Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698839328187.pdf (Saint Vincent and the Grenadines)
SOVEREIGN AND SUPRANATIONAL ISSUER IN-DEPTH 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable Annual credit analysis RATINGS St. Vincent and the Grenadines Foreign Currency Local Currency Gov.
Bond Rating B3/STA B3/STA Country Ceiling Bank Deposit Ceiling Ba3 Ba3 Ba3 Ba3 TABLE OF CONTENTS OVERVIEW AND OUTLOOK CREDIT PROFILE Economic strength: Low Institutional strength: Low Fiscal strength: Low (+) Susceptibility to event risk: High (-) Rating range Comparatives DATA, CHARTS AND REFERENCES 1 2 2 5 8 12 15 16 17 Contacts David Rogovic AVP-Analyst david.rogovic@moodys.com +1.212.553.4196 Patrick Cooper Associate Analyst patrick.cooper@moodys.com +1.212.553.3811 Mauro Leos VP-Sr Credit Officer/ Manager mauro.leos@moodys.com +1.212.553.1947 OVERVIEW AND OUTLOOK The credit profile of St. Vincent and the Grenadines (B3 stable) reflects the Caribbean island nation's high per capita income relative to B-rated peers, large share of government debt on concessional terms, and membership in the Eastern Caribbean Currency Union (ECCU).
St. Vincent's per capita GDP ($11,491 in PPP terms in 2017) is a relative strength at the B- rating level.

Growth is also set to improve after the opening of a new international airport in 2017.

Alongside small fiscal deficits, we expect higher growth to allow debt to remain broadly stable.

St. Vincent is the smallest economy in the rated sovereign universe, measured by nominal GDP, and its small size and narrow economic base constrain the credit profile.
The economy is highly dependent on tourism and is particularly vulnerable to external shocks, particularly natural disasters.

The credit profile is also constrained by a high government debt burden, which at 64% of GDP at the end of 2017 is above the B-rated median of 57% of GDP, but in line with B3-rated peers.
The stable outlook reflects our expectation that growth will accelerate and the fiscal deficit will remain moderate over the next two years, conditions that will allow the government debt burden to remain broadly stable.

There is limited potential for an upward rating change in the near future.

Higher sustained growth, along with a faster pace of fiscal consolidation, would improve economic resilience, and increase the probability of an upgrade.
A further deterioration in the government's balance sheet from the materialization of contingent liabilities from state-owned enterprises, or increased commercial borrowing would weaken fiscal strength, increasing the probability of a downgrade.
This credit analysis elaborates on St. Vincent and the Grenadines’ credit profile in terms of economic strength, institutional strength, fiscal strength and susceptibility to event risk, which are the four main analytic factors in Moody’s Sovereign Bond Rating Methodology.
MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL CREDIT PROFILE Our determination of a sovereign’s government bond rating is based on the consideration of four rating factors: economic strength, institutional strength, fiscal strength and susceptibility to event risk.

When a direct and imminent threat becomes a constraint, that can only lower the preliminary rating range.

For more information please see our Sovereign Bond Rating Methodology.
Economic strength: Low Factor 1: Overall score Scale VH+ + Factor 1: Sub-scores St. Vincent and the Grenadines VH VH- H+ H H- M+ M M- L+ Indicative L Final L- VL+ VL VL- - Low Score for St. Vincent and the Grenadines GROWTH DYNAMICS GROWTH DYNAMICS weight 50% Median of countries with B3 rating SCALE OF THE ECONOMY weight 25% NATIONAL INCOME weight 25% Average real GDP (% change) Volatility in real GDP growth (ppts) Global Competitiveness index Nominal GDP (US$ bn) GDP per capita (PPP, US$) VERY HIGH HIGH MODERATE LOW VERY LOW Economic strength evaluates the economic structure, primarily reflected in economic growth, the scale of the economy and wealth, as well as in structural factors that point to a country’s long-term economic robustness and shock-absorption capacity.
Economic strength is adjusted in case excessive credit growth is present and the risks of a boom-bust cycle are building.

This ‘credit boom’ adjustment factor can only lower the overall score of economic strength.

Note: In case the Indicative and Final scores are the same, only the Final score will appear in the table above.
St. Vincent and the Grenadines’ “Low” economic strength reflects the small scale of the economy and dependence on the tourism sector, which exacerbates vulnerability to external shocks.

Our assessment also reflects the economy’s susceptibility to environmental risks, particularly weather-related shocks.

