St Maarten continues to follow politicians heading straight to jail.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS
Moody’s takes account of the impact of environmental (E), social (S) and governance (G) factors when assessing sovereign issuers’ economic, institutional and fiscal strength and their susceptibility to event risk. In the case of Sint Maarten the materiality of ESG to the credit profile is as follows:
Sint Maarten’s ESG Credit Impact Score is moderately negative (CIS-3), reflecting moderate exposure to environmental risks, moderate exposure to social risks and a strong governance profile, reflecting institutional and economic support from the Netherlands.
Sint Maarten’s exposure to environmental risks is moderately negative (E-3 issuer profile score). The island is still recovering from the damage caused by Hurricanes Irma and Maria in 2017. Sint Maarten is a small island economy that is exposed to these types of climate events, particularly because the economy is heavily dependent on tourism.
Exposure to social risks is moderately negative (S-3 issuer profile score), reflecting social demands on housing, jobs and basic services exacerbated by the physical and economic impact of regular weather shocks.
Sint Maarten’s exposure to governance risks is neutral to low (G-2 issuer profile) and balances the challenges the government faces as it continues to build domestic institutions since becoming a constituent country of the Kingdom of the Netherlands in 2010 with continued economic, logistical, and institutional support from the government of the Netherlands.
Moody’s would likely downgrade the rating if following the review, the agency concluded that Sint Maarten’s government liquidity risks would remain high and that liquidity support from the Netherlands will continue to be tethered to political negotiations between the two nations. Lack of a clear plan to address long term funding challenges, including changes to the current institutional arrangements governing debt management, would contribute to this rating outcome. Expectations of continued political confrontations with the Netherlands that raised the risk of a repeat of the recent funding problems would also negatively affect the rating.
Moody’s would likely confirm the rating if the review were to conclude that Sint Maarten was likely to agree to and implement a new, long-term credible funding process that would eliminate the risk of another funding crisis. Such a process would likely require acquiescence by the government of the Netherlands and a political agreement between the two nations.
GDP per capita (PPP basis, US$): 39,507 (2019 Actual) (also known as Per Capita Income)
Real GDP growth (% change): 8.2% (2019 Actual) (also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 0.4% (2019 Actual)
Gen. Gov. Financial Balance/GDP: -1.8% (2019 Actual) (also known as Fiscal Balance)
Current Account Balance/GDP: -14.1% (2019 Actual) (also known as External Balance)
External debt/GDP: 40.9% (2019 Actual)
Economic resiliency: ba2
Default history: No default events (on bonds or loans) have been recorded since 1983.
On 05 February 2021, a rating committee was called to discuss the rating of the St. Maarten, Government of. The main points raised during the discussion were: The issuer’s institutions and governance strength, have materially decreased. The issuer’s governance and/or management, have materially decreased. The issuer’s fiscal or financial strength, including its debt profile, has materially decreased. The issuer has become more susceptible to event risks.
The principal methodology used in these ratings was Sovereign Ratings Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1158631.
