Fitch: Economic Impact Of Election Results

December 18, 2012

The clear victory by the One Bermuda Alliance in Monday’s general election “may signal a change in economic and fiscal policies for the island,” a statement from Fitch Ratings said.

In an analysis of the election results released today [Dec. 18], the international financial ratings agency said the new Bermuda government faces a pressing need to address high unemployment, a continuing recession, large fiscal deficits, and mounting public debt levels.

Led by newly sworn-in Premier Craig Cannonier [pictured], the OBA prevailed in the elections with a 52 per cent popular vote majority, and now will control 19 of the 36 seats in the House of Assembly.

The party’s win  ousted the Progressive Labor Party from power for the first time in 14 years, “opening the door for a reassessment of Bermuda’s economic policies,” Fitch said.

“OBA’s platform focuses on economic growth and job creation,” said Fitch analysts. “The new government will face a significant challenge in paving the way for a resumption of growth after three years in which the economy contracted as a result of both cyclical and structural factors. Bermuda suffers from a lack of economic diversification, weak growth prospects, and limited policy flexibility.

“Key mature sectors, including tourism, financial and reinsurance services face increasing competition from other countries and are exposed to swings in global economic conditions. After contracting by 2.8 per cent in 2011, Fitch expects Bermuda’s Gross Domestic Product to shrink again in 2012 and to remain essentially flat in 2013.

“The preservation of jobs in the international business sector, mainly reinsurance, will be key for the Bermudian economy in the coming years. Activity in the sector has continued to fall for four consecutive years — down 8.3 per cent in 2011 — as a result of low investment returns, high catastrophe claims, weak performance in business lines, and competition from other jurisdictions. Headcount is likely to fall again in 2013, though at a slower rate.”

Fitch analysts said the “new administration wants to attract foreign investment, both for new hotels and for the development of waterfronts in Hamilton and St. George’s. But revival of the tourist sector and new investments in hotels will depend on progress in lowering labour and other infrastructure costs in Bermuda. At the same time, the incoming government has announced initiatives to support local business owners and entrepreneurs.”

“OBA’s platform includes a tight control on public spending and a reduction in public debt,” said the analysts. “The new governing party has identified several sources of potential public spending cuts to reduce public deficits, including a possible government headcount freeze, the elimination of consulting contracts, a 10% pay cut for government ministers, and closer monitoring of all public expenditures. No planned reductions in social services spending have been included in the OBA platform.

“As we noted in June, when Bermuda’s long-term Issuer Default Rating was downgraded to ‘AA’, we will remain focused on the government’s commitment to a credible fiscal consolidation plan and steps to restore economic growth in assessing the sovereign’s credit profile.

“A failure of the new government to deliver on either of these priorities could lead to further negative rating actions. Alternatively, resumption of economic growth and concrete signs of fiscal consolidation and debt stabilisation would sustain Bermuda’s ratings.”

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Comments (16)

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  1. HeyBye says:

    I wonder if the contents of "The Books" will be ever revealed to Bermuda and to where the money squandering trail leads?

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    • The Truthsayer says:

      You can't hear the shredders humming on Court Street from your office?!

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  2. Concerned says:

    Come back Accountant General - Bermuda needs you and Mrs. Matthews - you are free to do as you know you should and can do and yes, Stand Strong for BERMUDA!

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    • Verbal Kint says:

      The great mystery now is what all that was about. Where is the Accountant General and why was she put on leave?

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  3. Blackness says:

    MAYBE THE ACCOUNTANT GENERAL DON'T WANT TO COME BACK TO ALL THE MESS, HOW BOUT THAT, I WANTED WANT TO IF I WAS HER.SHE CAN GET A JOB ANYWHERE SHE'S A VERY BRILLANT WOMAN.

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  4. 32n64w says:

    "the new Bermuda government faces a pressing need to address high unemployment, a continuing recession, large fiscal deficits, and mounting public debt levels."

    But, but, but the PLP said our growing deficits & debt represented an investment thereby providing societal returns.

    Let's go OBA ... turn this ship around and let a rising tide elevate all of us.

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    • Just Us says:

      How the hell is the tide gonna rise if there' a recession? And even if the OBA does get to turn the ship around, it has to go back up stream or battle the course of the recession, which means it has to burn more fuel trying to get back to its original destination...

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  5. swing voter says:

    debt is good they said....BS
    we invested in infrastructure they said....BS
    we invested in our people they said....BS
    our debt to asset reasonable is reasonable .....BS
    Bermuda's economy reflects the global economy...BS
    Arab and Chinese money is comming soon...BS
    Hotels will be built soon....BS
    Education results are sucessful....BS
    We're seriously looking a a oil docks cruise ship terminal....BS

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  6. Bdabdabdabda says:

    A good first step would be to remove the appointment of the AG from the political process and put the power back with the Governor. It's not a matter of self determination, its a matter of checks and balances (literally!!!).

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  7. Triangle Drifter says:

    The PLP needs to be quiet for a very long time. Adults have work to do inside the house. The PLP needs to stay outside & play in the sandbox.

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    • swing voter says:

      LOL more like go and play in the middle of front street during rush hour!

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  8. Oh this is Funny says:

    Clear Victory.... LMAO. 19-17 and 15 votes. Gimme a Break!

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    • swing voter says:

      @ Funny, the question you should ask yourself is, why did 5000-7000 PLP 'supporters' not show up on the 17th? Also why did you retain 3 strongholds by only a few votes (Scott, Burt and Brown)? PLP were lucky not to have lost more seats Take a page out of Cox's book and learn to loose gracefully ;-)

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    • BDAHermit says:

      14 votes and it would have been 21-15... Oh wait you seem to leave that out.

      Also the lowest popular vote a party got since the 1998 UBP Titanic sinking.

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    • BDAHermit says:

      Plus, you PLPers were always SURE of a victory. "GUARANTEED 22 PLP SEATS" lol

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  9. Umjussayin says:

    The remarks here are REALLY sad. The OBA has won the government, CONGRATULATIONS! The One Bermuda Alliance, according to Premier Cannonier is an ALL inclusive party yet the OBA supporters are still spreading messages of hatred. Don't make your Premier out to be a liar lets live in the fairytale that your government is one for ALL of our people, whites, blacks and ALL the little surrogates.

    Yesterday, the owner of [edited as we aren't sure if this is rumour or fact, will check into it later today] was heard to say words to the effect I'M GLAD THOSE N%^$RS ARE OUT OF THE HOUSE! When questioned, he played off his statement as a joke. I'm no black surrogate and I've NEVER been anyone's n%$%$r. The proverbial $#!t has started as there is a certain section of the community that now feels that old Bermuda is back and comments like those written are AGAIN acceptable. I can tell you that I will NOT being accepting anything of the sort. I refuse to go backward. To those who look like me and sound like me, if you want to accept that kind of behaviour you are more than free to do so, but not me. If the party that I support were to endorse that behaviour I would disassociate myself immediately. (I'm calling for a ------ boycott)

    Now to the topic above, is it only me that finds it laughable that FITCH, Fitch can say, 'the OBA’s platform focuses on economic growth and job creation' when the majority of the Bermuda public haven't even seen an OBA platform, WOW!

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