Maldives island

Moody’s assigns first sovereign credit rating to Maldives

The global credit ratings agency Moody’s has assigned a first-time local and foreign currency issuer rating of B2 with a stable investment outlook to the Maldives.

According to the agency, with its sovereign credit rating, Maldives became the fifth smallest nation by GDP that the agency’s Investor Service rates. Maldives is also one of the smallest of B-rated sovereigns.

The agency ranks the credit-worthiness of borrowers on a scale of Aaa to C, with C representing the lowest quality.

The B2 rating is considered ‘speculative and subject to high credit risk.’

According to a press release issued by the agency, the rating and outlook reflect healthy GDP growth prospects driven by the tourism sector, low institutional strength, low fiscal strength, and moderate susceptibility to event risks, predominantly driven by domestic politics.

“Expansion in the tourism sector has helped drive robust growth rates in the past, and has driven a tripling of per capita incomes since 1999, to close to USD 15,000 in 2015, in purchasing power parity terms,” the agency said.

“Real GDP growth averaged 14.2 per cent between 2006-08, but the shifting composition of tourist arrivals and slowing global demand have resulted in average growth rates moderating to just over 5 per cent between 2010-15. We expect GDP growth in the 3.20-4.5 per cent range over the medium term.”

Moody’s has also assigned a Ba1 ceiling for local-currency bonds and deposits, a Ba3 ceiling for foreign-currency bonds and a B3 ceiling for foreign-currency deposits. According to Moody’s, the short-term FC bond and deposit ceilings is ‘Not Prime’.

According to the agency, triggers for a positive credit rating include a steady reduction in fiscal deficits and the government debt burden; a successful diversification of the economy’s productive base and; a sustained period of political stability that encourages policy continuity and drives structural reform.

Triggers for a negative rating action include a meaningful deterioration in fiscal and debt metrics and worsening debt affordability, a shock to the tourism sector, stemming from geopolitical or natural disaster risks that result in a sharp fall in growth, and an escalation in domestic political tensions that hinder effective policy-making or undermine growth.

Moody’s provides credit ratings, research, tools and analysis that contribute to transparent and integrated financial markets.

Moody’s Corporation is the parent company of Moody’s Investors Service, which provides credit ratings and research covering debt instruments and securities, and Moody’s Analytics, which offers leading-edge software, advisory services and research for credit and economic analysis and financial risk management.