St Vincent shares the “Low” economic strength score with Barbados (Caa3 stable), Cuba (Caa2 stable), St. Maarten (Baa2 negative), Trinidad & Tobago (Ba1 stable) and Zambia (B3 stable).
The score for St. Vincent’s economic strength is set at “Low”, below the indicative score of “Low (+)”, to reflect the frequency of weather-related external shocks that aren’t captured in our real GDP growth forecasts, and weigh on our assessment of economic strength.
Peer comparison table factor 1: Economic strength Final score Indicative score Nominal GDP (US$ bn) GDP per capita (PPP, US$) Average real GDP (% change) Volatility in real GDP growth (ppts) Global Competitiveness Index St. Vincent and the Grenadines B3/STA L L+ 0.8 11,189.9 1.7 1.7 -- L Median Belize Jamaica Zambia Barbados Suriname Cambodia B3/STA L+ L+ 1.7 8,328.8 2.0 1.6 -- B3/STA L+ L+ 14.1 8,962.9 1.4 1.6 4.3 B3/STA L L 21.1 3,907.7 4.8 2.5 3.5 Caa3/STA L L 4.8 18,213.8 0.8 2.0 4.2 B2/NEG L- VL+ 3.3 14,538.7 0.8 3.6 -- B2/STA L- VL+ 20.0 3,740.8 7.0 2.5 3.9 4.8 16,730.7 1.7 2.0 4.1 2 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL Small size and dependence on tourism weigh on economic resilience With a GDP per capita of $11,491 in purchasing power parity (PPP) terms, an economy of around $0.8 billion (see Exhibit 1), and a population of around 110,000 in 2017, St. Vincent is considered an upper middle-income country by the World Bank.
The economy, like most other Caribbean nations, is highly dependent on tourism, which represented 23% of economic activity, 22% of total employment, either directly or indirectly, and generated 48% of total export receipts in 2017.

The United States (Aaa stable) is an important tourism market for St. Vincent therefore favorable growth prospects there should support economic activity in St. Vincent.
The economy also relies heavily on contributions from non-residents in the form of remittances, which represent almost 25% of GDP, and, to a lesser extent, demand for new housing when Vincentians come back to retire.
Exhibit 1 St. Vincent is the smallest economy in Moody's rated universe (Nominal GDP, $ billion) 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Sources: Moody's Investors Service, National Statistical Authorities Economy is vulnerable to environmental risks St. Vincent remains vulnerable to natural disasters and environmental risks as identified in our recent report on environmental risks and their impact on sovereigns.
The small size and dependence on tourism-related activity make the economy more susceptible to risks associated with frequent natural disasters.

The IMF estimates the average natural disaster causes 5.5% of GDP in damages in St. Vincent, or annual damages of 1.2% of GDP.

The authorities set up and contributed 0.3% of GDP in 2017 to a Contingency Fund to offset the potential cost of damages from future natural disasters, and will contribute around 0.5% of GDP annually going forward.
To capitalize the Contingency Fund, the government also introduced a 1% levy on consumption by increasing the VAT rate to 16% from 15% and the consumption tax rate for accommodation and other tourism-related activities to 11% from 10%, which both took effect in May 2017.

Completion of new airport key for improved growth prospects Economic growth remains subdued, but medium-term growth prospects are more favorable in light of the opening of a new airport.
Additionally, the development of the Canouan marina, the construction of a geothermal plant, and the reopening of a luxury hotel will support construction and tourism activity over the next two to three years.

The economy also remains heavily dependent on remittances and foreign direct investment (FDI).

The completion and opening of the Argyle International Airport in February 2017 is an important factor supporting our expectations for improved growth prospects in 2018-20 and beyond.
The opening of the airport will improve connectivity, supporting an increase in tourist arrivals.

Already, direct flights from Toronto and New York have been added.

Unlike existing airports, which can only receive regional flights from neighboring islands, the Argyle International Airport can receive large international aircrafts and is therefore expected to boost tourism and have a multiplier effect on other sectors of the economy.
We expect economic growth to accelerate to 2.3% in 2018, from 1.0% in 2017 (see Exhibit 2), as tourism arrivals increase following the completion of the airport and the introduction of new air connections (e.g.

Air Canada (Ba3 stable) flights from Toronto).


Additional 3 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL tailwinds to growth in the near term include the development of the marina in Canouan and the reopening of the Buccament Bay Resort, which closed in December 2016 as a result of outstanding utility bills.
Moreover, the development of a 10-15 megawatt geothermal energy plant, which could generate about 60% of the country’s energy needs, near the La Soufrière volcano will further raise long-term growth and reduce fossil fuel import needs.

The construction of the plant, in which the government has a 49% stake, occurs in cooperation with Emera Caribbean and Reykjavik geothermal, and costs about $82 million, of which the government will finance about 10%.
We therefore expect growth prospects to be more favorable after this year, with real growth of around 2.5% in 2019 and 2.8% in 2020.
Exhibit 2 Economic activity continues to lag B3-rated peers (Real GDP growth, %) B3 Median St. Vincent & the Grenadines 7 6 5 4 3 2 1 0 -1 -2 -3 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sources: Moody's Investors Service, Ministry of Finance Exhibit 3 St. Vincent's growth is weaker than B3-rated peers Solomon Islands Moldova St. Vincent Gabon Ecudaor Ghana Belize Egypt Jamaica El Salvador ) 7 1 - 1 0 0 2 ( y t i l i t a o v P D G l l a e R 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 0.0 1.0 2.0 5.0 Real GDP growth (2001-17 avg) 4.0 3.0 6.0 7.0 Sources: Moody's Investors Service, National Statistical Authorities Business competitiveness remains a constraint The World Bank’s Ease of Doing Business survey suggests weak business competitiveness as demonstrated by St. Vincent 129th ranking out of 190 countries in the 2018 edition, down four places from last year’s survey.
At 129th, St. Vincent is one spot ahead of Egypt (B3 stable).

