Research Update: Curacao Long-Term Sovereign Ratings Lowered to 'BBB-' From 'BBB'; Outlook Remains Negative

The impact of the COVID-19 pandemic on Curacao's already fragile economy will be more severe and prolonged than our base-case expectations in April 2020. We expect a slower economic recovery will lead to larger fiscal deficits and weaker public finances over the medium term. As a result, we are lowering our long-term foreign and local currency ratings on Curacao to 'BBB-' from 'BBB', and our short-term foreign and local-currency ratings to 'A-3' from 'A-2'. We are also revising down our transfer and convertibility assessment to 'BBB-' from 'BBB'. The negative outlook reflects the potential consequences posed by ongoing strain in the relationship with the Netherlands, and the potential risks to fiscal outcomes, economic reforms, or external financing as a result;

...- The impact of the COVID-19 pandemic on Curacao's already fragile economy will be more severe and prolonged than our base-case expectations in April 2020. - We expect a slower economic recovery will lead to larger fiscal deficits and weaker public finances over the medium term. - As a result, we are lowering our long-term foreign and local currency ratings on Curacao to '###-' from '###', and our short-term foreign and local-currency ratings to 'A-3' from 'A-2'. We are also revising down our transfer and convertibility assessment to '###-' from '###'. - The negative outlook reflects the potential consequences posed by ongoing strain in the relationship with the Netherlands, and the potential risks to fiscal outcomes, economic reforms, or external financing as a result; as well as the risk of a more rapid deterioration in the net general government debt or external debt metrics as a result of higher financing needs related to the pandemic....

Research Update