Moody’s Downgrades Bermuda’s Rating To A1

May 19, 2014

[Updated] Moody’s Investors Service has downgraded Bermuda’s rating to A1 from Aa3 and changed the outlook to stable from negative, citing the “ongoing deterioration of Bermuda’s key fiscal metrics” and the “persistent economic recession.”

“One of the key drivers stated as the reason for the downgrade is the persistent economic recession,” explained Finance Minister Bob Richards. “We are pleased, however, that Moody’s has attached a stable outlook to the rating.”

“Moody’s continues to endorse the Island’s institutional strength and Government’s program for prudent fiscal management. Government remains optimistic about future prospects for growth and will manage the economy accordingly.”

The Minister added, “The Government will continue to press ahead with our Jobs and Economic Turnaround Plan that strikes a balance between responsible growth and disciplined financial management.

“As the Minister of Finance, I remain committed to creating an economy that works for everyone and returning our public finances to a sustainable position”.

Update 6.10pm: This is the latest in a series of downgrades - In June 2013 Fitch downgraded Bermuda to AA-, in May 2013 Moody’s downgraded Bermuda to Aa3, in June 2012 Fitch downgraded Bermuda to AA, and in December 2011 Standard & Poor’s downgraded Bermuda to AA-.

Moody’s ratings, highest to lowest, go as follows: Aaa, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, Baa2, Baa3, Ba1, Ba2, Ba3, B1, B2, B3, Caa1, Caa2, Caa3, Ca, C.

The full press release from Moody’s is below:

Moody’s Investors Service has downgraded Bermuda’s rating to A1 from Aa3 and changed the outlook to stable from negative.

The key drivers of the downgrade are the following:

1) The ongoing deterioration of Bermuda’s key fiscal metrics, which although still at moderate levels, are now more aligned with those of its A-rated peers

2) The persistent economic recession, which has been the main factor in the weakening of the government’s balance sheet

Moody’s has also adjusted Bermuda’s long-term foreign currency deposit ceiling to A1. The rating action does not affect the Prime-1 short-term deposit ceiling, or the foreign currency bond ceiling (Aa2, P-1) and long-term local currency country and deposit ceilings (Aa2).


The first key driver for today’s rating action is the significant increase in the sovereign’s debt and interest burdens. Following the issuance of a $750 million global bond in 2013, government debt stands at an estimated 42% in relation to the country’s GDP, up from 28.8% at the end of 2012. The debt increase continued a trend that started in 2006, when the government’s debt was below 5% of GDP. Part of the bond’s proceeds were used to cover the 2013-14 fiscal deficit, and the authorities expect to use the remainder to fully finance the current fiscal year’s shortfall and provide some funding for fiscal year 2015-16.

After adjusting for assets held in the government’s Sinking Fund, net debt stands at 32% of GDP and is 10 percentage points below the gross debt figure, but we expect this ratio to deteriorate as the government draws down assets to finance future deficits. Moody’s expects deficits to reach approximately 4.8% of GDP in 2014-15 and 3.4% in 2015-16.

Given these dynamics, we anticipate that Bermuda’s government debt-to-GDP ratio will continue to be more in line with the median for A-rated sovereigns (46% in 2013) than that of peers in the Aa category (23%). In addition, debt affordability as measured by the ratio of interest payments to revenues for the sovereign weakened to around 12% in 2013 (from just 2% in 2008). This decreased fiscal flexibility also places Bermuda above the median for Aa- and A-rated peers, with only Malaysia (A3 positive) and Mexico (A3 stable) close at 9.7% and 9.1%, respectively.

The second key driver of the rating downgrade is the persistent weakness in economic activity. Moody’s estimates that the economy further contracted by 2% in real terms last year, making 2013 the fifth consecutive year of falling GDP in both real and nominal terms.

Bermuda’s weak growth has led to revenues falling below budgeted amounts in four of the last five fiscal years, making it difficult for authorities to appropriately allocate resources and, consequently, widening the fiscal deficits. Although Moody’s expects real output to return to growth in 2014, the recovery will be fragile because the reforms the government has implemented over the past year to incentivize the international business and tourism sectors (Bermuda’s main drivers of growth) are likely to have a gradual impact over the next five years.

The stable outlook balances potential risks related to the weak state of the economy that could undermine the government’s fiscal consolidation efforts, with the authorities’ commitment to deficit reduction as exemplified by the government’s Medium Term Expenditure Framework (MTEF). The MTEF delineates a clear plan to rein in the fiscal deficit and, if fully implemented, is likely to stabilize the debt-to-GDP and interest payments-to-revenues ratios.


