Fitch Ratings has affirmed Bermuda's long-term foreign currency Issuer Default Rating (IDR) at 'AA+' and the long-term local currency IDR at 'AAA'. In addition, Fitch has affirmed the short-term IDR at 'F1+' and country ceiling at 'AAA'. The Rating Outlook is Stable.
A high per capita income, low public debt burden, and mature domestic political system support Bermuda's sovereign creditworthiness.
"The ratings also reflect Bermuda's strong offshore international financial center underpinned by a proven track record of effective management of the economy and business environment," said Casey Reckman, Associate Director in Fitch's sovereign group.
Bermuda remains one of the world's most prosperous economies, with the third highest GDP per capita at market exchange rates among Fitch-rated sovereigns. Bermuda's GDP and foreign currency earnings growth continues to be strong relative to other high-income economies. Inflation is consistently in the low single digits and the current account balance has been in surplus since 1991.
Bermuda has successfully developed a dynamic international business sector, particularly with regard to the global (re)insurance industry, attracting major firms with its liberal regulatory and tax environment as well as an accumulation of investment capital and underwriting talent. Maintenance of the island's reputation as a domicile of choice for (re)insurance and financial services companies should provide the basis for sustainable growth going forward.
The government maintains a sound fiscal policy framework, which includes a 10% of GDP policy limit for net general government debt and a sinking fund for repayment of future maturities. Bermuda's 2007 general government debt as a proportion of GDP of 6.1% compares quite favorably to the 'AA' category median of 24.1%, a trend which Fitch projects will persist over the forecast horizon, even with higher social expenditures.
'Complementing Bermuda's strong political institutions, financial system supervision continues to improve and uphold high international regulatory standards', said Reckman. Regulators have responded quickly to strengthen Bermuda's framework for anti-money laundering and combating the financing of terrorism following an IMF assessment published in January 2008.
Limited information about the debt of foreign-owned entities residing in Bermuda remains the key rating constraint, even though these liabilities are highly unlikely to affect Bermuda's public finances or the domestic financial system.
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