Moody’s: ‘Fiscal Consolidation Efforts Bear Fruit’

February 26, 2016

Moody’s issued a credit report on Bermuda, Minister of Finance Bob Richards said in the House of Assembly today [Feb 26], with the report noting that the ”Government’s success in reducing the budget deficit reflects its increased efforts to maintain fiscal discipline and a moderate economic rebound that took hold in 2015 following a six year recession.”

Minister Richards said, “As emphasized in the 2016/17 Budget Statement, the Bermuda Government lives off credit, therefore, it is essential that we conduct our financial affairs in such a manner that is acceptable to our lenders.

“The perceptions of the lenders to Bermuda, as a credit risk, are strongly influenced by the analysis and conclusions of the major credit rating agencies: in Bermuda’s case, Standard & Poors and Moody’s.

“On February 8, 2016, Moody’s issued a credit report on Bermuda which reflected mainly on the fiscal performance released by the Government for the first three quarters for is fiscal year 2015/16.

“The headline of the report read as follows: “Bermuda’s Fiscal Consolidation Efforts Bear Fruit, a Credit Positive.”

“Mr. Speaker here is a few of the highlights:

  • 1. “The government’s success in reducing the budget deficit reflects its increased efforts to maintain fiscal discipline and a moderate economic rebound that took hold in 2015 following a six year recession.”
  • 2. “As a result, the deficit should narrow to about $220 million, or 3.8% of GDP in fiscal 2015. The resulting drop in the fiscal deficit may exceed 1.5percentage points, making it the most significant fiscal consolidation for Bermuda in more than 20 years.”
  • 3. “Growth over the next few years will be supported by higher infrastructure investment in the tourism sector, as well as improvements to Bermuda’s only airport ahead of the America’s Cup race in 2017.”
  • 4. “The latest labor statistics also suggest that the international business sector has resumed growth. Sustained growth in that sector in addition to infrastructure investment will likely create new jobs, supporting growth in average wages in the economy and payroll tax receipts for the government.”

“It should be noted that this report was written before the 2016/17 budget was unveiled last Friday.

“Mr. Speaker, it is gratifying to note that important, unbiased, expert analysts have noticed the progress this government has made in repairing the broken government finances and the economy as a whole we inherited from the former administration,” Minister Richards concluded.

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  1. Tired of it all says:

    Well done Minister Richards, and the OBA, for staying the course despite all the hindrances and hatred that have been spewed your way.

    I, for one, am happy that you are making the tough, but necessary, decisions to safeguard Bermuda’s future and haven’t given into populist, short-term thinking/gratification that so many espouse.

    And don’t let the PLP fool you, as they can’t dismiss the basic math and economic constraints we are in. If you think they will be able to spend, spend, spend, like they did in previous years you have been misled.

    Not too sure many understand what would happen with another credit downgrade. Hopefully we never find out and if we do these small austere budgets will be sorely missed when the alternative is implemented.

    Stay the course Min. Richards.

    • Sickofantz says:

      But please don’t build that ridiculous airport.

      • Build a Better Bermuda says:

        And keep the ridiculous one that is falling apart?

    • Alex says:

      David Burt, any comment?

      Moodys not credible enough for you? Paid OBA bloggers are they?

  2. justin says:

    Funny that before the PLP were in power most Bermudian would have never even heard of Moody’s and what they do… let that sink in for a minute.

    • Triangle Drifter says:

      Before the PLP were in power Bermuda’s finances had a long record of generally being in pretty good hands. For the most part we had a balanced budget & a small debt. Tiny by todays debt thanks to the PLP spending spree.

      • Time Shall Tell says:

        Well if you want to bring that up Triangle Drifter then you would also notice the most profitable years EVER in Bermuda’s history, the lowest unemployment, the greatest GDP & the highest population (of which Bermuda still hasn’t dropped to per PLP numbers yet for some reason people saying Bermuda needs ore people, so that must be admitting PLP did it right) was also under PLP. Go ahead, look it up.

