Standard & Poor’s Lowers Outlook On Bermuda

March 28, 2013

[Updated] Ratings agency Standard & Poor’s [S&P] has lowered its outlook on Bermuda from stable to negative and affirmed its ‘AA-/A-1+’ long- and short-term issuer credit ratings [ICR] on the island.

“In our view, Bermuda is experiencing a prolonged economic downturn; deteriorating fiscal performance; and deteriorating loan performance in its banking sector,” S&P said in a statement according to Reuters.

“We estimate that nominal GDP in 2013, although still much higher than that of most sovereigns at more than US$80,000 per capita, will be 15 percent below its 2008 peak, with growing evidence of a more-than-cyclical economic downturn,” the rating agency said.

S&P also said: “We expect Bermuda’s economy to stabilize and begin to modestly grow in 2014-2015, particularly if its major trade and finance partner, the U.S., continues to increase its GDP by 2%-3%, in real terms, as we expect. In addition, the new One Bermuda Alliance government is undertaking a variety of measures aimed at economic revitalization.”

What the new move from ‘stable’ to ‘negative’ means is that if there were a substantial deterioration in either the economic, fiscal, or banking-sectors S&P would likely lower their ratings for Bermuda.

However, were S&P to become convinced that Bermuda could again soon look forward to sustainable real GDP growth, low fiscal deficits as a share of the economy, and banking-system stabilization (other things unchanged), this could lead them to revise the outlook to ‘stable’.

Minister Richards said, “I was pleased to read in the report that Bermuda’s ratings are supported by our ongoing achievements in attracting and retaining foreign financial services companies and the fact that S&P had faith in the Bermudian economy’s ability to stabilize in the next few years.

“It is also pleasing to note that S&P has recognized that the OBA is putting various initiatives in place aimed at economic improvement. This of course includes elements of our Jobs and Economic Turnaround Plan,” said Minister Richards.

Though Bermuda has seen its outlook adjusted, like a number of other jurisdictions, the Government said they “pleased that the underlying fundamentals and strengths of our Bermuda economy have been recognised and that we have not been downgraded.”

In December 2011, S&P lowered its long-term sovereign rating on Bermuda from AA to AA-. Moody’s Investors Service rates the island Aa2 with a stable outlook; Fitch rates Bermuda AA, also with a stable outlook.

Update 7.39pm: The full statement from S&P is below:

Standard & Poor’s Ratings Services today said it revised its outlook on Bermuda to negative from stable and affirmed its ‘AA-/A-1+’ long- and short-term issuer credit ratings on the country.

“The negative outlook reflects our view of the potential of a downgrade over the next two years if the country’s economy fails to show signs of emerging from its contraction since 2009, if the new government’s fiscal consolidation plans prove difficult to implement, or if ongoing bank loan deterioration leads to broader banking system pressure,” said Standard & Poor’s credit analyst Nikola Swann.

The ratings on Bermuda are supported by our view of the country’s ongoing achievements in attracting and retaining foreign financial services companies (largely reinsurance), which underpin high per capita income and, until recently, strong economic growth; its large net external asset position; and the government’s net fiscal asset position, although the latter has declined with growing deficits. Constraining the ratings are Bermuda’s lack of monetary flexibility, and continued gaps in official data, despite some progress.

We estimate that nominal GDP in 2013, although still much higher than that of most sovereigns, at more than US$80,000 per capita, will be 15% below its 2008 peak, with growing evidence of a more-than-cyclical economic downturn.

Nevertheless, we expect Bermuda’s economy to stabilize and begin to modestly grow in 2014-2015, particularly if its major trade and finance partner, the U.S., continues to increase its GDP by 2%-3%, in real terms, as we expect. In addition, the new One Bermuda Alliance government is undertaking a variety of measures aimed at economic revitalization.

