International credit rating agency Moody’s Investors Service has released its biannual credit rating for the Cayman Islands.
The government retained its high Aa3 grade and ‘stable’ economic outlook reflecting its “very low debt burden and prudent fiscal management”, a Moody’s statement said.
The agency’s rating committee made its evaluation on 5 June and the updated result was released in a report on 8 June – accessible to subscribers on Moody’s website.
The last rating was published in October 2022.
“Strong institutions and a history of macroeconomic policy consensus contributes to high income levels and economic resilience despite the economy’s small size,” the agency said.
“The stable outlook balances Cayman Islands’ susceptibility to shocks, and the concentration of economic activity in tourism and financial services against its high-income levels and prudent policy making.”
‘Significant economic recovery’
Premier Wayne Panton, Minister of Finance and Economic Development, said he was pleased with the rating, which is fourth on Moody’s rating scale containing 21 grades.
In a 15 June press release, he described Cayman’s score as being partly due to ongoing prudence of government fiscal policy along with the strength of the economy.
“But also to the resilience of our people as we continue to rebound from the economic effects of the COVID-19 pandemic,” he said.
“Moody’s made note of the significant economic recovery made in 2022, and this is an achievement that we can all be proud of.”
The premier predicted that the rating will positively affect economic activity within the Cayman Islands as it will reinforce investor confidence.
This will lead to higher levels of investment, increased economic activity and greater opportunities for Caymanians, he said.
The Cayman Islands’ local and foreign currency country ceilings – which determine where credit should be capped – also remain unchanged at Aaa.
The three-notch gap between the two grades reflects a small government footprint in the economy and financial system as well as low political risk, Moody’s said.
Negligible transfer and convertibility risks in a “very open economy” and “important international financial centre” resulted in foreign and local currency ceilings being identical.
‘Significantly wealthier’
The Cayman Islands’ shares its Aa3 rating with countries including Belgium, Czech Republic, Hong Kong, Ireland, Isle of Man, Macau, Qatar, Taiwan, and the United Kingdom.
With a GDP of US$6.8 billion in 2022, Moody’s noted that the Cayman Islands is a fraction of the size of much larger Aa-rated peers, which have a median nominal GDP of US$416 billion.
However, with per capita income of US$87,135 in 2022, the Cayman Islands is “significantly wealthier” than similarly rated peers, Moody’s said.
The Cayman Islands’ debt-to-GDP ratio was 8.9% at the end of 2022, which is a fraction of the 43% of GDP median for similarly rated countries, it added.
This is due to the government’s fiscal policy being anchored in the Framework for Fiscal Responsibility which sets guidelines for debt levels, borrowing and debt service.
“This latest evaluation from Moody’s reflects confidence in our country’s economic, fiscal and institutional strengths,” Panton said.
“However, it also underscores our responsibility to ensure that these accomplishments are maintained for the benefit of this and future generations.
“We must remain committed to keeping our debt burden low and affordable, diversifying and growing our economy, protecting our financial services sector, and mitigating the potential risks posed by climate change and other weather-related disasters.”
Moody’s is the only rating agency that provides sovereign credit ratings to the Cayman Islands. Standard and Poor’s, Fitch and DBRS are other international credit rating agencies.
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