FRIDAY, JULY 6: Some have said that the *second credit ratings downgrade only returns Bermuda to the same sovereign credit ratings level Bermuda had from 1994-2006.

But in 2012, Bermuda is in a very different situation, and weaker situation. Financial analysts would say: “Though the rating is the same, the fundamentals are different”.

Here are eight factual comparisons and one critical fact referred to in the Fitch Report. You can see all the important differences between 1994/2006 and now, 2012. You can decide for yourself.


• 1994-2006: Bermuda’s residential population was steadily growing (59,550 to 63,797; for 4,247 more residents — residential population 7% up)[63,797 from Cabinet Office Report]

• 2012: Bermuda’s residential population has been falling since 2008. It continues to fall. (about 68,000 in 2008 to about 61,000 in 2012 — residential population about 11% down). Census 2010 counted 64,237 people which is just 440 more than is reported in 2006. More residents have left since 2010.

National Workforce

• 1994-2006: National Workforce grew from 34,143 (1994) to 39,686 (2006), rising by 16% and creating 5,543 new jobs.

• 2012: National Workforce has been shrinking. 40,213 jobs in 2008 to 37,399 jobs in 2011., falling by 7% with 2,814 jobs disappearing.

Gross Domestic Product (GDP)

• 1994-2006: GDP grew from about $2.4bn to $5.4bn.

• 2012: GDP has been falling for three consecutive years. $6.11bn (2008) to $5.72bn(estimated in 2011) and about level with 2006. GDP expected to go down again in 2012 and not grow in 2013.

Financial Services and International Business

• 1994-2006: International Business and Financial Services [IB+] were coming into Bermuda and expanding its Bermuda footprint. IB+ employment grew 77% from 6,489 to 11,482 (rising to 11,994 in 2007).

• 2012: IB+ has been exiting Bermuda since 2007. IB+ employment has fallen 10% from its high of 11,994 (in 2007) to 10,800 (in 2011). Now close to what it was in 2005 (when it was 10,943)

Debt to Revenue ratios

• 1994-2006: Debt to Revenue ratios ranged between 17% and 22%. ($119m Debt on $705m in 2003/04 Revenue and $138m Debt on $623m Revenue in 2000/01

• 2012: Fitch reports Debt to Revenue of 150% for 2010/11. Debt to Revenue for 2012/13 still 150% ($1,381m Debt to $909m Revenue in 2012/13).

Debt to GDP ratios

• 1994-2006: Debt to GDP ranged from 3% to 5%

• 2012: Debt to GDP is 24%. As GDP falls and Debt rises, this percentage will rise.

Annual Cost to Service Debt (Debt Service Ratio)

• 1994-2006: Annual cost to service Debt [Interest + Sinking Fund] as a percentage of revenue ranged between 1.9% and 2.4% ($15m debt service out of $623m revenue = 2.4% on Debt Service)

• 2012: Annual cost to service Debt as a percentage of revenue is now 13% ($115m Debt Service out of $909m revenue in 2012/13). In 2011/12, the Debt Service Ratio was 11%. This DSR will continue to rise.

Fitch Report comment on debt & revenue

The Fitch Report said: “...Bermuda’s debt/revenue ratio .... is deteriorating faster than its peers.”

Between 2000 and now, this is what has happened with the relationship between Government’s Revenue and Government’s Debt. Note, in the chart above, the steep rise of the debt line, and the relative non-rise of the revenue line.

This rising gap is what the Fitch Report is describing as “...deteriorating...”.

The chart paints a very clear picture of what the Fitch Report describes. The chart also delivers this additional factual information:

• Change in the rate of rise in Debt becomes visible and obvious in 2005/06.

• Revenue is not rising beyond the 2010/11 high of $996.7m.

• Revenue has never yet gone over $1bn.

• The $996.7m revenue spike for the raised Payroll Tax year of 2010/11 is followed by a steep revenue decline in 2011/12.

• Without the 2010/11 spike in revenue, the overall revenue trend would have shown a steady decline that begins in 2008/09.

*Bermuda’s first credit rating downgrade was in December 2011, when Standard & Poor’s moved Bermuda down one notch from AA+ to AA.