A recent release from RatingsDirect, Standard & Poor’s Web-based credit analysis system, says that new tourism investment – both ongoing and expected to start in 2007 – and the strong performance of the financial sector – boosted by improved legislation, supervision, and regulation – create a solid base for the Bahamian economy and future growth. *”The risk of fiscal relaxation stemming from the government’s sharing the cost of envisaged private-sector-led investments are balanced with the expected positive long-term impact of these projects,”* Credit Analyst Olga Kalinina reports.

Standard & Poor’s has affirmed its **’A-‘** long- and **’A-2’** short-term Sovereign Credit Ratings on The Commonwealth of The Bahamas. The outlook on the long-term ratings remains stable, with indications that this could be changed to “positive”. Specifically, Ms. Kalinina points out that should the government manage to contain fiscal pressures and foreign direct investment remains high, buffering the central bank’s international reserve position from widening current account deficits, *”a positive outlook will be considered.”*

These recent ratings reflect The Bahamas’ macroeconomic stability, prudent fiscal policies, and steady monetary stance, and the analyst further states that the fixed exchange-rate regime in The Bahamas, in effect since 1973, ensures low inflation, while generally prudent fiscal management has led to only moderate accumulation of government debt. This debt is estimated at 24% of GDP on a net basis in 2006, compared to 20% for the ‘A’ median.

*”The stable ratings also reflect the island’s politically stable environment and high standard of living (compared to its peers), as well as the public sector’s low and declining external debt,”* continued Mrs. Kalinina. Constraints on the ratings were ascribed to limited fiscal flexibility, vulnerabilities inherent in the small and open economy, and high external current account deficit, which puts pressure on the country’s external liquidity position.