The country scores particularly weak with regard to getting credit (159th), registering property (166th), and resolving insolvency (ranked 168th).

We expect the passage of insolvency legislation in 2014 to improve the country’s ranking in this last category.

On the other hand, St. Vincent outperforms many of its peers in dealing with construction permits (44th) and enforcing contracts (53rd).
For example, St. Vincent's ranking for enforcing contracts is only one spot below Belgium (Aa3 stable) and two behind Japan (A1 stable).
4 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL Institutional strength: Low Factor 2: Overall score Scale VH+ + Factor 2: Sub-scores St. Vincent and the Grenadines VH VH- H+ H H- Indicative M+ M M- L+ L Final L- VL+ VL VL- - Low Score for St. Vincent and the Grenadines Median of countries with B3 rating INSTITUTIONAL FRAMEWORK AND EFFECTIVENESS POLICY CREDIBILITY AND EFFECTIVENESS weight 75% weight 25% Worldwide Government Effectiveness index Worldwide Rule of Law index Worldwide Control of Corruption index Inflation level (%) Inflation volatility (standard deviation) VERY HIGH HIGH MODERATE LOW VERY LOW Institutional strength evaluates whether the country’s institutional features are conducive to supporting a country’s ability and willingness to repay its debt.
A related aspect of institutional strength is the capacity of the government to conduct sound economic policies that foster economic growth and prosperity.

Institutional strength is adjusted for the track record of default.

This adjustment can only lower the overall score of institutional strength.

Note: In case the Indicative and Final scores are the same, only the Final score will appear in the table above.
Our “Low” assessment of St. Vincent and the Grenadines’ institutional strength reflects the country's relatively favorable scores in the Worldwide Governance Indicators and our qualitative assessment of the government’s ability and willingness to pursue policies that support timely debt payment.

Data limitations add to our assessment of St. Vincent's weak institutional framework.
St. Vincent shares the “Low” institutional assessment score with Bolivia (Ba3 stable), Cote d’Ivoire (Ba3 stable), Egypt (B3 stable), the Maldives (B2 stable), and Trinidad & Tobago (Ba1 stable).

St. Vincent’s score for institutional strength is set at “Low”, below the indicative score of “High (-)” because both monetary and fiscal policy credibility display a mixed track record based on inflation volatility and relatively discretionary fiscal management.
Peer comparison table factor 2: Institutional strength Final score Indicative score Gov.
Effectiveness, percentile [1] Rule of Law, percentile [1] Control of Corruption, percentile [1] Average inflation (%) Volatility in inflation (ppts) St. Vincent and the Grenadines B3/STA L H- 54.4 61.0 69.8 1.0 3.1 L Median Trinidad & Tobago Jamaica Maldives Fiji El Salvador Kenya Ba1/STA L M+ 55.8 41.9 44.1 2.7 2.9 B3/STA L+ L+ 61.7 38.2 49.2 5.8 5.4 B2/STA L L+ 28.6 27.9 23.5 3.0 4.3 Ba3/STA L+ M 30.8 36.7 58.8 2.8 2.3 B3/STA L- M- 30.1 16.9 26.4 1.3 2.5 B2/STA L- L- 29.4 23.5 11.7 5.5 3.8 25.3 27.6 26.1 2.8 3.0 [1] Moody's calculations.
Percentiles based on our rated universe.

Worldwide Governance Indicators point to a robust institutional framework Our assessment of St. Vincent’s institutional strength is informed by its scores in the Worldwide Governance Indicators (WGI) (see Exhibits 4 and 5).

St. Vincent ranks particularly well with regard to control of corruption (70th percentile in 2016), rule of law (61st), and government effectiveness (54th).
Moreover, as a stable democracy, St. Vincent also scores particularly high for political stability (90th) and voice and accountability (80th) – see detailed discussion on political risk under the factor 4 section of the report.
5 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL Exhibit 4 While St. Vincent's governance indicators still outperform B-rated peers ... (Percentile rank among rated sovereigns, 2016) Exhibit 5 … scores dropped significantly in the latest survey (Percentile rank among rated sovereigns, 2016) St. Vincent and the Grenadines Mean - B Government Effectiveness Control of Corruption Regulatory Quality Rule of Law Voice & Accountability Political Stability Political Stability 100 80 60 40 20 0 Government Effectiveness Rule of Law Regulatory Quality Voice and Accountability Control of Corruption * Composite index with values from about -2.50 to 2.50: higher values correspond to better governance Sources: Worldwide Governance Indicators, Moody’s Investors Service Participation in the ECCU anchors inflation 100 90 80 70 60 50 40 30 20 10 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Sources: Worldwide Governance Indicators, Moody’s Investors Service St. Vincent is part of the six member Eastern Caribbean Currency Union (ECCU).
The Eastern Caribbean dollar (EC$) has been pegged at EC$2.7 to the US dollar in a currency board system since 1976.

