Bermuda's finance minister disappointed by Fitch downgrade

HAMILTON, Bermuda, June 1, CMC - Finance Minister Bob Richards has described the decision by Fitch Ratings’s to downgrade the country’s credit rating as “disappointing”.



Richards, however, said the move was not unexpected, “given the high level of debt accumulated since the financial crisis”.



In its commentary on Friday, the international agency said Bermuda, which has been in recession for more than five years, has a weak fiscal position.



Although Fitch believes government’s policies have led to “improved business confidence”, the agency says there are risks to the Finance Ministry’s debt-reducing strategy, given its partial reliance on a return to economic growth.



Fitch expects zero growth in the Bermuda economy this year, but a one per cent increase in gross domestic product (GDP) in 2015.



Fitch cut Bermuda’s long-term foreign and local currency issuer default ratings (IDRs) to A+ from AA- and did the same with issue ratings on Bermuda’s senior unsecured bonds to A+ from AA-.



The rating outlook has been revised to stable from negative, based on Fitch’s expectation of a return to economic growth and government’s continuing commitment to reducing the deficit.



Richards noted that the rating remains in the upper medium investment grade, with a stable outlook.

“Fitch has said that our economic data in 2014 suggests that the Bermudian economy could be stabilising and foresees GDP growth to be zero in 2014 followed a by one per cent expansion in 2015,” Richards said.



Richards said government’s strategy was “to implement a Jobs and Economic Turnaround Plan that strikes a balance between responsible growth and disciplined financial management”.



He added: “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.”



Last month, Moody’s, another international agency, cut Bermuda’s rating from Aa3 to A1.



The ruling One Bermuda Alliance inherited a national debt of US$1.4 billion when it took office after defeating the Progressive Labour Party (PLP) in the December 2012 general election. The PLP had run the country for 14 years after ending 30 years of rule by the now defunct United Bermuda Party.



Unemployment in Bermuda is running at around eight per cent.



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