Outlook on T&T’s ratings revised from stable to negative

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.”