The monetary authority for the union, the Eastern Caribbean Central Bank (ECCB), holds reserves in excess of 100% of the union’s monetary base to safeguard the peg, which has been stable since its inception.

Membership in the union has provided St. Vincent with a stable exchange rate and an anchor for inflation (see Exhibits 6 and 7).
Annual price increases, for instance, averaged 0.6% between 2010-17, although the pass-through from fuel and food prices remains high and leads to moderate inflation volatility.

ECCU membership, however, implies that St. Vincent has no independent monetary policy and cannot adjust the exchange rate to mitigate external shocks.
Exchange rate inflexibility places a greater emphasis on export competitiveness, both for goods and services (mainly the tourism offering), to ensure balance of payments sustainability.
Exhibit 6 St. Vincent's inflation is lower, but more volatile, than peers (CPI, % change Dec/Dec) Exhibit 7 Inflation is anchored through the ECCB (CPI, % change Dec/Dec) B3 Median St. Vincent & the Grenadines 14 12 10 8 6 4 2 0 -2 -4 ECCU St. Vincent & the Grenadines 10 8 6 4 2 0 -2 -4 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2021 2022 Sources: Moody's Investors Service, Ministry of Finance, National Statistical Authorities Sources: Moody's Investors Service, Ministry of Finance, IMF 6 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL Data transparency remains a major institutional bottleneck Significant data limitations constrain St. Vincent’s institutional strength despite the country’s relatively high governance scores.
Data deficiencies are a constraint in analyzing the fiscal situation in St. Vincent with public sector debt data reporting subject to lags and government finance statistics coverage that is generally worse than similarly-rated sovereigns.

Substantial shortcomings also exist in terms of coverage, consistency, timeliness, and quality of macroeconomic data.
Balance of payments data, a critical area in terms of St. Vincent’s credit vulnerabilities, are compiled only annually by the ECCB and are quarterly data are not available.

Annual data for the international investment position are also not available.
7 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL Fiscal strength: Low (+) Factor 3: Overall score Scale VH+ + Factor 3: Sub-scores St. Vincent and the Grenadines VH VH- H+ H H- M+ M M- L+ Final L Indicative L- VL+ VL VL- - Low (+) DEBT BURDEN DEBT BURDEN weight 50% Score for St. Vincent and the Grenadines Median of countries with B3 rating DEBT AFFORDABILITY weight 50% General government debt (% of GDP) General government debt (% of revenues) General government interest payments (% of revenue) General government interest payments (% of GDP) VERY HIGH HIGH MODERATE LOW VERY LOW Fiscal strength captures the overall health of government finances, incorporating the assessment of relative debt burdens and debt affordability as well as the structure of government debt.
Some governments have a greater ability to carry a higher debt burden at affordable rates than others.

Fiscal strength is adjusted for the debt trend, the share of foreign currency debt in government debt, other public sector debt and for cases in which public sector financial assets or sovereign wealth funds are present.

Depending on the adjustment factor the overall score of fiscal strength can be lowered or increased.
Note: In case the Indicative and Final scores are the same, only the Final score will appear in the table above.

St. Vincent’s fiscal strength is “Low (+)” on account of the government’s high debt burden and the relatively high share of foreign currency debt.

The debt-to-GDP ratio has increased considerable since the global financial crisis, weighing on our assessment of fiscal strength.

Other countries with “Low (+)” scores include the Maldives, Gabon (B3 negative), and Greece (B3 positive).
We have adjusted the final score to “Low (+)”, which is above the indicative score of “Low” to offset the adjustment we would otherwise make to reflect high levels of foreign currency debt given the Eastern Caribbean Central Bank’s (ECCB) track record in guaranteeing the currency peg and reasonable expectations that the peg will be maintained going forward.

Peer comparison table factor 3: Fiscal strength Final score Indicative score Gen. gov.

debt/GDP Gen. gov.

debt/revenue Gen. gov.


interest payments/GDP Gen. gov.

int.
payments/revenue St. Vincent and the Grenadines B3/STA L+ L 66.1 223.2 2.1 6.9 L+ Median Uganda Armenia Maldives Gabon Cambodia Honduras B2/STA L L 37.5 248.5 2.5 16.4 B1/POS L L 56.5 238.2 1.9 8.2 B2/STA L+ M 58.8 205.5 1.8 6.4 B3/NEG L+ VL- 63.3 374.6 2.7 16.1 B2/STA M- M- 33.9 169.7 0.4 2.1 B1/STA M- M- 38.7 142.8 2.5 9.3 98.0 292.0 3.0 7.7 High government debt limits fiscal space Government debt has increased by 26 percentage points since 2008, reaching 64% of GDP at the end of 2017, compared with 39% of GDP in 2008 (see Exhibit 8).
The increase in government debt reflects a combination of low growth, disaster-related budgetary outlays, and the construction of the Argyle International Airport.

The airport cost the government around EC$700 million (US$259 million), or 35% of GDP.

