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19 May 2016
New York, May 19, 2016 -- Moody's Investors Service, (Moody's) has today changed the outlook
on the Government of St Vincent and the Grenadines' B3/NP issuer
and B3 government bond ratings to stable from negative and affirmed the
The rating action reflects our expectation that faster growth and lower
fiscal deficits will keep St Vincent's debt metrics consistent with
B-rated peers. Real GDP will likely increase closer to 2%
this year and next, after averaging only 0.5% per
year from 2010 to 2015. We forecast debt will end at 260%
of revenues in 2016, similar to the 234% median for ratings
The stable outlook reflects our view that while debt will likely continue
to rise in the next two years, the increase will be moderate and
debt affordability will continue to be supported by low interest funding
from multilateral and bilateral creditors.
The local currency ceiling remains unchanged at Ba3. The foreign
currency bond and bank deposit ceilings also remain unchanged at Ba3/NP.
RATIONALE FOR AFFIRMATION OF ST VINCENT'S B3 RATING
After years of weak economic growth St Vincent is poised for a modest
recovery, with real GDP forecast to grow 2% on average until
2018. St Vincent, like most other Caribbean nations,
is highly dependent on tourism, which represents almost 25%
of economic activity, either directly or indirectly. Most
tourism is from the US and with the recent economic recovery in the US,
growth has also picked up in St Vincent. Last year stay-over
tourist arrivals rose 6.6% relative to 2014, compared
with an average increase of only 0.1% since 2010.
Further growth may result from the opening of a new international airport.
In construction since 2008, lack of necessary funding has delayed
the start of operations of Argyle international Airport. Since
currently there are no direct flights to the capital city of Kingstown
from North America or Europe, the new airport will likely lead to
an increased flow of tourists, a development we anticipate will
have a multiplier effect on the economy.
Economic growth should help limit the increase in the debt burden,
which remains on par with peers but has been rising in recent years.
Debt to GDP will end at 72% this year, compared to 60%
in 2012. Low interest funding from developments banks has helped
keep interest payments stable, despite the increase in debt.
We estimate interest payments will represent 9% of revenues in
2016, a similar percentage as in 2012, and lower than the
B-rated median of 10%.
St Vincent's B3 rating remains constrained by its small and undiversified
economy. The country is highly susceptible to weather-related
shocks and it relies heavily on grants and multilateral lending for its
funding needs. Fiscal flexibility is limited as well as overall
policy effectiveness reflecting a weak institutional framework and lack
of timely and adequate macroeconomic data.
RATIONALE FOR ASSIGNING A STABLE OUTLOOK
The stable outlook reflects our expectation that the fiscal deficit will
remain moderate over the next two years limiting the increase in the debt
burden. Fiscal deficits averaged 3.5% of GDP since
2011 but that should fall to 2.5% in 2016, on the
heels of increased tax compliance efforts and faster growth. The
government aims to reach fiscal results close to balance by 2018,
an ambitious target which we anticipate will be extremely hard to reach
given historical performance.
WHAT COULD MOVE THE RATING UP/DOWN
We see limited potential for upward rating changes in the immediate future.
Faster growth driven by the completion of Argyle International Airport
and the expected associated increase in FDI in the tourism sector would
be credit positive and supportive of the rating. A significant
strengthening of the government's balance sheet through a marked reduction
in debt metrics or diversification of funding sources would place upward
pressure on the sovereign's rating. A significant reduction in
external vulnerabilities, particularly a drop of the current account
deficit which reached almost 30% of GDP last year, would
also create upward pressure.
A further deterioration of the government balance sheet, the assumption
of contingent liabilities coming from state owned companies, or
increased commercial borrowing to finance potential cost overruns related
to the Argyle airport would be credit negative. Downward pressure
on the rating would also arise if access to grants and concessional finance
were to deteriorate, or if a large external shock - such
as a major hurricane - were to jeopardize balance of payments sustainability.
GDP per capita (PPP basis, US$): 11,009 (2014
Actual) (also known as Per Capita Income)
Real GDP growth (% change): 1.6% (2015 Actual)
(also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 0.5%
Gen. Gov. Financial Balance/GDP: -2.8%
(2015 Actual) (also known as Fiscal Balance)
Current Account Balance/GDP: -29.6% (2015 Actual)
(also known as External Balance)
External debt/GDP: 46.8% (2015 Actual)
Level of economic development: Low level of economic resilience
Default history: No default events (on bonds or loans) have been
recorded since 1983.
On 17 May 2016, a rating committee was called to discuss the rating
of the St. Vincent and the Grenadines, Gov-t of.
The main points raised during the discussion were: The issuer's
economic fundamentals, including its economic strength, have
materially increased. The issuer's governance and/or management,
have decreased. The issuer's fiscal or financial strength,
including its debt profile, has not materially changed.
The principal methodology used in these ratings was Sovereign Bond Ratings
published in December 2015. Please see the Ratings Methodologies
page on www.moodys.com for a copy of this methodology.
The weighting of all rating factors is described in the methodology used
in this credit rating action, if applicable.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating. For provisional
ratings, this announcement provides certain regulatory disclosures
in relation to the provisional rating assigned, and in relation
to a definitive rating that may be assigned subsequent to the final issuance
of the debt, in each case where the transaction structure and terms
have not changed prior to the assignment of the definitive rating in a
manner that would have affected the rating. For further information
please see the ratings tab on the issuer/entity page for the respective
issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
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to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
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Please see www.moodys.com for any updates on changes to
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Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
VP - Senior Credit Officer
Sovereign Risk Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
Anne Van Praagh
MD - Sovereign Risk
Sovereign Risk Group
Moody's changes outlook on St Vincent and the Grenadines' B3 ratings to stable from negative; affirms rating
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
No Related Data.
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