Cooper: Downgrade driven by lack of credible recovery plan

Shadow Finance Minister and Deputy Leader of the Progressive Liberal Party (PLP) Chester Cooper said in a statement yesterday that in the wake of the country’s credit rating downgrade by Standard and Poor’s (S&P) on Thursday, there needs to be an “absolute focus” on the country’s economic growth, adding that the Economic Recovery Committee’s (ERC) recently released summary report came up short of ideas to spur that growth.

Cooper added that S&P’s statement outlining its reasons for the downgrade seems to also suggest the agency found the ERC report lacking.

“The negative outlook cited by S&P appears driven by the absence of a credible recovery plan,” said Cooper.

“Unfortunately, the Economic Recovery Committee’s summary report was a disappointment after waiting eight months for its delivery. It clearly did not convince S&P that it is a viable road map for the short and medium-term recovery of our economy.”

According to Cooper, it is apparent from S&P’s report and the response of Deputy Prime Minister Peter Turnquest to the report that no clear, viable plan has been presented.

“We must all wake up each day thinking of ways to grow the economy, focusing not only on tourism,” he noted.

In response to the S&P downgrade, Turnquest said in a statement on Thursday that the government is committed to public finance reform in the midst of the economic fallout from COVID-19.

“We have accelerated our legislative reforms to strengthen the country’s fiscal framework and we are following through on structural reforms in the coming months to significantly strengthen accountability and transparency in fiscal and procurement matters,” said Turnquest.

“We cannot forget that the Bahamian economy is experiencing unprecedented shocks from two catastrophic external events. Nevertheless, we remain confident in the economy’s ability to rebound and our commitment to restoring fiscal balance over time.” 

Last week Thursday, global credit rating agency S&P downgraded The Bahamas from BB to BB- and maintained its negative outlook on the country.

Moody’s, another global credit rating agency, downgraded The Bahamas in June.

The country’s credit rating lies within junk status, owning in part to both the effects on the economy following Hurricane Dorian and now the damaging effects of the global COVID-19 pandemic.

And while S&P’s report was a damning assessment of the country’s current state of affairs, it holds to account successive governments that have failed to implement meaningful fiscal reforms that would have countered economic shocks like Dorian and COVID-19.

Cooper contended in his statement that though every country has been impacted by COVID-19, especially tourism-dependent nations like The Bahamas, he believes the government “inflicted unnecessary self-harm on the economy through haphazard, half-baked policies that have made the situation worse”.

Cooper added that the country was in an economic free-fall before the COVID-19 pandemic shut down the main revenue earner.

“The fundamentals suggest that we were heading in this direction even in the pre-pandemic environment,” he said.

“S&P says it is worse than anticipated than when they made their assessment in April. If they are basing it on a 21 percent GDP decline on tourism figures up to July, I shudder to think what the assessment would be when we look at tourism figures from July through the end of November, when the government effectively closed our stopover tourism market.”

Cooper also called the government’s response to Hurricane Dorian recovery “anemic”.

S&P and the government have suggested that borrowing in the upcoming fiscal year will be about $800 million, after the government borrowed an historic $1.3 billion this fiscal year.

Cooper said this recent downgrade will continue to weaken the government’s ability to borrow more money at reasonable interest rates for the 2021/2022 budget.

Cooper called for out-of-the-box thinking to grow the country’s economy, explaining that tax hikes and civil service cuts will only cause more pain and economic contraction.

“Since 2017, I have become a scratched record calling for focus on economic growth. I renew this call today,” said Cooper. “We renew our call for the Fiscal Responsibility Council’s report that would examine government reports and reasonableness of projections.

“While we do not need S&P to tell us that we are in deep economic trouble, it sadly lays bare the dire straits we are in, the damaging government response to the pandemic and the lack of a clear strategy to guide us moving forward. The Progressive Liberal Party remains available to assist.”

The post Cooper: Downgrade driven by lack of credible recovery plan appeared first on The Nassau Guardian.

source https://thenassauguardian.com/cooper-downgrade-driven-by-lack-of-credible-recovery-plan/