About half of the financing for the airport came from external grants, while around one-third came from external loans, with the remainder from land sales and government transfers to the International Airport Development Company.
Based on our 8 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL expectations for moderate fiscal deficits of 1.3% of GDP in 2018 and 2019, we expect government debt to remain broadly stable going forward.
Exhibit 8 The debt burden will stabilize above 60% of GDP, in line with B3- rated peers (Government debt, % of GDP) Exhibit 9 … while the interest burden remains below that of peers (% of revenue) St. Vincent and the Grenadines B3 median B median St. Vincent and the Grenadines B3 median B median 80 70 60 50 40 30 20 10 - 350 300 250 200 150 100 50 - 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sources: Moody's Investors Service, National Statistical Authorities Source: Moody's Investors Service The rise in the country’s debt stock is also driven by the island’s exposure to natural disasters.
For example, in 2013, weather- related shocks led to the highest fiscal deficit in the past decade.

The country was also hit by natural disasters in 2010 and 2011.

The government estimated damages and losses from the 2013 floods and landslides alone were 15% of GDP.

To address the costs associated with frequent natural disasters, the government established the Contingency Fund as a fiscal buffer for natural disasters.
The size of budgetary contributions to the fund at 0.5% of GDP in 2017 and 0.3% of GDP are still small and below the average annual cost of natural disasters estimated by the IMF.

Our forecasts for government debt assumes St. Vincent is not affected by any additional natural disaster.

As such, the risk of natural disasters represents a key downside to our projections.
The IMF estimates the average annual cost of natural disasters in St. Vincent to be around 1.2% of GDP, of which the government assumes around 0.8% of GDP.

St. Vincent’s high government debt burden is a key constraint on the credit profile, but is consistent with B3-rated peers.

At 64% of GDP in 2017, government debt is the 16th highest among B-rated sovereigns, and above the B-rated median of 57% of GDP.
Measured as a percentage of government revenue, St. Vincent’s debt burden at 220% is below the B-rated median of 254%.

Out of the 19 sovereigns we currently rate at the B3 level, St. Vincent has the 10th highest debt burden relative to GDP and 13th highest relative to revenue.

As a result of the high stock of government debt, St. Vincent has limited space to respond to external shocks.

Given the frequency and economic impact of natural disasters, risks to the outlook are skewed to the downside (i.e.
larger fiscal deficits and higher debt ratios).

Additionally, when including the debt of state-owned enterprises (SOEs), public sector debt is above 80% of GDP.

We expect fiscal deficits to narrow While government debt will remain high, the fiscal deficit has narrowed in recent years and we expect this trend to continue.
After recording a deficit of 6.2% of GDP in 2013, the fiscal deficit has gradually narrowed mainly due to the government’s tax compliance efforts, which has increased tax revenue to 24.7% of GDP in 2017, from 21.6% of GDP in 2013 (see Exhibit 10).

In 2016, the government recorded a fiscal surplus driven by one-off revenue of 1.5% of GDP from collection of tax arrears (1.1% of GDP) and an exceptional dividend from the electricity company (0.4% of GDP) (see Exhibit 12).
Excluding these one-off revenue gains, we estimate the fiscal balance would have recorded a deficit of 0.4% of GDP.

In 2017, the fiscal balance returned to a deficit of 0.4% of GDP.

Meanwhile, current expenditures increased by 7.4% year-over-year in 2017 because of higher spending on most categories of current expenditures.
9 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL Exhibit 10 St. Vincent primarily generates revenue through taxes (% of GDP) Tax revenue Non-tax revenue Capital revenue Grants 35% 30% 25% 20% 15% 10% 5% 0% Exhibit 11 The government reduced capital expenditures to narrow the deficit (% of GDP) Wages and salaries Goods and services Interest Capex Transfers and subsidies 35% 30% 25% 20% 15% 10% 5% 0% 2013 2014 2015 2016 2013 2014 2015 2016 Sources: Moody's Investors Service, Ministry of Finance Sources: Moody's Investors Service, Ministry of Finance With the exception of 2016, when St. Vincent recorded a fiscal surplus, the government typically runs a fiscal deficit; between 2017 and 2009, the fiscal deficit averaged 2.0% of GDP.
The balance on the capital budget has improved from a deficit of 4.3% of GDP in 2013 to 1.7% of GDP deficit in 2017, and is expected to remain around this level going forward.

We expect capital expenditures to remain around 13% of total expenditures, down from as high as 24% in 2013 (see Exhibit 11).

In 2017, the government announced a number of new revenue measures aimed at narrowing the fiscal deficit.
To help cover operating costs at the airport, the government doubled the airport service charge to EC$100 per departure.

The government also announced a one percentage point increase in the VAT to 16% from 15%, and to 11% from 10% for tourism accommodations and activities.

The VAT increase was partially offset by an increase in the VAT registration threshold to EC$300,000 from EC$120,000, which the government explained would allow the revenue authority to focus on larger taxpayers.
Additional measures announced in the 2017 budget included an increase in landholding license rates and a telecommunication levy on incoming telephone calls.

We expect the fiscal deficit to remain around 1.3% of GDP in 2018 and 2019, while the primary balance will remain in surplus, averaging 1.4% of GDP in both years.

