S&P downgrades Bermuda
Rating agency Standard & Poor’s (S&P) has downgraded Bermuda’s ratings based on weak economic performance and weak public finances.
The rating agency downgraded Bermuda’s long-term issuer credit and senior unsecured debt ratings to 'A+' from ‘AA-‘. At the same time, S&P lowered its short-term rating on Bermuda to 'A-1' from ‘A-1+’, although the outlook is now stable.
“The downgrade reflects our assessment of Bermuda's continuing weak economic performance, persistent government deficits, and increases in debt burden, which we expect will continue through our forecast horizon,” said S&P.
According to the rating agency, Bermuda’s economy remains in recession with real gross domestic product (GDP) contracting in 2014 for the sixth consecutive year. It added that it expects real GDP growth to remain flat in 2015, but 2016 could be brighter with 1 percent growth.
“The stable outlook reflects our expectation that Bermuda's economy will grow in the next two years, which in turn will trim fiscal deficits and stabilise gross government debt at slightly more than 40 percent of projected GDP,” said the rating agency.
It added that if government measures, including the hosting of America's Cup, place Bermuda back on a higher growth plane that resulted in a steady decline in the government debt burden, the rating agency could consider a positive outlook revision or upgrade.
Commnenting on the move, Stuart Shipperlee, managing director of Litmus Analysis, said: "S&P have previously said that due to the international spread of business the reinsurers have – and the similar spread of investments - they are not directly impacted by the Sovereign. A ‘local’ insurer however would be subject to the sovereign stress test."