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BARBADOS: MOODY'S ISSUE ANNUAL REPORT ON BARBADOS
[August 27, 2006]

BARBADOS: MOODY'S ISSUE ANNUAL REPORT ON BARBADOS


(InfoProd Via Thomson Dialog NewsEdge) In its annual report on Barbados, Moody's Investors Service says its investment-grade ratings and stable outlook for the country are supported by its relatively high standard of living, political stability, and a distinctive social accord among government, unions and business that sustains the economic policy framework. "Our stable outlook for the country is based on the improvement in Barbados' public accounts since 2001-2002 as a result of a return to more normal spending patterns following the strong fiscal impulse, combined with a strengthened National Insurance Scheme due to pension reforms," said Moody's Senior Vice President Nina Ramondelli, author of the report. Barbados' A1 foreign-currency ceiling for bonds is derived from the government's Baa2 foreign currency bond ratings and our assessment of a very low moratorium risk in case of a government default. "Barbados' external vulnerability indicator has deteriorated since 2001 and it is now higher than the average of similarly rated countries," said Ramondelli. "However, this vulnerability is mitigated by the sizable increase in non-resident deposits related directly to the growth of the country's international business sector. In addition, Moody's also recognizes that the authorities can ask the private sector to repatriate a portion of their assets held abroad -- the so called second-tier reserves." The island's economic recovery began in 2003 and continued through 2005, with real GDP rising by 4.1% -- a rate that is expected to be maintained this year. Tourism and the international business sector have been leading this recovery. But construction has also been important, spurred on by both public and private investment at record levels on for tourism-related and private residential buildings. The combination of rapid demand growth at the same timecoinciding with a more than doubling of world oil prices more than doubled has placed pressure on prices and imports. Inflation reached over 7% in 2005, while the external current account deficit nearly doubled to an average of over 12% of GDP in 2004-05 -- half of which accounted by oil imports. In light of expectations for continued strong economic growth, we expect the government debt burden relative to its revenues and to GDP to decline over time," said Ramondelli. "And even though the external current account deficit is likely to remain at double-digit levels, we think Barbados' external debt burden will continue to be in line with the average for other Baa-rated countries. The rating agency's report, "Barbados: 2006 Credit Analysis," is a yearly update to the markets and is not a rating action.



Copyright 2006 . Infoprod.

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