STATEMENT: Moody’s Investors Service (Moody’s) has released its latest regular update regarding the Commonwealth of The Bahamas in which it outlines the country’s monetary, macroeconomic and fiscal policy effectiveness, continued economic recovery and strong institutional framework.
Regarding recent economic performance, Moody’s states that in 2023, “the economy expanded 2.6% year over year. Most industries recorded growth in 2023, with accommodation and food services, and construction expanding 26% and 22%, respectively.” This follows the strong recovery observed in 2021 and 2022, with GDP growth of 17% and 14.4%, driven primarily by the tourism sector. In 2023, stayover tourist arrivals increased 17% y/y, reaching 95% of 2019 levels, while cruise ship arrivals increased 44% y/y and are now 50% above 2019 levels.
On The Bahamas’ policy framework, Moody’s notes that the country’s “monetary and macroeconomic policy effectiveness is supported by the long track record of the currency peg, which reflects the Central Bank of The Bahamas’ policy credibility and contributes to macroeconomic stability.” The strong institutional framework resulted in a “baa2” institutions and government strength score, which supports The Bahamas’ credit profile.
Looking ahead, Moody’s sees The Bahamas’ improved fiscal policy framework as a driver for decreasing government debt levels: “a fiscal policy framework that has been responsive to economic shocks will support fiscal consolidation and a downward trend in government debt ratios”. General government debt to GDP decreased from 93.4% in 2021 to 82.0% in 2023, and Moody’s forecasts the decreasing trend will continue in 2024 (79.6%) and in 2025 (76.2%). In addition, the authorities’ fiscal consolidation efforts and prudent spending will contribute to a narrowing fiscal deficit, which the agency expects to turn into a surplus in FY 2024/25: “we expect improvement in revenue collection and continued restraint on spending will allow the government to come close to the annual [fiscal deficit] target of 0.9% of GDP [in fiscal 2024]”.
Lastly, the government’s efforts to increase fiscal transparency were also outlined by the credit. agency: “Authorities also increased transparency by publishing quarterly fiscal performance reports, an annual borrowing and debt management plan, and an annual fiscal strategy report that sets out the government’s multiyear macroeconomic assumptions and supports the formulation of the budget.”
The Bahamas’ rating remains at B1/stable as assigned by Moody’s on October 6, 2022 (no rating action).
