KEY RATING DRIVERS
The economy contracted in 2013 for the fifth consecutive year while total employment shrank further. The government's initiatives to improve business conditions, avoid further job losses and strengthen fiscal accounts have resulted in improved business confidence and positive investment prospects in the tourism sector. Some economic data in 2014 suggest that the Bermudian economy could be stabilizing, although there is still uncertainty about medium-term growth prospects. Fitch foresees GDP growth to be zero in 2014 followed a by 1% expansion in 2015.
The revision of the outlook to Stable reflects Fitch's expectation that economic growth will gain pace and the authorities' commitment to a reduction in the fiscal deficit will be sustained in 2014-2016. A pickup in international business, tourism, retail and real estate activity support the improvement in growth prospects. In addition, the fiscal consolidation strategy, if successfully implemented, could decelerate the rate of public debt accumulation.
The main risk factors that, individually or collectively, could trigger a rating action are:
--Improved employment and investment prospects leading to a sustained faster growth trajectory;
--A successful implementation of the fiscal consolidation strategy that results in decreasing budget deficits and public debt burden;
--Failure to successfully implement a fiscal consolidation strategy that undermines confidence in the ability of the authorities to contain the increase in debt burden;
--No material pick-up in economic growth resulting in further job losses and adversely affecting the trajectory of fiscal accounts;
--Regulatory changes that hurt international companies operating in
The ratings and Outlooks are sensitive to a number of assumptions.
--The growth, fiscal and external forecasts assume that
--Fitch assumes that economic growth in the U.S. will reach 2.8% in 2014 and 3.1% in 2015, providing some support to
--Current account surpluses will provide support to the pegged exchange rate regime in 2014-2016.
Additional information is available on www.fitchratings.com
--'Sovereign Rating Criteria' (
--'Country Ceilings' (
Sovereign Rating Criteria
Source: Fitch Ratings
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