Report card on Bermuda economy
A graded report card on the Bermuda economy has said the island appeared likely to continue to post accelerated growth compared with the pre-Covid level.
But it noted that the Government’s net external asset position had tipped to negative territory, at about -5 per cent of gross domestic product.
The KBRA Sovereigns Surveillance Report on the island, however, believes that revenues from corporate income tax should improve that to surplus.
“Fiscal restraint is integral to the policy environment and even if the tax produces a windfall, it [the Government] is expected to use it judiciously,” KBRA said.
In affirming Bermuda’s long-term and short-term issuer ratings, the rating agency said: “Bermuda’s tepid recovery from the global financial crisis, reflected in part a substantially reduced “expat” labour force.
“Skill shortages exist. Immigration restrictions have eased but supply side bottlenecks persist. About 10 per cent of employment is in tourism, the largest employer for Bermudians, and the island’s largest hotel is still closed.
“A strong IBS sector, improving capacity in hospitality, residential investment, immigration reform, sandbox initiatives, and a payroll tax reform have assisted recent performance.
“Total employment lags 2019, although it is recovering.”
The report points out: “Bermuda has a reduced external vulnerability due to large current account and international investment surpluses, and sizeable net external assets particularly in the financial sector.
“Lack of independent monetary policy and reliance on external funding are a vulnerability.
“Bermuda has no refinancing needs until 2027, and the fixed-rate, long-term profile of government debt moderate risks.
“High capital levels at banks and strong supervision reduce risks.”
KBRA reported a stable outlook that reflected the island’s strides in fiscal consolidation and said the agency expected Bermuda’s status as a financial hub would remain intact.
The ratings are based on KBRA’s Sovereigns Rating Methodology and also utilise the ESG Global Rating Methodology.
KBRA said Bermuda’s new corporate income tax could prompt considerable increased fiscal flexibility, although risks continued to exist.
The report said: “Bermuda’s innovativeness positions it as a hub in emerging financial industries and it is increasingly diversifying its international business services sector.”
Foreign Currency LT A+
Local Currency LT A+
Foreign Currency ST K1+
Local Currency ST K1+
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