Compared to the government’s budget for 2018, we forecast a smaller fiscal deficit because we expect capital expenditures to fall short of budgeted amounts.
In 2017, execution of capital spending was just 30%.

Wages will continue to make up a relatively large share of total expenditure – in 2017 the wage bill amounted to 13% of GDP and accounted for more than 40% of total expenditures.
Exhibit 12 St. Vincent's fiscal deficit remains narrower than the B3 median (Financial balance, % of GDP) St. Vincent and the Grenadines B3 median 1 0 -1 -2 -3 -4 -5 -6 -7 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sources: Moody's Investors Service, National Statistical Authorities 10 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL On the revenue side, we expect overall revenue collection to remain around 29% of GDP, with capital revenue, including grants, equal to 1.4% of GDP.
Tax revenue as a percentage of GDP is already high at 25%, the highest among ECCU countries, and we therefore don’t expect to see much improvement from revenue-related measures.

The 2018 budget includes some marginal fiscal stimulus via a reduction in the corporate tax rate to 30% from 32.5% and a reduction in the marginal rate on personal income tax to 30% from 32.5% as well.

To offset the lost revenue, the government intends to focus on improving tax compliance and the collection of tax arrears.
Debt of public corporations pose contingent risk Adding the debt of public corporations to central government debt reveals St. Vincent’s debt burden is much higher, at 81% of GDP at the end of 2017, a level which has been constant over the past four years.
Debt of public corporations includes EC$112 million (5.3% of GDP) of debt contracted under the PetroCaribe initiative, which is debt provided by Venezuela (C stable) on concessional terms, and part of this debt was not recorded under general government debt until 2016.

The government is committed to bringing the wider public sector debt ratio down to 60% of GDP by 2030, in line with the ECCU target.
The IMF estimates that the government would need an additional fiscal adjustment of 1.0% of GDP in 2018, and 1.8% of GDP in subsequent years to bring the government debt-to-GDP ratio down to 60% by 2030.

Predominantly foreign-currency debt is largely concessional, mitigating risk Almost two-thirds of government debt is external and denominated in foreign currency, which exposes St. Vincent to exchange rate risk.
However, this risk is mitigated by St. Vincent's membership in a long-standing currency union and the large share of US dollar- denominated external debt (72% in 2016).

The majority of external debt is owed to multilateral and bilateral creditors, and comes at concessional interest rates and long maturities (see Exhibit 14).

Nearly 80% of external public debt matures in over 10 years, while only 7.0% of external debt matures over the next one to five years.
Exhibit 13 One third of the debt is owed to domestic creditors (% of total domestic debt) Exhibit 14 External debt is primarily owed to multilateral and bilateral lenders (% of total external debt) Other 15% Bank of SVG 14% Commercial (ex/ Treasury bills) 7% Treasury bills 6% Treasury Bills 2% Regional Government Securities Market 19% National Insurance Services 15% ECCB 4% Private Placement 31% Multilateral 42% Bilateral 45% Sources: Moody’s Investors Service, ECCB, National Statistical Authorities Sources: Moody's Investors Service, ECCB, National Statistical Authorities Multilateral and bilateral debt each represent about 40% of total external debt.
The Caribbean Development Bank (Aa1 stable) is the largest multilateral lender, accounting for 70% of total multilateral debt.

The remainder of the multilateral debt is owed to International Development Association (IDA, Aaa stable) and the IMF.

China (A1 stable) and Venezuela’s ALBA Bank/El Fondo are the largest bilateral creditors.

Commercial external debt is relatively small, at 7% of GDP, and consists of bonds and Treasury bills held by nonresidents.
Despite the high debt burden, the mostly concessional nature of government debt keeps debt servicing costs relatively low.

Interest payments as a share of revenue were just 7.8% in 2017, below the B-rated median of 9.2%.

St. Vincent’s interest burden has declined from 10.5% in 2010.

Even taking into account the increase in the interest payment-to-revenue ratio that we expect in 2018, St. Vincent’s debt affordability will compare favorably with B3- and B-rated peers.
11 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL Susceptibility to event risk: High (-) L- L L+ M- M M+ H- Final H H+ VH- VH VH+ - Factor 4: Overall score Scale VL- VL + Factor 4: Sub-scores St. Vincent and the Grenadines POLITICAL RISK VL+ Indicative High (-) DEBT BURDEN GOVERNMENT LIQUIDITY RISK BANKING SECTOR RISK Score for St. Vincent and the Grenadines Median of countries with B3 rating EXTERNAL VULNERABILITY RISK Political risk Gross borrowing requirements/GDP Non-resident share of gen. gov.
debt (%)Market-implied rating Average baseline credit assessment (BCA) Total domestic bank assets/GDP Banking system loan-to-deposit ratio (Current account balance + FDI inflows)/GDP External vulnerability indicator (EVI) Net international investment position/GDP VERY HIGH HIGH MODERATE LOW VERY LOW Susceptibility to event risk evaluates a country’s vulnerability to the risk that sudden events may severely strain public finances, thus increasing the country’s probability of default.
Such risks include political, government liquidity, banking sector and external vulnerability risks.

