Above: Bermuda

By the Caribbean Journal staff

New York-based Standard & Poor’s has affirmed its AA-/A-1+ rating on Bermuda, the ratings firm announced this week.

The British Overseas Territory’s outlook remains negative, however, it said.

“The ratings on Bermuda are supported by our view of the country’s ongoing achievements in attracting and retaining foreign financial services companies (largely reinsurance), which underpin high per capita income; its large net external asset position; and the government’s net fiscal asset position, although the latter has declined with growing deficits,” Standard & Poor’s said in a statement. “Constraining the ratings are Bermuda’s lack of monetary flexibility and continued gaps in official data, despite some progress.”

S&P estimated that nominal GDP in Bermuda, although “still much higher than that of most sovereign at $80,000 per capita,” would be 15 percent below its 2008 peak.

“Nevertheless, we expect Bermuda’s economy to stabilize and begin to modestly grow in 2014-2015, particularly if its major trade and finance partner, the U.S., continues to increase its GDP by 2%-3%, in real terms, as we expect,” the firm said. “In addition, the new One Bermuda Alliance governing party is undertaking a variety of measures aimed at economic revitalization.”

The firm said that fiscal revenue had declined in nominal terms, reflecting the island’s weak economy, and that Bermuda’s deficit had gradually risen.

The firm said it expected general government debt in Bermuda to rise by less than 2 percent of GDP over the next three years, after jumping by almost 13 percent of GDP last year.

It said the negative outlook reflected its view of the potential for a downgrade over the next two years “if the island’s economy fails to show signs of emerging from its contraction since 2009, if the new government’s fiscal consolidation plans prove difficult to implement, or if ongoing bank loan deterioration leads to further weakness in the broader banking system.”