Standard & Poor's Global Ratings (S&P) has released its latest full analysis report on the Commonwealth of The Bahamas in which it recognizes the country’s economic recovery, ongoing fiscal consolidation and diversification in funding sources.

In the report, S&P underscores that “The Bahamas' economic recovery during 2022 was robust, with GDP growth estimated at 14.4%.” This performance was notably driven by a recovering tourism sector, which registered 7.0 million visitors during 2022 and over 5 million in the first half of 2023 compared to 2.1 million in 2021. Looking ahead, S&P expects “the growth momentum to continue through 2023, backed by continued recovery from the pandemic” with a strong pipeline of new tourist arrivals from the US and other foreign investment projects over the coming years.

As mentioned by S&P, “the growing economy continues to support the reduction of the government's fiscal deficits to levels more consistent with those seen pre-pandemic.” Government revenues increased nearly 12% during FY2022/23 and a fiscal deficit of 4.6% of GDP is expected for the same period. Additionally, S&P highlights the government’s tax collection and property tax reassessment efforts as positive levers for fiscal performance over the next few years.

Despite the challenging international economic backdrop, S&P sees a deep domestic financial sector and multilaterals as supporting the external financing outlook: “We think that external financing risks remain elevated for The Bahamas, but a large domestic financial sector and multilateral external funding should mitigate this risk.” The government’s $300 million bond payment due in January 2024 is expected to be sourced through the international bank market, underpinned by multilateral credit enhancements as well as direct multilateral lending. Regarding gross financing needs, S&P noted the viability of the government’s funding strategy for FY2023/24, in which it expects to source more than half of its financing domestically.

Lastly, S&P states, “the stable outlook reflects our view that economic growth will support government revenues and help contain government expenditures, leading to smaller fiscal deficits over the next 12 months.” Gross debt to GDP is expected to continue to decline, reaching 75.4% by end of 2024 from 89.9% in 2020.

S&P’s analysis is broadly in line with the Government’s assessment of macroeconomic conditions which continue to be underpinned by strong tourism gains alongside steady foreign investment inflows.

As this was not a rating action, The Bahamas’ rating remains at B+/stable as assigned by S&P on November 12, 2021.