Bangkok--8 Aug--Standard & Poor's
Standard & Poor's Ratings Services said today that it has raised its foreign currency long-term sovereign credit rating on Fiji to 'B' from 'B-'. The outlook on the foreign currency rating is revised to stable from positive. Correspondingly, we raised the Transfer & Convertibility assessment to 'B' from 'B-'. At the same time, we affirmed our 'B' local currency long-term rating and raised the 'C' local and foreign currency short-term ratings to 'B'.
We raised the foreign currency rating on Fiji following continued improvements to the country's external position and following the implementation of Standard & Poor's revised methodology and assumptions for sovereign ratings (see "Sovereign Credit Criteria", June 30, 2011). In accordance with these criteria, the local currency rating on Fiji is equated with the foreign currency rating, based on Fiji's use of fixed pegging against a basket of currencies and the shallowness of its local currency capital markets.
Fiji's sizeable current account deficits, reflecting large merchandise trade deficits, have improved in recent years. At the same time, the ratings on Fiji reflect the country's persistent fiscal and current account deficits. They also encapsulate Fiji's growth prospects, which have been reduced by past political instability, low productivity in the sugar sector, and flood damage to both crops and infrastructure. After contracting for three of the past four years, we project Fiji's economy to grow 1.3% in real terms in 2011 thanks to a rebounding tourism sector and some fillip from government spending.
The stable outlook reflects Standard & Poor's expectation that Fiji's external position will continue to improve, including in the level of foreign exchange reserves, supported by a continuing recovery in the tourism sector.
"We may raise the ratings if there are improvements in one of several areas, including strengthening Fiji's political institutions, improving donor relations, enhancing growth prospects through labor or market reforms, bettering the external indicators, or placing the government's debt trajectory on a steady downward slope," said credit analyst Kyran Curry. "On the other hand, Fiji's ratings could be lowered if political pressures intensify or if public finances and external imbalances worsen, leading to sharply lower reserves."
Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
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Media Contact:
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Analyst Contact:
Kyran Curry, Melbourne (61) 3-9631-2082