Cayman retains AAA for now

| 29/06/2009

(CNS): Although the Cayman Islands has maintained its triple A rating with Moodys the assessment was based on the country’s financials at the end of the first quarter of the year and not the revised figures as declared by Financial Secretary earlier this month. Moody’s said that the country’s rebound from Hurricane Ivan in September 2004 demonstrates the jurisdiction’s resilience. The agency acknowledged some public debt due to ambitions capital projects but said the country’s macroeconomic fundamental should remain solid.

The Cayman Islands has the second highest rating in the Caribbean after Bermuda and Moodys said in its report that the high GDP and Cayman’s high governance indicators, policy predictability and sound institutions  as further contributing to the retention of the ratings. Moodys however, noted Caymans vulnerability to hurricanes, limited fiscal flexibility given the narrow revenue base and dependence on exterior sources for growth would prevent an upward movement in the jurisdiction’s rating. The agency warned that negative structural changes in tourism and offshore-financial services coupled with an erosion of public finance could result in future negative ratings and said it would be monitoring the Cayman Islands closely.

Although all credit rating agencies have come in for some considerable criticism for their role in the economic crisis when they offered high ratings to financial institutions that promptly collapsed, they still hold weight on the global stage and given the external problems that Cayman already faces with the onslaught from the OECD and onshore nations, a reduction in rating would not be easily overcome.

Moody’s currently rates  Cayman’s economic and institutional strength as high, government finances as very high and susceptibility to event risk as low. It notes that the new constitution maintains the isalnds’ dependence on UK and said the change of government is not expected to lead to any major political changes and noted that the PMFL helps maintain the country’s financial stability. The analysis was completed however before government announced that the country was no longer compliant with the law , and the agency noted that if debt accumulation did not change it could result in  decrease in ratings.


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