Reflecting the weak economy, revenue has also declined in nominal terms, and Bermuda’s deficit has gradually risen. We expect general government debt to rise by almost 7% of GDP this year, with the increase easing to about 4% of GDP in 2014. We expect the government to remain in a net asset position, with large government-run defined-benefit pension fund assets exceeding gross government debt. Still, net general government assets are estimated to be 7% of GDP this year, down from 25% of GDP in 2006.

We observe rising nonperforming loans in the Bermudian banking sector, and 20%-30% declines in residential housing prices. As with most sovereigns, we consider the local banking sector to be a contingent risk to the government.

Because the Bermuda banks have relatively low corporate and securitization exposures, and appear well capitalized, we believe the sector still poses only a modest potential contingent liability to the government.

The outlook on Bermuda is negative. Substantially worse-than-expected economic, fiscal, or banking-sector indicators could cause us to lower our ratings, most likely to ‘A+/A-1′. If we were to come to believe that Bermuda’s GDP will stagnate or continue to decline in real terms beyond 2014, this would constitute one such indicator.

If progress in reducing deficits, and consequent annual increase in government debt, were to deviate substantially from our expected path toward balance, this would constitute another indicator. If banking-system loan deterioration were to lead to substantial deposit outflows, this would be yet another indicator.

On the other hand, were we to become convinced that Bermuda could again soon look forward to sustainable real GDP growth, low fiscal deficits as a share of the economy, and banking-system stabilization (other things unchanged), this could lead us to revise the outlook to stable.

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Comments (37)

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  1. Been Watching says:

    Not unexpected. It’s a gentle downgrade, but still a downgrade. That change from stable to negative is more important.

    This is another warning that we need to get GDP growing which means getting employment up and that translates into getting more high-skill brain workers and more investors coming into Bermuda and working in Bermuda and doing their ‘stuff’ FROM Bermuda.

    That translates into more foreigners coming into Bermuda. Why? Because Bermudians are declining in numbers and not even replacing themselves.

    Jobs IN Bermuda are created by FOREIGNERS who come here and then work FROM here.

    If you don’t accept that, then snap your fingers and conjure up some jobs for the now 4,500 Bermudians [Bob's February report] who need work. Just snap your fingers and see what happens.

    Re-grow IB. That’s the answer. Finger-snapping will do nothing.

    Been Watching.

    • Black Soil says:

      Thank you PLP….ya fak’n idiots….

      • Black Soil says:

        It’s sooooo easy to create a mess…..I guess it takes others to clean da sh!t you made!!!!!! My granny would have preferred to see PLP clean da crap they created…..but the reality is different.

        • James says:

          Let’s see-The US is running a $16 trillion dollar debt—-England running a 1.7 trillion pound debt at close to 9% GDP…Canada at close to a 700 Billion dollar debt, Greece failing ,Cyprus failing, Spain failing, Italy and France all but failing and most of the world in serious financial trouble and you think what happened in Bermuda was unusual–Really?

          • Rick Rock says:

            Oh thanks James. You just proved that the countries who tried borrowing and spending like there’s no tomorrow are the ones in the deepest sh!t.

            The difference is that many of those countries have diversified economies. We don’t.

            They make things they export. We don’t.

            They have been in economic growth for 3-4 years. We haven’t.

            They have been doing all they can to encourage investment and businesses. We have been doing all we can to discourage investment and encourage businesses to move away.

            You also conveniently leave out countries like Canada, Switzerland, that had no recession at all.

            We started with almost no debt. We got into debt by spending money on stupid stuff. None of it needed to happen. If we’d been better managed we could have preserved an enourmous amount of financial flexibility. But instead we pi$$ed it all away, and now we’re out of choices. The only hope we have is a government with the balls to sort the mess out, despite wankers like Bean whining about ridiculous sh!t every couple of weeks.

    • Future says:

      When will these parrots stop running their mouths? Bermudians have no more or no less capacity to create jobs for residents of Bermuda than anyone else. Stop the continuation of this myth that no one even knows who started by now. This superiority of foreigners in job creation capacity…is odd in the face of cries of xenophobia by many of he same ilk. There is no evidence to substantiate these hollow claims, just repetition hoping for traction and undermining Bermudians self image. Job creators at always a minority amongst the population at large.

