By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas is being urged not to let its upgraded credit rating from Standard & Poor’s “go to your head” even as a prominent businessman hailed the move as “a game changer” and signal the economy has “turned the corner”.

Gowon Bowe, Fidelity Bank (Bahamas) chief executive, speaking after Standard & Poor’s (S&P) raised the country’s sovereign credit rating by one notch from ‘B+’ to ‘BB-‘ on the basis of it strengthened economy, told Tribune Business that this was far from the end game but “merely a step towards the achievement we are targeting” – a return to investment grade status with all the rating agencies.

The Bahamas still remains three notches away from escaping so-called ‘junk’ status with S&P, and Mr Bowe said this nation must remain disciplined, “continue those actions” that sparked this upgrade and “accelerate” the improvements if it is to achieve Prime Minister Philip Davis KC’s ambitions of restoring ‘investment grade’ status by 2028-2029.

However, Sir Franklyn  Wilson, the Arawak Homes and Sunshine Holdings chairman, described S&P’s assessment of The Bahamas’ improved creditworthiness as “a game changer” and signal that this nation is “bouncing back” from the $1.335bn fiscal deficit it incurred for 2020-2021 during the COVID-19 pandemic’s peak.

Asserting that he was “not being partisan”, he argued that the then-Minnis administration had expanded the fiscal deficit at “too rapid” a pace even though significant public spending was necessary after the Bahamian economy was forced to shutdown almost overnight by the pandemic.

Sir Franklyn said the S&P upgrade is a sign of improved investor and international capital markets confidence that The Bahamas is emerging from those struggles, and agreed that the country’s enhanced creditworthiness will improve the Government’s access to financing and ability to borrow at lower costs (reduced interest rates) and better terms.

Credit rating upgrades typically give investors greater confidence that countries are managing their fiscal affairs prudently, which can help attract greater levels of foreign direct investment, while lower borrowing costs help ease the debt servicing burden for Bahamian taxpayers.

S&P, explaining what drove The Bahamas’ credit rating upgrade, cited the upward revision to The Bahamas’ gross domestic product (GDP) growth for 2024 by the Bahamas National Statistical Institute (BNSI) to 3.4 percent as well as its strong tourism arrivals performance – especially in the cruise industry.

Providing a further boost by forecasting that Bahamian economic output or GDP growth for 2025 will beat both earlier predictions and its long-run average by coming in at 2.1 percent, S&P said the Government’s energy reforms will be critical to lowering costs for households and companies, improving the ease of doing business and introducing more reliable power supply.

“The Bahamas' GDP grew at a stronger pace of 3.4 percent in 2024, following revised GDP data collection methods from the Bahamas National Statistical Institute, including wider geographic coverage across the Family Islands,” S&P said.

“Further, The Bahamas' tourism sector continued to perform very well, particularly within the cruise segment. Total arrivals in 2024 were 11.2m, compared with 9.6 m the year before and up about 153 percent from 2019. The economy also had support from sustained investments across the Family Islands.

“We expect growth in 2025 will remain above potential at 2.1 percent, accounting for continued buoyancy in tourism despite challenges in key source markets. GDP per capita is estimated at $39,590,” S&P added. “The number of inbound arrivals reached 6.3m in the first half of 2025, compared with 5.7m during the same period in 2024.

“The Bahamas is advancing on its comprehensive energy reforms announced in June 2024, with key partnerships and contracts signed set to support improvements to the country's transmission and distribution infrastructure, as well as diversifying energy sources in favour of solar power and natural gas. These shifts could create important savings and ease the high costs of doing business in the Bahamas over the long-term.”

Mr Bowe told Tribune Business that S&P’s action was “absolutely positive news”. He added: “It’s one of moving us up one notch closer to ‘investment grade’. As with all rating assessments, it’s more important to read through the basis for which they made their decision.

