Barbados represents a higher risk opportunity

Preliminary results from Euromoney’s country risk survey, due to be released next week, indicate Barbados is one of the more notable movers since March.

Its risk score has fallen by half a point to 39.9, causing the sovereign borrower to slide further down the fourth of five categories of risk to 90th out of 186 countries surveyed in the global rankings, where a lower score represents increased risk.

In total, the risk score has fallen 21 points since 2010.

Barbados is facing a number of economic challenges, says ECR survey contributor Winston Moore, professor of economics at the University of the West Indies (UWI).

“It has one of the highest debt-to-GDP ratios in the world, it recently defaulted on its external debt obligations, the fiscal deficit remains stubbornly high and its stock of international reserves – in months of imports – is below international benchmarks,” he says.

The debt is 175% of GDP, the fiscal deficit is 4% of GDP, payments to external creditors are suspended and a restructuring programme is under way with the assistance of the IMF.

GDP growth contracted on a year-on-year basis in the first quarter.

No wonder its scores for all five macroeconomic risk factors have been downgraded in Euromoney’s survey, including bank stability:

At the elections held on May 24, the Barbados Labour Party led by Mia Mottley achieved a landslide victory, wining all 30 seats in parliament to leave the country without an elected opposition for the first time since independence.

Upon taking office, Mottley – an economist who takes up the roles of prime minister and finance minister – stated the country’s problems were worse than thought. She’s also a lawyer. Her ministers of state in the ministry of finance and the ministry of economic affairs are economists.

This seems to have caused an adjustment effect among those less familiar with these problems, believes Stacia Howard, managing director of Antilles Economics, another of ECR’s survey contributors.