Susceptibility of event risk is a constraint which can only lower the preliminary rating range as given by combining the first three factors.

Note: In case the Indicative and Final scores are the same, only the Final score will appear in the table above.

We assess susceptibility to event risk as “High (-),” driven by external vulnerability risk from large balance of payments imbalances.
Other sovereigns that share a similar score for susceptibility to event risk, driven by external vulnerability risk, include Mongolia (B3 stable), Mozambique (Caa3 negative), and Tunisia (B2 stable).

Banking sector risk: Low (+) Peer comparison table factor 4c: Banking sector risk Final score Indicative score Baseline credit assessment Total dom.
bank assets/GDP Loan-to-deposit ratio St. Vincent and the Grenadines B3/STA L+ VL+ -- 82.7 61.0 L+ Median Sri Lanka Jamaica Nigeria Gabon El Salvador Armenia B1/NEG M- L+ b1 76.0 88.0 B3/STA L L+ -- 76.8 94.7 B2/STA L+ VL- b2 31.2 88.7 B3/NEG L+ L+ -- 28.6 90.3 B3/STA L L+ b3 69.6 93.2 B1/POS M- M- b2 78.6 111.9 baa3 89.6 95.0 We set the score for banking sector risk at “Low (+),” which is above the indicative score of “Very Low (+),” to reflect the importance of foreign-owned banks in the financial system, which might expose St. Vincent to events taking place in other countries where the foreign banks operate.
There are no immediate contingent liabilities arising from the banking sector.

The banking system is relatively sizeable, with assets amounting to around 83% of GDP in 2017.

There are four banks operating in St. Vincent: the Bank of St. Vincent, a subsidiary of RBC, and two branches of Canadian banks (BNS and CIBC).

The Bank of St. Vincent is the only indigenous bank, in which the central government owns 43% and the state-owned National Insurance Services (NIS) owns 20%.
Altogether, the government owns a 63.13% shareholders stake in the bank.

Similar to other Eastern Caribbean countries, the financial system is fragmented with 22 insurance companies and 9 credit unions, which are gaining more prominence in the financial sector, operating besides the 4 banks.
The IMF 12 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL notes that the financial system has become more vulnerable to the credit unions as a result of their increased size and concentration of deposits in the banking system.

Risk to asset quality stems from low economic growth and sizeable exposure to the inherently risky retail customer segment.
Nonperforming loans (NPLs) reached 9.7% of gross loans in the second quarter of 2017, with loan loss provisions covering about 40% of these NPLs.

NPLs had risen steadily in recent years as a result of subdued growth and tourist arrivals.

We do not expect a substantial improvement in credit quality because of sluggish economic growth amid hefty retail lending, at 69% of total loans by year-end 2015.
Commercial banks’ performance remains stable with rising profitability and a capital adequacy ratio well above the regulatory requirement.

External vulnerability risk: High (-) Peer comparison table factor 4d: External vulnerability risk Final score Indicative score (Curr.

acc.

bal.
+ FDI inflows)/GDP External vulnerability indicator (EVI) St. Vincent and the Grenadines B3/STA H- VL+ -4.0 53.3 H- Median Mongolia Tunisia Barbados Belarus Bahrain Tajikistan B3/STA H- H+ -42.6 146.4 B2/STA H- H- -6.6 185.1 Caa3/STA H M+ -- 156.8 B3/STA H H- -0.9 331.4 B1/NEG M+ M+ -3.9 1,674.9 B3/STA M+ H -1.8 447.3 -5.3 99.8 The score of St. Vincent’s external vulnerability risk is set at ”High (-)”, which is above the indicative score of “Very Low (+)”, to reflect the high susceptibility to an external shock, stemming from a balance of payments crisis, and the heavy reliance on foreign capital inflows.
The overall current account deficit has narrowed in recent years, with the deficit reaching 14.6% of GDP in 2017, from its peak of 29.2% in 2013, on the basis of reduced food imports, lower oil prices, and an increase of tourist arrivals, particularly from the US.

In the past years, IMF assistance managed to alleviate immediate pressures on St. Vincent’s external accounts from natural disasters, but the balance of payments remains vulnerable to further extreme weather events.
As foreign direct investments do not fully cover the current account deficit, St. Vincent remains highly dependent on concessional, international financial flows form multilateral development banks and bilateral agreements with individual countries.

Moreover, the external accounts continue to be vulnerable to extreme weather events.
Exhibit 15 Structural trade deficit weighs on the current account balance (% of GDP) Trade balance Service balance Primary balance Secondary balance Current account balance 30% 20% 10% 0% -10% -20% -30% -40% -50% Source: IMF 2013 2014 2015 2016 2017 2018 ECCU members are required to pool their foreign exchange reserves at the ECCB.
St. Vincent’s contribution to the accumulation of foreign exchange reserves within the ECCU has been limited, but the monetary union’s foreign exchange reserves reached $1.7 billion as of September 2017.
With international reserves covering over 5 months of imports of goods and services at a regional level, foreign 13 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL exchange reserves remain well above the import coverage ratio and various other metrics of reserve adequacy, thereby providing a sufficient buffer.

