New York, May 19, 2016 — Moody’s Investors Service, (Moody’s) has today changed the outlook on the Government of St Vincent and the Grenadines’ B3/NP issuer and B3 government bond ratings to stable from negative and affirmed the ratings.
The rating action reflects our expectation that faster growth and lower fiscal deficits will keep St Vincent’s debt metrics consistent with B-rated peers. Real GDP will likely increase closer to 2% this year and next, after averaging only 0.5% per year from 2010 to 2015. We forecast debt will end at 260% of revenues in 2016, similar to the 234% median for ratings peers.
The stable outlook reflects our view that while debt will likely continue to rise in the next two years, the increase will be moderate and debt affordability will continue to be supported by low interest funding from multilateral and bilateral creditors.
The local currency ceiling remains unchanged at Ba3. The foreign currency bond and bank deposit ceilings also remain unchanged at Ba3/NP.St Vincent is poised for a modest recovery, with real GDP forecast to grow 2% on average until 2018.
St Vincent’s B3 rating remains constrained by its small and undiversified economy. The country is highly susceptible to weather-related shocks and it relies heavily on grants and multilateral lending for its funding needs.
Fiscal flexibility is limited as well as overall policy effectiveness reflecting a weak institutional framework and lack of timely and adequate macroeconomic data.