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Credit FAQ: What's Behind S&P Global Ratings' Actions On Certain Caribbean And North Atlantic Sovereigns?

S&P Global Ratings recently reviewed its ratings on 10 tourism-dependent sovereigns in the Caribbean and North Atlantic, as the spread of the COVID-19 pandemic, together with the sudden stop in tourism, will cause unprecedented declines in GDP, fiscal balances, and foreign exchange inflows. Although there is a high degree of uncertainty about the rate of spread and the peak of the coronavirus outbreak, our base case for tourism in the region in 2020 assumes a year-over-year decline of 60%-70% from April to December, with the largest declines occurring in the second and third quarters.

Frequently Asked Questions

Why did S&P Global Ratings take various rating actions on sovereigns in the Caribbean and North Atlantic?

The spread of the COVID-19 pandemic has escalated in tourism-dependent sovereigns in the Caribbean and North Atlantic. Many of them have implemented travel restrictions and closed their borders to tourists, and have been severely affected by the spread of the pandemic in visitors' countries. These sovereigns are some of the most tourism-dependent countries in the world, and they rely heavily on international visitors, largely from North America, to contribute to their GDP, fiscal revenues, and foreign exchange inflows (see: "Stress Scenario: The Sovereigns Most Vulnerable To A COVID-19-Related Slowdown In Tourism," published March 17, 2020).

What are the results of the sovereign review?

We reviewed 10 sovereigns based on their geographic location and dependence on tourism in their economies, as well as incorporating the other knock-on effects that COVID-19 is expected to have. We affirmed our ratings on eight of these sovereigns and lowered the ratings on two. We revised the outlook to negative from stable on four sovereigns. We also revised the outlook to stable from positive on one sovereign (see table).

S&P Global Ratings Recent Sovereign Rating Actions
Current foreign currency rating   Previous foreign currency rating


BBB+/Negative/A-2 BBB+/Stable/A-2


BB/Negative/B BB+/Negative/B


B-/Stable/B B-/Stable/B


A+/Stable/A-1 A+/Positive/A-1


CCC/Negative/C B-/Stable/B


BBB/Negative/A-2 BBB/Negative/A-2

Dominican Republic

BB-/Negative/B BB-/Stable/B


B+/Negative/B B+/Stable/B


BBB-/Stable/A-3 BBB-/Stable/A-3

Turks and Caicos

BBB+/Stable/A-2 BBB+/Stable/A-2

We affirmed our ratings on some sovereigns because we believe that their rating strengths are sufficient, within our current assumptions, to counterbalance the negative impact of lower tourism demand resulting from the pandemic, as well as the knock-on effects of the outbreak. Typically, these sovereigns, such as Bermuda, Turks and Caicos, Aruba, and Montserrat, benefit from strong institutional frameworks, often based on ties with, and support from, higher-rated sovereigns. These ratings have historically been supported by these frameworks and our belief that the sovereigns would benefit from such support, if needed. In some cases, such as in Aruba and Curacao, we are seeing this support materialize. Others, such as Barbados and Jamaica, have strong ties to or support from multilateral-lending institutions that should sustain their external liquidity and set the stage for economic recovery.

We have lowered the ratings on or assigned a negative outlook to some sovereigns because of a deterioration or potential deterioration, respectively, in their economic growth prospects, fiscal flexibility, or external position as a result of the pandemic. In certain cases, such as Belize, we believe that the sovereign has less external resources on which to draw in a downturn.

Does S&P Global Ratings expect further downgrades for the sovereigns it reviewed?

Our future rating actions will depend on our evolving assumptions for the spread of the pandemic, the impact on tourism, the timeliness and adequacy of the policy response in each country, and the underlying economic and political resilience of the country. In addition, we will assess individual sovereign ratings in the context of global GDP growth prospects, which S&P Global Economics recently revised downward across all regions.

This report does not constitute a rating action.

Primary Credit Analyst:Julia L Smith, Toronto (1) 416-507-3236;
Secondary Contacts:Paul Judson, CFA, Toronto (1) 416-507-2523;
Roberto H Sifon-arevalo, New York (1) 212-438-7358;
Joydeep Mukherji, New York (1) 212-438-7351;

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