  2. Argosy says:

    I hope the Colonel, Rolf, the Cog and the Doc are happy….after all, it’s their untiring efforts that got us here!

  3. ... says:

    Great job OBA. Keep it coming

  4. Eastern says:

    Thank you to the former PLP Government; your policies have done this.

    (Did you notice that the PLP paid bloggers don’t get paid past 5pm!!!)

  5. Mad Dawg says:

    So S&P confirms the economic downturn since 2008 is more than cyclical. In other words, our economic problems have not been just like the rest of the world, as the PLP liars would want us to believe. It’s much worse.

    Thanks Cox, Burch, Ewart, Zane. Idiots.

  6. Felix says:

    Thanks green regime!

  7. Yellowfin says:

    A direct result of PLP term limits, Hope they are happy— but they wont be because to this day the PLP cannot fathom just what term limits did !! Here`s a news flash for them,,,,,,, Term limits (kicking out ex-pats) took away Bermudas ability to generate its own cashflow !!!! Not to mention the lack of international business !! The only way forward here is with the OBA !!!

  8. You all above sound like real proffessional idiots and want to take a swipe at the P.L.P anyway you can,when in reality we are experiencing just what may other juristictions are experiencing.

    Our twist is we can see who the money changers are that really help us to head in this direction and I can assure you that they dont look like Dr Brown,Paula Cox, Burch or anyone else in the P.L.P,with the exception of Mr Desilva.

    I would also point out that it is not by suprise that the former Sonesta property would be purchase by the Green family and if Bermuda was in such a bad fix,you think these business people wouold invest so much in the former Waterloo house,Hamilton Princess and now the former Sonesta.

    So yes our former leaders has to take the blame for their part in where they went wrong but it started way before them and the money changers made sure they were going to do their part to help hurt the P.L.P as much as they could,that is why you now see old money resurfacing.

    You dont see them lowering their interest rates or the cost of doing business in Bermuda,so please look at the real picture and see who is hurting this economy in the worst way,Bermuda has a lot to offer but is still hell bent in doing at they do best when you dont play by her rules.

    The biggest damn puppet at this hour is Mr Cannonier.

    • Eastern says:

      @ Duane P.

      Did it ever dawn on you that the Green Family bought the old Sonesta property after the OBA became the new government.

      I have known Craig Cannonier all my life and I can assure you that Craig plays puppet to no man. Your insult aimed at Craig Cannonier cancels out any argument that you put forward as obviously you do not know the man and that is proven by your statement.

      In case you think I am a supporter of the OBA; I am not. But I voted for them in this past election. I would never align myself with any political party (unlike yourself) as political parties change (like the PLP did), but I am pro-Bermuda and any party that is pro-Bermuda at election time I will support. Unlike yourself that will continue to support a party that has caused so many job losses for Bermudians and a party that is “past its due date”! But you will support them to the end of time despite what they have done or not done. Oh, and by the way Duane, your party issued more work permits than any Government in the history of Bermuda, but you do not want to talk about that do you? I am sick and tired of people like you that consistently support a party that carried on just like the UBP. As for your statement “So yes our former leaders has to take the blame for their part in where they went wrong but it started way before them and the money changers made sure they were going to do their part to help hurt the P.L.P”; well they had fourteen long years to reverse that didn’t they, but they didn’t did they? Instead they became like the UBP, but worse; they plunged the island into $1.5 billion in debt and eliminated 4,000 Bermudian jobs. So carry on and support “your” party Duane and leave me, Craig and the OBA out of it.

