Moody’s downgrades Bermuda's rating to A1 (Update)

The Minister of Finance the Hon. E.T. Richards JP MP today advised that Moody’s Investors Service has downgraded Bermuda’s rating to A1 from Aa3 and changed the outlook to stable from negative.

“One of the key drivers stated as the reason for the downgrade is the persistent economic recession,” explained Minister Richards. “We are pleased, however, that Moody’s has attached a stable outlook to the rating."

While the ratings adjustment is disappointing news, the Minister of Finance noted that the adjusted rating remains in the upper medium investment grade.

The Minister said: “Moody’s continues to endorse the Island’s institutional strength and Government’s program for prudent fiscal management. Government remains optimistic about future prospects for growth and will manage the economy accordingly.”  

Moody’s has also adjusted Bermuda’s long-term foreign currency deposit ceiling to A1. The rating action does not affect the Prime-1 short-term deposit ceiling, or the foreign currency bond ceiling (Aa2, P-1) and long-term local currency country and deposit ceilings (Aa2).

A Moody’s press releases issued today stated: “Although Moody’s expects real output to return to growth in 2014, the recovery will be fragile because the reforms the government has implemented over the past year to incentivize the international business and tourism sectors (Bermuda’s main drivers of growth) are likely to have a gradual impact over the next five years.”

The stable outlook was attributed to, in part, Bermuda’s “commitment to deficit reduction as exemplified by the government’s Medium Term Expenditure Framework (MTEF).”

The Moody’s release stated: “The MTEF delineates a clear plan to rein in the fiscal deficit and, if fully implemented, is likely to stabilize the debt to-GDP and interest payments-to-revenues ratios.”

In closing the Minister of Finance said, “The Government will continue to press ahead with our Jobs and Economic Turnaround Plan that strikes a balance between responsible growth and disciplined financial management. As the Minister of Finance, I remain committed to creating an economy that works for everyone and returning our public finances to a sustainable position”.

Statement from Shadow Minister of Finance David Burt:

Moody's Downgrade a Vote of No Confidence

"Today’s downgrade by Moody’s is a vote of no confidence in the OBA’s “Job’s and Economic Turnaround Plan”. Instead of the words such as “Turning the Corner” used by the OBA when talking about the economy; Moody’s used language that all Bermudians know to be true, “ongoing deterioration”. The OBA’s Jobs and Economic plan has turned into an unemployment and economic nightmare for Bermudians. Since the OBA have taken office Bermuda has lost 1,166 jobs and seen 261 companies close their doors.

Employers are cutting staff, hours, and benefits – meanwhile the cost of living continues to rise making life harder for most Bermudians. Our young people are leaving the island as they see no opportunity at home while work permit policies seem to put the rights of employers and non-bermudians over the rights of Bermudians.  Major construction projects are coming to an end with no new projects in the pipeline – meanwhile the OBA is embroiled in division and is paralysed rendering it unable to act.

We cannot build an economy for the future with ideas from the last century; we must look forward and be bold. This is why we have called for immediate action on online gaming; immediate action on alternative energy investments; immediate action on freeing up local industry from unnecessary regulation, which is stifling the creativity of our entrepreneurs; and the establishment of a Bermuda Fund to attract new job creating industries to our shores. These ideas will assist Bermuda and Bermudians by diversifying the economy, creating new jobs, and increasing government revenue. "