Bermuda’s small size, lack of economic diversification, weak economic performance, and fiscal metrics that are more in line with those of its other A-rated peers, suggest that upward rating momentum is unlikely to develop over the next few years.

Downward pressure on Bermuda’s rating could arise if the economy continued to contract in coming years, further complicating the government’s efforts to reduce fiscal imbalances. Additionally, an increase in debt because of fiscal slippage from the government’s own spending targets, jeopardizing public finance sustainability, would result in a loss of creditworthiness.

GDP per capita (PPP basis, US$): — (also known as Per Capita Income)

Real GDP growth (% change): -2% (2013 Estimate) (also known as GDP Growth)

Inflation Rate (CPI, % change Dec/Dec): 1.9% (2013 Actual)

Gen. Gov. Financial Balance/GDP: -6.1% (2013 Estimate) (also known as Fiscal Balance)

Current Account Balance/GDP: 13.8% (2013 Estimate) (also known as External Balance)

External debt/GDP: 152.9% (2013 Estimate)

Level of economic development: High level of economic resilience

Default history: No default events (on bonds or loans) have been recorded since 1983.

On 16 May 2014, a rating committee was called to discuss the rating of the Bermuda, Government of. The main points raised during the discussion were: The issuer’s economic fundamentals, including its economic strength, have decreased. The issuer’s institutional strength/ framework, have not materially changed. The issuer’s governance and/or management, have increased. The issuer’s fiscal or financial strength, including its debt profile, has materially decreased. The issuer’s susceptibility to event risks has not materially changed.

Update May 20, 6.56am: Shadow Minister of Finance, Mr. E. David Burt said the “downgrade by Moody’s is a vote of no confidence in the OBA’s “Job’s and Economic Turnaround Plan”. Instead of the words such as “Turning the Corner” used by the OBA when talking about the economy; Moody’s used language that all Bermudians know to be true, “ongoing deterioration”. The OBA’s Jobs and Economic plan has turned into an unemployment and economic nightmare for Bermudians. Since the OBA have taken office Bermuda has lost 1,166 jobs and seen 261 companies close their doors.

“Employers are cutting staff, hours, and benefits – meanwhile the cost of living continues to rise making life harder for most Bermudians. Our young people are leaving the island as they see no opportunity at home while work permit policies seem to put the rights of employers and non-bermudians over the rights of Bermudians. Major construction projects are coming to an end with no new projects in the pipeline – meanwhile the OBA is embroiled in division and is paralysed rendering it unable to act.

“We cannot build an economy for the future with ideas from the last century; we must look forward and be bold. This is why we have called for immediate action on online gaming; immediate action on alternative energy investments; immediate action on freeing up local industry from unnecessary regulation, which is stifling the creativity of our entrepreneurs; and the establishment of a Bermuda Fund to attract new job creating industries to our shores. These ideas will assist Bermuda and Bermudians by diversifying the economy, creating new jobs, and increasing government revenue. “

Read More About

Category: All, News, Politics

Comments (39)

Trackback URL | Comments RSS Feed

Articles that link to this one:

  1. Fitch Downgrades Bermuda’s Ratings to ‘A+’ | | May 30, 2014
  1. Terry. says:


    Lobster time. And a rum.

    It’s not raining.

    • Rhonda Neil says:

      Moody’s said it all…. the OBA hasn’t clue…

      • Kangoocar says:

        Kangoocar will say it all!!! Rhonda, you and your plp are the ones that had, and still have no clue to the damage you caused with your time of carnage!!! The damage you guys caused will be felt for a long time to come!!! Instead of displaying your ignorance, you should be apologizing to all those that are suffering because of the fiscal carnage your plp caused!!!!

        • BETTTY TRUMP says:

          This downgrade is NOT GOOD at all. This is a serious problem. The Minister Richards is clearly sleeping. What this rating clearly tells us is that the OBAubp never had a “PLAN” to move Bermuda forward in the first place. If Mr. Richards had a plan it would in the early stages of at least showing at least a growing spout. NOTHING so far.

          The JETGATE AFFAIR has set us back even further, by hurting Bermuda’s ability for a big Hotel development. The OBAubp can not continue to use the BLAME THE PLP CARD as a method to escape from their lack of PLAN or SOLUTIONS for BERMUDA moving forward.

