CariCRIS reaffirms ‘adequate creditworthiness’ ratings for St Lucia

• • • CariBBB- Regional Scale Local Currency
    • CariBBB- Regional Scale Foreign Currency

TRINIDAD / ST LUCIA – Caribbean Information and Credit Rating Services Limited (CariCRIS) has reaffirmed the assigned ratings of CariBBB- (Foreign Currency and Local Currency Ratings) on its regional rating scale to the several debt programmes of the Government of Saint Lucia (GOSL). These ratings indicate that the level of creditworthiness of these debt obligations, adjudged in relation to other debt obligations in the Caribbean, is adequate.

CariCRIS has also maintained a stable outlook on the ratings. The stable outlook is premised on our expectation of strong construction activity and a partial recovery in tourism in 2021, and that debt to GDP would not breach the current rating category’s limit.

Furthermore, we expect that debt to GDP would plateau with borrowings for the Hewanorra International Airport’s redevelopment but would thereafter decline as: (i) COVID-19’s negative fiscal impacts begin to taper off, (ii) GDP improvements lead to better fiscal performance and (iii) fiscal consolidation towards achievement of the Eastern Caribbean Currency Union’s (ECCU) debt to GDP target of 60 percent by 2035 is pursued.

The ratings on Saint Lucia continue to reflect: (1) its monetary and exchange rate stability underpinned by membership in a quasi-currency board arrangement, (2) sound financial sector despite COVID-19 challenges, and (3) economic activity is broad-based although dependent on COVID-ravaged tourism; moderate GDP strengthening is expected in coming years.

These rating strengths are tempered by: (1) the worsened fiscal position and significantly increased indebtedness of GOSL brought on by COVID-19, and (2) international reserves are under pressure; however, external debt servicing is expected to be adequate.

Rating sensitivity factors

Factors that could, individually or collectively, lead to an improvement in the ratings and/or outlook include:

• Substantial changes in the debt levels leading to a debt to GDP ratio below 65 percent;
• Achievement of a balanced budget over the medium term
• Sustained GDP growth of the order of 3 percent per annum or more (above pre-COVID- 19 level);

Factors that could, individually or collectively, lead to a lowering of the ratings and/or outlook include:

• Significant changes in the fiscal position leading to a deficit larger than 15 percent of GDP;
• Substantial changes in the debt levels leading to a sustained debt to GDP in excess of 90 percent alongside a decline in debt servicing to 2 times.

About the Sovereign

Saint Lucia, “Helen of the West Indies”, is situated in the Eastern Caribbean, at the northern end of the Windward Island chain. The total area of Saint Lucia is approximately 616 km2 (238 square miles). Total population is estimated at 181,1921, with a plurality of persons living around the capital, Castries. Average life expectancy is 75.7 years. Infant mortality was estimated at 12.7 deaths per 1,000 live births in 2015. The official language is English, but French patois (Kwéyòl) is widely spoken.

Tourism is the mainstay of the economy with the main markets being the United States of America (USA), the United Kingdom (UK), the Caribbean and Canada. Agriculture, specifically bananas, also plays a significant role in the economy. There is a small manufacturing sector which is the most diverse in the Eastern Caribbean. The sector is involved in the production of food & beverage, paper products, the assembly of electronic components and agro-processing.

Related: CariCRIS ratings