S&P revise Fiji's rating outlook in view of elections

Transcript

International credit ratings agency Standard and Poor's says Fiji's upcoming elections has played a central role in the agency revising the country's rating outlook from stable to positive.

Ratings range from triple A to B minus and Fiji currently has a B rating.

Standard and Poor's Credit analyst, Craig Michaels, says Fiji's transition to democratic rule, if successful, and continued economic reforms should support sound growth.

Amelia Langford asked Mr Michaels what impact a rating upgrade could have on Fiji.

CRAIG MICHAELS: Well it means we think there's around a 1-in-3 chance it'll raise the ratings on Fiji over the next 12 months or so. They're currently at a B rating but if we do upgrade them at some stage that will put them to B+.

AMELIA LANGFORD: What has prompted Standard and Poor to do this?

CM: It's really that we've reassessed our view on the strength of the economy. We had thought that the economy  had remained quite anemic over the last few years. Now we think growth has been better than what we thought before, largely because of the revisions to the economy growth numbers by the local authorities. We also see evidence that that growth momentum has been sustained in the last 12 months or so and probably even picked up. And we think it's possible that during the transition of the political system through late 2014 that the economic growth momentum could be sustained. But that's really what our outlook is on. If the transition to democratic rule in late 2014 doesn't occur then we'll probably remove that positive outlook.

AL: How much is the impact of the upcoming elections on this ratings upgrade?

CM: It's really very central at this point in time. Potentially, a transition to democratic rule will bring in a lot of official lending and donor aid from the international community. It may also attract a lot of foreign investment into the local economy. That should be supportive for economic growth through infrastructure spending and private investment. Potentially, if the government isn't a stable one it could reduce domestic confidence in the economy and if the military does intervene, which we think is unlikely but still possible, then the foreign community wouldn't be supportive either. We view the economy in Fiji to be stronger than what we though before but still not strong. The average per capita income is still quite low in Fiji and it potentially could be growing quite a lot faster than what it is at the moment. But, that really happens hinges on the government to introduce further reforms in the economy to strengthen the environment for private investment and the efficiency of the economy. Potentially, that could drive stronger growth in the medium term.

AL: How could this affect Fiji in terms of relationship with other countries?

CM: In part if reflects our view that relations with other countries are improving and so the direction is working in that way. We see tat the international community is very supportive of Fiji's endeavors to transition to democratic rule and we saw that evidence with the Australian foreign minister being in Fiji earlier this year. So with the potential for stronger foreign aid and multilateral leaning, that should be supportive of the rating as well.