THA Secretary of Finance and Economics Joel Jack said the downgrade in the performance of the Tobago House of Assembly (THA) by Moody’s Investors Service reflects the strong operational, financial and institutional links between the ‘Assembly and the central government, and is not due to any fiscal indiscipline or increased debt on its part.
On Monday, Moody’s downgraded the THA issuer’s rating from Ba2 to Ba1, but changed its outlook from negative to stable. It follows Moody’s rating of November 17 in which the agency downgraded the government bond rating from TT to Ba2 from Ba1 and also changed its outlook from negative to stable.
“Moody’s, in its assessment, assumed that given the close ties between the THA and the central government, it is difficult for the THA to avoid any fiscal pressure felt by the sovereign,” Jack told Newsday in a response. by email to the report. .
âThe tendency is therefore not to give a higher score than that of the sovereign. The degradation of HAT is therefore only due to the degradation of the central government and not to a deterioration of the economic situation of HAT and Tobago.
Despite the downgrade, Jack observed that the THA had a higher rating than several other Caribbean islands. For example, he noted that the Dominican Republic in March received a rating of Ba3 while Barbados received a rating of Caa1 in July.
Jack also observed that the Bahamas received a Ba3 rating in September while St Vincent received a B3 rating since February 2020. Belize received a Caa3 rating last year.
He said: âWhat is evident is that none of these countries have a higher rating than HAT. Additionally, the THA’s current ratings do not fall under the junk bond category, meaning that there is a relatively low risk that the THA will default on any of its debt payment obligations.
Jack noted that Moody’s downgrade of Trinidad and Tobago’s credit rating was largely due to rising national debt levels, the maturing production profile of its hydrocarbons sector and the gloomy outlook for the country. non-hydrocarbon sector.
This contrasts with the very positive outlook for the domestic economy expressed by the IMF in its recent Article IV consultation report for 2021, he added.
Jack said the International Monetary Fund (IMF) in a recent statement forecast a strong economic recovery for 2022.
“In fact, the IMF has indicated that real GDP growth in 2022 is projected at 5.7%, bolstered by continued political support and the expected recovery in oil and gas production.”
He said the IMF was also forecasting headline inflation of 2.4 percent.
The IMF, noted Jack, also said the country’s current account surplus “will remain high over the medium term, supported by the recovery in energy exports and that foreign exchange reserves will be around seven months of imports. “.
Jack said that in light of the IMF’s positive outlook for the domestic economy, the country’s downgrade by Moody’s right now “seems somewhat confusing.”