Caribbean Information and Credit Rating Services Ltd (Caricris) has revised it outlook on T&T’s ratings from stable to negative.
“Our decision to revise the outlook on the ratings to negative from stable is based on the uncertainty of a return to sufficient economic growth in 2021 and over the medium-term,” a release from Caricris stated.
“The COVID-19 pandemic brought a sudden stop to domestic activity in Q1 2020 and necessitated an increase in government spending and borrowings,” it stated.
The pandemic also in part caused a collapse in energy prices.
“Downside risks to economic recovery in 201 and a reversal of COVID-19’s other macroenonomic impacts over the medium-term include: a prolonged ‘L’ shaped global recovery with negative implications for energy prices, weakness in demand from regional markets and a second-wave of virus transmission,” it stated.
Caricris reaffirmed its ratings of CariAA+ (foreign and local currency ratings) on its regional rating scale for the US$500 million debt issue (notional) of the Government of the Republic of T&T.
“These ratings indicate that the level of creditworthiness of this notional obligation, adjusted in relation to other obligations in the Caribbean, is high,” it stated.
The release said the factors supporting the reaffirmation of the ratings include that T&T continues to be one of the largest and most diversified economies in the Caribbean which provides a level of resilience in economic performance during difficult times.
Caricris stated that “the financial system continues to be well-regulated with relatively stable monetary conditions and exchange rate performance and that T&T retains comfortable debt service coverage when compared to its Caribbean peers, despite some deterioration.”
“These rating strengths are tempered by the following factors:
(1) balance of payments deficits continue due to softer commodity prices in recent years
(2) a significant fiscal deficit is projected for FY 2019/20, despite good fiscal restraint shown over the past three years,
(3) social instability persists, worsened by rising unemployment and heightened crime levels, and
(4) the continued lack of reliable macroeconomic data hampers efforts to strengthen the economy and improve revenue collection.”