“Bermuda’s economy continues on an upward trajectory,” exclaimed Premier and Minister of Finance, David Burt. “Our progress is once again highlighted by Moody’s Investor Service (“Moody’s”) recent affirmation of Bermuda’s A2 issuer and senior unsecured bond ratings, along with their continued confidence in our stable outlook.
“This review along with the Standard and Poor’s (S&P) reaffirming Bermuda’s A+ Credit Rating in May,is another independent validation of this government’s careful and thoughtful fiscal approach anddemonstrates our success in driving economic advancement and development for Bermuda.
“Overall, Moody’s review reflected positively on Bermuda and the fiscal management approach being taken to shape our country’s direction and indicates that Bermuda’s bonds are of good quality with a low credit or default risk. This confirms that there has been no change in rating since the 2020 report.”
The Moody’s report stated that, “The affirmation of Bermuda’s A2 ratings is driven by continued fiscal consolidation that Moody’s expects will support a gradual decline in the government’s debt burden, while debt affordability will remain relatively stable, at levels above those observed in similarly-rated peers. Even though the pandemic had a lingering impact on the tourism sector, GDP growth has recovered strongly and economic activity has been supported by public investment and renewable energy projects.
It was noted that, “The outlook also considers Bermuda’s very strong institutional framework, very high per capita income, and strong external position, which are underlying credit strengths that bolster Bermuda’s capacity to absorb potential future shocks, despite the small size of the economy, limited diversification and the long-term impact of ageing population on potential growth.
The review emphasized Moody’s confidence in the Bermuda Government’s ability to manage its fiscal position and achieve a balanced budget this fiscal year and to start generating surpluses as of FY2025/26. As a result, Moody’s projects Bermuda’s debt burden to decline gradually over the coming years moving to 38% of GDP by 2025. Debt affordability will remain a constraint on the country’s fiscal profile, given a relatively elevated interest-to-revenue ratio of some 11%, compared to a median of less than 4% for A-rated peers. Moody’s expects further improvement in Bermuda’s fiscal metrics as revenue collection strengthens with the implementation of a new corporate tax.
It also stated that, “Economic growth will be driven by infrastructure projects and the construction sector, steady growth in the international business sector and tourism. Moody’s projects GDP growth around 1.5% in 2023-2025, a conservative estimate relative to the post-pandemic recovery, but more in line with the economy’s pre-pandemic growth performance. Government investment in renewable energy projects coupled with the agenda for the Blue Economy adds upside potential to Moody’s medium- to-longer-term growth forecasts.
“The stable outlook reflects Moody’s expectation of gradual decline in debt burden and broadly stable interest burden, balanced against moderating growth performance in line with pre-pandemic trend, which reflects Bermuda’s mature economy and long-term impact of ageing population on growth potential. The outlook also considers Bermuda’s very strong institutional framework, very high per capita income, and strong external position, which are underlying credit strengths that bolster Bermuda’s capacity to absorb potential future shocks.”
Premier Burt concluded, “This government fully recognizes the importance of Bermuda’s credit rating and is committed to taking all necessary steps to maintain it. At the same time, we are dedicated to our social agenda, working to provide relief that eases the financial burden on many individuals and businesses.
“I want to thank the many individuals in the public and private sectors for working with Moody’s and providing valuable information to support their analysis.”
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