“Ultimately, there’s a significant amount of reliance based on the fiscal projections; maybe not a surplus but a reduction in the fiscal deficit and curtailment of expenditure. If we achieve a surplus that’s a bonus. It isn’t one that we must achieve a surplus, but if we get closer to that in the eight to ten months that will bode well and support the upgrade that has taken place.”

Mr Bowe acknowledged that energy reform is “high on the agenda” for S&P “from the perspective they are looking to see this isn’t lip service; we are going to see the investments you [the Government] are speaking about and see a reduction in energy costs and improved reliability. That’s a high priority”.

The Fidelity Bank (Bahamas) chief added that another key focus for S&P, as well as its fellow rating agencies, Moody’s and Fitch, is whether the Government will hit its much-touted 25 percent revenue-to-GDP target as well as wider tax reforms.

Examining the overall impact from S&P’s rating upgrade, which is the first that The Bahamas has enjoyed for almost two decades, Mr Bowe added: “To me, I say let us not get too high on the highs or too low on the lows.

“This one is certainly a positive move. It puts us in non-investment grade with lower risk, and places us in a positive light.” The Bahamas also appears to be tracking Jamaica, albeit one notch behind, with S&P having also raised its fellow Caribbean nation’s credit rating last week.

Mr Bowe said Jamaica was more advanced than The Bahamas from the standpoint of having already achieved a Budget surplus and lowered its debt-to-GDP ratio to under 60 percent. This nation’s debt-to-GDP ratio remains in the 70-80 percent range.

“The reason why it’s important to get debt-to-GDP down is because it gives us headroom for hurricanes, it gives us headroom to look at capital development and advancement, it gives us some headroom for future borrowing and asset utilization,” Mr Bowe added.

“It’s important to remain disciplined. There shouldn’t be exaggeration of the upgrade. It’s not taking us from non-investment grade to investment grade. There’s still three notches to go to investment grade.

“It means read the tea leaves for the basis of why they’ve given this assessment, so we manage and ensure these things are carried out and executed so that we can look forward to further upgrades in the ensuing years.”

Mr Bowe continued: “In the Bahamian vernacular, the best way to put it is: ‘Don’t let it go your head’. This is not the achievement we want. It’s merely a step to achievement of your target. Don’t get enamoured by a one-notch improvement from non-investment grade to non-investment grade.

“We must continue these positive actions and make sure where possible to accelerate them.”  He added that the information upon which S&P based its decision will be available to all other rating agencies as well as multilateral institutions such as the International Monetary Fund (IMF), which should aid consistency in their assessment of The Bahamas and, potentially, further creditworthiness upgrades.

Sir Franklyn, meanwhile, said of S&P’s actions: “It’s a game changer, it’s a game changer. I have just got back from Washington DC, and what is becoming clearer and clearer to me.. I was speaking to some people and what happened to The Bahamas was, and I’m not being partisan here, but what happened here is that the pace at which the Minnis administration increased the national deficit was the problem.

“It happened too quickly. COVID happened, and we have to understand the effects, but the pace of it was too rapid. It was too rapid. I was speaking to a finance man who knows The Bahamas extremely well, and his point was that confidence is building that we are bouncing back from that; that particular period.

“When Minnis ran the deficit up at the pace he did it was too fast. That was too fast. It was too fast. That was the problem. I think it takes time for people to see that we are over that. That’s what I think international agencies are now gaining confidence in. We are over that,” Sir Franklyn added.

“I think this [the S&P upgrade] is really a comment on the fact we have turned the corner from that rapid pace of escalation under Minnis.”  Tribune Business calculations show that some $2.896bn was added to The Bahamas’ national debt over the three-year period between 2019-2020 and 2021-2022.

The Government incurred annual fiscal deficits ranging from $839m during the first of those three fiscal years to $1.335bn in the second and $722m in the latter. However, all were in response to unexpected events – first, the loss, damage and rebuilding caused by Hurricane Dorian and, second, the COVID-19 pandemic.