      • weedy says:

        The bottom-line is that OBA promised they had creative ideas to diversity our economy. I too voted for the OBA, but I now see that they did not have any other way to diversfield our economy. Bermuda leans too much on IB and tourism. Both have changed in terms of how they are able to operate and as a result contribute to our economy. Bermuda can no longer relied upon these two revenue sources as our main income maker. IB will never be as it was back in the day, Tourism is now Global, and folks have many more options. Bermuda has to seek out another form of revenue to diversfield out economy. The OBA are operating under an old model dating back to the 1960s, which will not work in today’s economy. Where are their ideas they brag about pre-election? At least the PLP on the doorstep spoke to ideas that could generate Bermuda’s alternative sources of revenue.

        The OBA lied on the door step in regards to this factor. So in many ways Mr Santucci is correct. The OBA lack creative ideas to move Bermuda’s economy forward. There are those whom will support the OBA regardless of what they do, and so those comments are expected. But a real look at things suggest they indeed promoted themselves as bringing about real change for Bermuda, but in reality have no ideas as to how. At least the PLP did present to me on the doorsteps ways to improve our economy, as well create alternative ways to generate revenue.

        • Rick Rock says:

          Betty, it takes more than 3 months to turn around an economy that has been driven over the cliff for 14 years.

          You, Duane, Bean, Robaine, all know this. But you insist on misleading the public with your petty and ridiculous announcements, complaining that after 100 days debt is still too high and the economy isn’t booming yet. You really are ridiculous.

          • Luis Suarez says:

            Totally agree. Be real, one party caused this mess, and three months in, it’s them we should be castigating. It is absurd to expect hundreds of new jobs when the crater is that big.

            I’m also amazed the current opposition party have the gall to criticicize the OBA on anything. It will take years for me to forgive what they did.

        • Crowned Onion says:

          As one who has been to Bermuda over the years; at least 60 times over 30 years; the changes are amazing and depressing. Starting with no more “welcome” at the airport (started out with a steel band, went to a pan player, then to nothing), the poor treatment I have gotten at the airport (instead of greeting and welcoming a frequent visitor, they have sent me “to the right” nine out of 10 times); I used to close Bermuda, but now fear going out after dark, and there is nowhere to go, anyway. People are now either rude or indifferent. Early on, people were polite, said hello, at least, which I found nowhere else in the world. Although I am a seasoned rider, I am tense on the bikes nowadays; people ride right up my a$$. VERY impatient. I always stay as far to my left as I can so they can pass, but people seem to actually enjoy the intimidation factor. So, instead of my usual twice or three times a year to Bermuda, I have not been for almost a year now. There are other places for me to explore that are less expensive, and as friendly (or unfriendly). I do miss my “old Bermuda” very much, and it wasn’t that long ago. There are things that people can do as individuals to buoy up tourism, from my point of view. Please do your part.

          • Luis Suarez says:


            Amazing how often I hear this. Come on Craig, intervene here.

        • Felix says:

          Weedy, there is very little doubt in anyone’s mind here which way you voted (or not) 17 December. You are incapable of voting OBA. So please cut the crap and at lease be honest, you are one of the green regime! You like the other green regime trolls are here for one purpose, divide and confuse!

          If you were to put as much time into offering valid solutions instead of stirring emotions, Bermuda would be a better place and we may just come out of the mess your regime created sooner and with less discomfort.

    • SNS says:

      Duane – I’m sorry, but you are the only one who sounds like a real professional idiot!

      • Concerned says:

        He is not a profeesional, he paints graves and talks out of both sides of his racial mouth.

    • Mad Dawg says:

      Duane, if you can tear yourself away from your comic books, get an adult to read the S&P report to you. It confirms that Bermuda’s problems are worse, and longer, and more pervasive than in most other economies.

      The PLP want us to believe the economic mess was inevitable, and that the same thing happened everywhere. It didn’t, and they caused the debt and unrmployment here.

  9. Keepin' it Real...4Real! says:

    stop blaming the parties…Blame the a$$wipes that put them in…

    • Concerned says:

      I agree, one live weedy, duane, laverne,and myself twice. never again!

