Moody’s Investor Service warned that The Bahamas, among other countries which are highly exposed to the physical effects of climate change, could find itself faced with credit implications in the longer term.
In its report titled, ‘Small island credit profiles resilient to near-term climate shocks, but climate trends pose longer-term risks”, Moody’s said climate trends could affect credit profiles via economic and fiscal challenges over the longer term, depending on a country’s resilience.
“GDP levels of small islands could be four percent lower by 2030 compared to a world with no climate change,” said the ratings agency.
“Investment in climate change-resilient infrastructure and technology could however mitigate the physical impact. Higher income levels, economic diversification, participation in insurance funds and access to foreign support would also improve resilience.”
The study looked at 18 rated islands and archipelagos susceptible to climate change and found that The Bahamas and Maldives are “highly exposed” to climate change, but its impact is “somewhat” mitigated by higher income levels.
“The ratings for the six small island sovereigns identified as most vulnerable – The Bahamas, Fiji, Jamaica, Maldives, Solomon Islands and St. Vincent & the Grenadines – largely incorporate the near- to medium-term credit implications of climate change,” said Moody’s.
“The ratings range from Baa3 for The Bahamas to B3 for Jamaica, Solomon Islands and St. Vincent & the Grenadines, illustrating that other factors unrelated to exposure and resilience to climate change also drive the ratings.”
The report also points out that Jamaica and St. Vincent & the Grenadines are the least resilient to climate change effects. “Both have some of the lowest levels of economic development as represented by per capita incomes and are least flexible fiscally among the small island sovereigns,” the report notes.
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