S&P Global reaffirms Fiji’s ‘B+’ rating
29 July, 2017, 12:00 am
ON Thursday the S&P Global affirmed its long-term foreign and local currency sovereign ratings on Fiji at “B+”.
They also affirmed their short-term rating on Fiji at “B” with outlook as being stable and with Fiji’s transfer and convertibility at “B+”.
S&P also gave an overview where they expected Fiji’s economic growth to pick up, after the effects of Severe Tropical Cyclone Winston, while spending initiatives weighed on fiscal performance. Fiji’s falling interest costs, sound external performance, and medium-term economic growth prospects support the ratings.
As a result, they said they were affirming their “B+” long-term and “B” short-term sovereign credit ratings on Fiji.
“The outlook remains stable, reflecting our expectations that policymakers will contain pressures on Fiji’s finances stemming from the cyclone, while safeguarding the country’s external position and reserve levels,” S&P said.
“The rating affirmation on Fiji reflects our view of the country’s weak institutional settings, limited monetary policy flexibility, income levels, and weakening fiscal metrics constrain the Government’s credit-standing.
“Mitigating these weaknesses are the Government’s falling interest costs and its sound external position.”
They further said STC Winston’s effects on the economy and fiscal balance was likely to be temporary, and they expected Fiji’s credit quality to remain stable.
“We forecast real economic growth to rise to 3.8 per cent in 2017 as the economy recovers from Cyclone Winston.
“This will help drive Fiji’s GDP per capita to more than $ US5400 ($F10,884) by the end of 2017 and improve the country’s economic outlook in the medium-term.
“Reconstruction works, Fiji National Provident Fund’s assistance (worth about $F260 million in total), government assistance, and donor and multilateral agency aid will support economic growth and offset the temporary ffect on the agriculture and sugar industries.
“Growth slowed to about 2.0 per cent in fiscal 2016, After STC Winston and capacity constraints during the reconstruction effort.
“We forecast the government’s fiscal position to weaken in 2018 after performing better than expected in 2016.
“The 2017-2018 budget announced several large spending initiatives that will be only partially offset by higher tax receipts, driving Fiji’s deficit to more than six per cent of GDP.
“We forecast public sector reforms, including higher wages; tertiary education spending; and infrastructure spending to increase total expenditure by more than 40 per cent in 2018 from a year earlier,” the S&P report said.