  10. Walken Chugum says:

    Premier Cannonier a puppet? Say it ain’t so! Premier Cannonier is the kind of “strong” “black” “leader” that the UBP-OBA folks love to love. One false move though and watch out. Wonder why he’s gone cold on Eva and Arthur lately? Hmmmmm…..

  11. IB McGinty says:

    hear hear Duane

  12. navin johnson says:

    ironic that Duane would call anyone a puppet……this downgrade goes right to the PLP from the last downgrade due to “GAPS” in information….translation ? missing reports and hidden information….

  13. Chuckling says:

    @Eastern . I’ve watched your fellow OBA imps make libelous claims about people, past and present who have served in the PLP as well as any and all PLP supporters. Am I to believe that all the imps know the aforementioned individuals and supporters to be making these claims? Why haven’t you rushed to their defense.

  14. weedy says:

    Mr Santucci, often writes smart comments and he calls it as he sees it. If you sees the Premier as puppet, I can assume that many others also view him in the same way. One can not dismiss what others are seeing and feeling. So to attack Mr Santucci for calling it as he sees it is wrong, as it gives some merit to his comment.

    As I mention above the OBA have not provided any creative methods to diverfield our economy, that is the biggest problem of all. This is the real issue. OBA promised pre-election they had solutions to move Bermuda forward, and so far they have fallen flat on their faces.

    Keep writing Mr Santucci, at least you call the truth out on both parties.

    • Sandgrownan says:


    • Billy Mays says:

      Weedy, your illiteracy makes it difficult to decipher your meaning, but I gather that you believe that Duane has a point, and I agree with you. His point, however, is on his head. Fools like him (and you, it seems), see the ineffective, divisive plp as faultless in all of this. The fact is that this downgrade is entirely their doing. Not primarily; ENTIRELY. The period covered by the report was during their regime. The dawn of the OBA is too recent to have yet turned around and saved the sinking ship. Be patient; 14 years of destruction takes more than a few months to reverse.

  15. Come Correct says:

    “diverfield”?…. Go back to sleep Betty you’re hung over.

  16. Donna C says:

    The problem Bermuda is having is not unlike any small jurisdiction. We live in a global economy and Bermuda only has two pillars International Business (IB) and Tourism. Both of these industries are service industries and are dependent upon people whereas other juridictions have more than two industries that fuel their economy. If Bermuda where smart years ago they may have researched a fishing industry in the 1970′s when the Japanese were fishing around our waters. This would have bolstered are economy now. Today this new industry would result in an insurmountable capital outlay and is perhaps not feasible now as we have no money. Bermuda in my opinion needs a strategy to reposition themselves. I am not surprised that we ascertained a negative outlook as I expected it. The increase in soverign debt with no ability to grow GDP in the short-term or long-term for that matter results in the negative outlook by S & P.

    What Bermuda needs to do is to review its strategic strategy, review its alliances and attempt to grow its economy by looking at the emerging markets and the GDP of emerging nations who will grow their GDP at a higher rate than the 2.8% anticipated for 2013 for the USA. Countries such as United Emirate State, Saudi Arabia which anticipate a 5.0% growth factor need to be assessed as potential jurisdiction we can garner business from. China which would have an 8.0% growth factor anticipated in 2013 maybe an option to attract new captive insurance companies. Bermuda needs to look objectively at the overall international picture and recognize that although the economic indicators are looking at a US recovery is this really the case or is this recovery temporary. The US stock market is up but for how long? Presently there is a shift in funds from Europe to the US resulting from the potential economic issues in the Euro zone. Thus in my opinion Bermuda would do well to have a stakeholders meeting to ascertain suggestions in were do we go from him.
    Mind you I am not a blogger but just a concerned citizen who believes that Bermuda does have potential to overcome the existing problems are economy now faces.

  17. Felix says:

    For the green regime, chew on these statistics. Bermuda has come a long way from minus numbers (2009) to positive (2013) but still a long way to go. What do you figure caused such a alarming drop in our gdp in 2009? Can anyone say green regime / term limits? Our economy is struggling and actually growing under the OBA.