CaribWorldNews, NEW YORK, NY, Thurs. June 11, 2009: Barbados` credit rating was on Wednesday downgraded from BBB-plus to BBB by Standard & Poor`s Ratings Services.
The outlook on the new rating is stable, as the agency expects the government to tighten its fiscal accounts as of 2010 when the economy is seen stabilizing.
S&P said Wednesday it expects Barbados` economy to contract by 2.5 percent this year, followed by a flat performance in 2010, before gradually recovering to 2.5 percent growth in 2011.
The nation`s fiscal policy is seen resulting in debt rising to 86 percent of gross domestic product.
`Interest payments are expected to rise to 12 percent of revenues this year from 9 percent in 2007 – the highest level among the rating peers,` S&P said.
S&P said it will also closely watch the levels of Barbados`s international reserves `in order to identify any potential stress on its external liquidity position and currency peg.`
`The ratings could come under downward pressure if reserve losses were to come in higher than projected and strain the country`s already weak external liquidity ratios,` S&P said.