        • Bermyman says:

          So if I took my credit card went on a spending spree, maxed it out and some. That would technically make me appear to be successful on the outside, until the bill comes.

        • bandit says:

          Because the inherited a balanced budget and still hadn’t figured out how to screw it up until DEB took over…..

          • Time Shall Tell says:

            Actually, if you bothered to look you would see it was a huge increase so there was major growth. Not a stagnation as would be found of just merely inheriting & holding onto wealth as you’re saying Bandit.

        • Navin Pooty Tang Johnson says:

          Every person hired during the PLP reign of terror works for government and we cannot get rid of them

          • Time Shall Tell says:

            Ah actually the numbers of the population growth was obviously guest workers. Locals would of already been factored into the population numbers Navin Pooty Tang Johnson.

            • Navin Pooty Tang Johnson says:

              the guest workers were leaving thanks to Birch and Brown along with Bermudians on Social Insurance who the PLP helped go to the UK to get on the dole…to make up the slack in unemployment the PLP exploded the Civil Service. What do we have left? fewer guest workers and the money they contribute and a bloated civil service that we have to borrow money to pay….deadly combination……

        • jt says:

          “Most profitable.”

          Net or gross? Budgets had very little relevance.

        • justin says:

          Lol .The PLP inherited a Porsche and turned it into a Toyota in about 10% of the time it took the UBP to set it all up . The PLP are masters at failure!

    • Shernette W says:

      That is a very distasteful and offensive remark and the likes of such would even be distasteful for persons of AlL NATIONALITIES!!! HOW DARE YOU!! From an intelligent and well educated Bermudian!! I have travelled extensively and each time I travel to these countries, Europe, Canada, U.K. Etc there are protests on the policies of these countries I’ve visited protesting myriad issues ranging from economic fiscal policies to that of health policies. Conversely most times these individuals from these respective countries who then come to reside here have the nerve to bad mouth hard working intelligent Bermudians when they speak up! Enough is enough!

      • Family Man says:

        Last I checked Europe wasn’t a country but my education is probably not as well rounded as yours. I can’t afford to travel much either.

      • justin says:

        …and your point is?

  3. OnionX says:

    OMG…so there is evidence out there that the current government is doing the correct things, in spite of all the noise.

    • Unbelievable says:

      This news makes David Burt’s Reply To the Budget kind of moot.

      • As I’ve mentioned on countless occasions the Progressive Labour Party members are “like a dog chasing its tail.”

        • By the way, these are the reasons why my wife and I are relocating, tomorrow…for good! (You can have Bermuda for it’s a huge world out there.)
          I quote: “The P.L.P. leave a billion and a half dollar debt and now complain those elected to sort out their mess, have dared to pay the interest, keep paying the bloated civil service, support those in need to the tune of $50 million, rectify poorly constructed cruise ship piers, continue maintaining Ewart’s vanity projects and conjure up miracles in their spare time. Just no gratitude either.”
          Others will be following if the Progressive Labour Party are voted back into “power” I’ll feel sorry for u’lot :-( Sad yes, but true.

        • Triangle Drifter says:

          Fun to watch but there is no point to it.

  4. Ann says:

    Please someone from the PLP make one of your intelligent comments, its Friday afternoon! I need a laugh. PLP hasn’t been fairing to well this week!!!

    • Mr. JiF says:

      Rating agencies are far from unbiased. (Laughable, probably!)

      A unbiased look into the Airport deal, from a financial perspective, has already been reported and the analysis concluded it is a financial disaster waiting to happen. (Laughable, definitely!)

      • Onion says:

        It was a report specifically commissioned to assist the government and provide guidance on how to be better – which is exactly what it did.

      • Spectator says:

        You are lying and your nose just grew two inches.

    • Bermyman says:

      If you want a few case studies on Financial disasters just google the words, PLP, Bermuda and Capital projects.

  5. Unbelievable says:

    I bet the Progressive Labour Party HATES this news.

  6. Terry says:

    It’s Friday.