          The OBAubp need to get a PLAN together as fast as possible.

          • Black Soil says:

            Just more PLP fall out. When you fight the flu you always feel worse before getting better. You fail Betty to notice that the outlook Moody’s post is improving. When the ratings go up I look fwd to your drivel.

            • Rhonda Neil says:

              Yes, I was held back in grade 1, now my performance is positive,

          • Silence Do Good says:

            I am tired of kicking this economic horse to get up and go again with naysayer sitting on its neck. I wonder what Bermuda’s rating was before the last government took the economic reins?

            I give up! The current government should move out of the way and let the ones who beat the horse into the ground see if they can get it back on its feet. I bet the first thing they do is throw a BBQ (dead horse) and say we are feeding the masses. When the meat runs out and our economic future is so far gone they will explain why devaluing the dollar is a good thing. For every $1 US look you have $32 BDA. We are all rich.

      • CBA says:

        Ahh but the outlook is now stable, up from negative.

        • Al says:


          This marks a turning point in the rating agency’s outlook.

  2. Rhonda Neil says:

    The Emperor has no clothes…
    How will we continue to allow the Finance Minister to tell us that a downgrade is good, before we call him out on it….

    • Unbelievable says:

      You do realise that the outlook has been changed from negative to stable?

      That’s far better than the descent that the PLP allowed and the OBA had to grapples with when they took over.

    • non politics says:

      when your beloved band of c***** admit you started it and had no idea what you were doing stupid statement and shows you have no idea of what you speak!!

  3. Jetgate says:


  4. SL says:

    Not good Bermuda

  5. Meeeee says:

    “On 16 May 2014, a rating committee was called to discuss the rating of the Bermuda, Government. The main points raised during the discussion were: The issuer’s economic fundamentals, including its economic strength, have decreased. The issuer’s institutional strength/ framework, have not materially changed. The issuer’s governance and/or management, have increased. The issuer’s fiscal or financial strength, including its debt profile, has materially decreased. The issuer’s susceptibility to event risks has not materially changed.”

    In plain language? Bermuda is not out of the doo-doo and it might get into deeper doo-doo.

    The tone and style of the written language of these reports is almost exactly the opposite or inverse of the words spoken by the report writers.

    But their resulting written description remains. Bermuda is not out of its mess and might get in deeper.

  6. Onion says:

    It is mind boggling to me that we’re in such a deep financial crisis but seem to have the money to spend millions of dollars a year (with interest) on things like non-emissions testing and gigantic swimming pools.

    • Kangoocar says:

      Yup!!! You can thank the plp for those things!!! Those are exactly the types of things that is keeping us in the financial cesspit the plp drove us all into!!! The OBA have a massive hill to climb because of the constant incompetent things the plp did!!!!! The money being spent each month NOW, could have gone towards turning our economy around!!! Just wait until we have to start paying for the hospital that was built under the plp who never gave a thought to how it would be paid for????

    • We the People (1st!!) says:

      I agree.

      However, the question has to be asked, where is the vision from our political leaders to get us out of this mess? It is easy to say blame the PLP but that does nothing to move us forward. The PLP was voted out.

      Under this OBA government, what is the plan or vision to get us out of this mess? The SAGE report is not the plan.

      • We the People (1st!!) says:

        To be clear, I agree with Onion.

      • Mike Hind says:

        Why is the SAGE report not the plan?

        • We the People (1st!!) says:

          The SAGE report is not the answer alone as the main focus/purpose of the report is to find ways to reduce Government spending and nothing is wrong that.

          However, simply cutting cost alone will not get us out of this fiscal mess. We need an innovative economic vision or plan that will help us get out of the fiscal challenges facing this island.

          Vision is the key word. Not let’s take a stab at this and see if it works. So far there has been no vision (leadership) from the government on the way forward.

          • Mike Hind says:

            So… the SAGE report is PART of the plan. You agree with that? Yes?

            See, it seemed as though you were dismissing it altogether in your post up there.

            If you agree that it IS, in fact, part of a plan, then cool.

            What I don’t get is how you can say that there has been no leadership… and yet, they’ve got part of a plan.

            • We the people!! (1st) says:

              There has to be visionary leadership to significantly increase government revenue to help get us out of this fiscal mess. Increase in revenue is what is needed most.

              This is an example of visionary leadership.

              In the late 1970 comprehensive legislation and oversight procedures was put in place to make Bermuda the first country to formalize the captive industry. As a result we have the benefits of international business community today. The Cayman Islands quickly copied Bermuda. That is an example of vision leadership.

