Grenadines (B3 negative), because their economies depend heavily on tourism.

The tourism recovery largely reflects improving economic conditions in the US and will continue to depend on the on the strength of the recoveries in the US and the UK through 2016.

“Although the rebound in tourism will help all Caribbean nations that rely on this industry, the individual credit effects will reflect each country’s dependence on this industry,” says Gabriel Torres, a Moody’s Vice President and Senior Credit Officer.

Barbados, Belize, the Bahamas and St. Maarten are most dependent on tourism.

Lower oil prices have also helped spur tourist growth, with fuel costs for airlines dropping significantly in 2014 and expected to continue their decline in 2015. They will also support domestic demand and consumer spending by easing current and expected inflation levels.

However, lower oil prices are credit negative for Trinidad & Tobago. The sharp drop in energy prices will significantly reduce government revenues, the current account surplus and foreign direct investment flows.

While Belize is a net oil-importing country, the decline in its petroleum production will have a significant negative effect on government finance.