    Bermudians are a “Moody” bunch and have been for years.

    TGIM………

    Thank God It’s MOODY………

    Great weekend all.

    (wonder who will crawl out of the “Shadows” to attack this good news. Shadow Minister of Fun)

  7. Navin Pooty Tang Johnson says:

    Well done. Rating agencies determine the interest we pay on our debt. Bravo

  8. True Lies says:

    The problem is that the mindless PLP supporters won’t even read this. They’re too busy making illegible signs about how foreigners took their jobs that they don’t want to show up on time for.

  9. bermy Bud says:

    Just goes to show Min. Richards is the right man for the job despite Burt’s noise!

  10. trisha says:

    One thing the government needs to look up for is elligal workers.

  11. jt says:

    Ouch for the budget reply. Timing is everything.

  12. marcusbmco says:

    “Essential that we conduct our financial affairs in such a manner that is acceptable to our lenders”

    That’s called losing democracy, maintaining the status quo, the banks are running our Government.
    They should be taxed to offset the cost of the damage they do everyday to our citizens…

    • thetruth says:

      Well you should blame the people who sold us to foreign lenders. Paula, Ewart, and Burt.

  13. Lois Frederick says:

    The timing of this Report was perfect. To finally hear Bob Richards finish off the debate around 3:30am and be able to point to the Moodys Report, contrasting their comments with inaccurate statements by Burt, put everything in perspective. Who would you trust more, Moodys or Burt?

  14. Portia says:

    The truth is, Moody’s is wrong.

    Moody’s objective is solely to evaluate a Government’s fiscal performance based on it’s budget and how it handles the deficit. They can only provide a detached, outsider perspective based on Government’s balance sheets – which totally ignores the human elements concerned.

    The truth is, not one single person at Moody’s lives in Bermuda and has to feel the knock on effects of the Government’s policies, and how those policies will impact Bermudians in the coming years. It also ignores the fact that companies are still (quietly) laying off employees here. It’s happening at my company, and I know in others as well. Praising the AC and the airport for (potentially) providing some (short-lived) jobs is like using a band-aid on a hatchet wound, hoping it will heal it.

    The truth is, the increases in taxes, especially the general sales tax, is going to push many struggling people over the edge. It WILL impact businesses too as consumers are forced to cut back or leave the Island all together.

    Moody’s is also totally oblivious to the fact that our social fabric is slowly crumbling, as tensions are at an all time high here. You can feel it when you walk the streets, you can read it in the news.

    Moody’s is happy that Government is reducing the deficit – yet the social cost of the current Government’s policies is creating a negative knock-on effect that is rippling through the Island, causing enmity and hardship that is truly sad to see.

    • OnionX says:

      I see what you getting at, that Moody’s has an unbiased opinion. The Truth is, International Business, seeing our improved credit ratings will use this rating to see if Bermuda would be a good place to invest and in turn, will benefit Bermuda’s economy.

    • And you are Right says:

      Whether we like the news that was delivered by Moody’s or not–the fact is that the fiscal position of this country is moving in the right direction which ultimately will ease the burden so many of us feel at present.

      It may not be politically expedient to ackowlegde this–but the facts are the facts.

      This just proves that a delicate trend of recovery is occuring.

      It is truly amazing how some folks just don’t want our country to move forward. They musn’t have children or grandchildren.

  15. Fred says:

    Let’s be careful of what we read into rating agencies. If you disagree watch the movie The Big Short. It gives you an interesting perspective of these rating agencies. Remember we pay for these services. These are the same rating agencies that got AIG and XL limited into trouble in 2008 as they thought they were acquiring AAA debt when in fact it was junk. The net result being they had to cut jobs as their share price got crushed. In fact our existing Finance Minister made disparaging remarks about these same agencies when he was the Shadow Finance Minister. Yes there are some signs but we are by no means out of the woods. Our recovery is very much following the US recovery. It sputtered along for quite some time with false starts and required three QE programs. So let us all keep it real and stop politicizing. Both sides have a lot to do to right the ship.