              I’m sorry but deciding to cut government spending is not the vision going forward. It will only temporality relieve us of the fiscal burden we are in. We need a bold, new, innovate idea (vision) to help us to get out of this mess. In these economic times all governments have cut spending, the US government have cut spending, the UK government, and in many other European countries their governments have cut spending, where is the leadership in that. Many people in their own lives have had to cut spending, that is not visionary leadership, it is necessary for survival. In other words, as the finance minister put it, “we can’t maintain the Status Quo.”

              There have been talks about deep offshore mining, not that I agree with it because I don’t know much about it but that is an example of innovate, bold, leadership thinking.

              Without a vision going forward, people will continue to be distracted, discouraged and disengaged.

              I don’t know how you define visionary leadership, but to my mind the SAGE report is not it. All the report is – it’s the Tylenol to relieve some of the pain, not the plan to fix the broken bone (fiscal system) in multiple places.

    • Sandy Bottom says:

      Courtesy of the party that told us “more debt is a good thing”. Yeah, well let’s hope so. We’re stuck with it now for decades.

  7. nuffin but the truth says:

    the blame lays only with the plp friends and family plans during the 14 years that Bermudians allowed them to do as they liked.

    • Ian says:

      Its funny how you people carry on with your “14 years of terror” mantra as if Bermuda didn’t experience its most accelerated growth within that time frame. The amnesia is shocking. And then you pretend you didn’t notice how, I don’t know… maybe by coincidence perhaps, that the rest of pretty much the ENTIRE WESTERN WORLD found itself in deep doo doo post-2oo8 with record debt levels and financial collapse. Maybe it was the PLP that made that happen… Spend some time learning the history of our beloved western banking system and see if you can start putting two and two together…

  8. Ian says:

    Its funny how you idiots blame the PLP and OBA for this stuff. Read a book or two and get a clue on how global recessions work and how susceptible Bermuda is to longterm negative impact. WE HAVE NO DIVERSITY UNDERLYING OUR PRODUCTIVITY/GROWTH RETARDS! Are you really dumb enough to think it was strictly PLP fiscal mismanagement, temporary payroll tax hikes, and a few soundbites from Colonel Burch that done us in and scared away 5ooo fragile, oversensitive, “I feel sooooo unwelcome” expats/companies? Keep living in denial. And to the other idiots that think the OBA and our small time local politics have the influence it takes to shape GLOBAL financial dynamics [outside of a single industry] over night, then keep dreaming. The OBA can sell Bermuda, Bermuda status and preach trickle down economics all they want. It won’t do a darn thing in the absence of creative solutions for deleveraging ourselves off of [re]insurance as our single source of real productivity.

  9. Campervan says:

    Those civil service pensions are starting to look less of a guarantee, especiallly now there are 6000 less worker bees on the rock. The remaining shrinking populace is on the hook the bills . Lets not scare anyone else away people.

  10. shutthemdown says:

    the ubp/oba is going to fail bigtime

    • Born Bermudian says:

      Whose held accountable? To many incompetent uneducated overpaid puppets have been given keys and a badge on this island

  11. Moodys’got mood swings again,the glass is half full…was empty about a year and a half ago….michael ….break out the sea and ski it’s gonna summer soon…I’m sorry Craig stepped down stay thirsty my friend.On ward and upward….Remember this one small very important thing Craig….you brought money in the house…plp took all the money out the house….in the house….out the house…..hell dats a no brainah…

  12. Coffee says:

    This underground double dealing by the OBA ex premier will not bode well in any ratings agencies next appraisal . However when it materialises feel free to blame the PLP if it makes you feel better .

  13. Raymond Ray says:

    There’s an ole sayin’ “one must go through hell in order to enter into heaven” Bermuda has been through hell.
    Moody’s Investors Services has stated we are now “stable”. In other words, we’re no-longer digging any deeper in that hole instead we’re possibly on the road to recovery… Now only time will / can tell.

  14. Garcia Lorca says:

    To Bring Bermuda Back

    1) High stakes casinos with plush red carpet, champagne, a mono-rail, legalized cannabis, lilies and flowers growing everywhere;

    2) Strict laws on desecrating the environment in any way with harsh penalties for disobedience;

    3) Family planning laws starting with marriage and based on security.

    4) Public flogging

  15. Unbelievable says:

    I just heard David Burt sound just like Bob Richards prior to the election.