ECCU membership does not entirely temper the risk of a balance of payments crisis.
The ECCB has been successful in maintaining the EC$ peg since 1976, thereby offsetting the impact of any balance of payment developments on the exchange rate and ensuring macroeconomic stability.

However, the ECCB is the only institution to guarantee the exchange rate regime and to warrant the convertibility of the EC$ to hard currency.

Even though the probability of a devaluation of the EC$ remains low, the currency union does not eliminate exchange rate risk.
A deterioration in the terms of trade across the ECCU zone and increased foreign currency needs could, for instance, increase pressure on the regional currency peg.
Political risk: Very Low Peer comparison table factor 4a: Political risk Final score Geopolitical risk Domestic political risk St. Vincent and the Grenadines B3/STA VL VL VL -- -- United States of America Aaa/STA VL+ VL VL+ Jamaica Mongolia B3/STA VL VL VL B3/STA VL VL VL Trinidad & Tobago Ba1/STA VL VL VL Costa Rica Cyprus Ba2/NEG VL VL VL Ba3/POS VL VL VL We assess both geopolitical risk and domestic political risk to be “Very Low.” St. Vincent is a parliamentary democracy and an independent Commonwealth realm.
The parliamentary term of office is five years and the House of Assembly is a unicameral parliament with fifteen elected members and six senators.

The Governor General, who represents the monarch of the United Kingdom (Aa2 stable), appoints the senators: four on the advice of the prime minister and two on the advice of the opposition leader.

Following the parliamentary elections of December 2015, the Unity Labour Party retained its one seat majority and currently holds eight seats.
The remaining seats are taken up by electives of the New Democratic Party.

Government liquidity risk: Low (+) Peer comparison table factor 4b: Government liquidity risk Final score Indicative score Gross borrowing req./GDP Gen. gov.

ext.

debt/gen.

gov.
debt Market funding stress indicator St. Vincent and the Grenadines B3/STA L+ VL 5.9 80.3 -- L+ Median Lebanon Jamaica B3/STA L+ L+ 29.9 14.5 Caa1 B3/STA L+ L 8.5 60.9 Ba1 8.9 57.1 B1 Democratic Republic of the Congo B3/NEG L VL- 0.7 83.5 -- Cambodia El Salvador Tajikistan B2/STA L VL- 4.3 83.0 -- B3/STA M- M- 7.8 50.5 B2 B3/STA M- -- 4.3 -- -- We assess government liquidity risk as “Low (+)” given modest gross borrowing requirements and reliance on multilateral and bilateral lenders, which reduces rollover risk.
We have adjusted the score for government liquidity risk upward from the indicative of “Very Low” to a final score of “Low (+)” to take into account relatively narrow domestic capital markets and foreign currency borrowing, which is a mix of concessional lending from a diverse base of multilateral and bilateral creditors, commercial borrowing from banks or via debt issuance.
For 2018, we estimate gross financing needs equal to 8.1% of GDP, with 6.3% of GDP in amortizations, split evenly between domestic and external debt.

The government relies on several funding sources, including a regional government securities market, multilateral and bilateral lending, and domestic bank loans.

The share of external debt owed to commercial creditors is relatively low at 14% of total external debt, or 9% of GDP.
The increase in commercial debt as a share of external debt since 2014, when it was 5% of external debt, reflects the re-classification of Treasury bills held by nonresidents as external debt.

The government has a Sinking Fund used to set aside monies from current revenue on an annual basis to meet bullet bond obligations when they fall due.

For 2018, the government expects to put aside about 1.0% of GDP throughout the year.
14 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL Rating range Combining the scores for individual factors provides an indicative rating range.

While the information used to determine the grid mapping is mainly historical, our ratings incorporate expectations around future metrics and risk developments that may differ from the ones implied by the rating range.
Thus, the rating process is deliberative and not mechanical, meaning that it depends on peer comparisons and should leave room for exceptional risk factors to be taken into account that may result in an assigned rating outside the indicative rating range.

For more information please see our Sovereign Bond Rating Methodology.

Exhibit 16 Sovereign rating metrics: St. Vincent and the Grenadines Economic strength How strong is the economic structure?
Sub-factors: growth dynamics, scale of the economy, wealth VH+ VH VH- H+ H H- M+ M M- L+ L L- VL+ VL VL- Institutional strength Fiscal strength + + + How robust are the institutions and how predictable are the policies?

Sub-factors: institutional framework and effectiveness, policy credibility and effectiveness VH+ VH VH- H+ H H- M+ M M- L+ L L- VL+ VL VL- How does the debt burden compare with the government's resource mobilization capacity?
Sub-factors: debt burden, debt affordability VH+ VH VH- H+ H H- M+ M M- L+ L L- VL+ VL VL- Susceptibility to event risk What is the risk of a direct and sudden threat to debt repayment?
Sub-factors: political risk, government liquidity risk, banking sector risk, external vulnerability risk VL- VL VL+ L- L L+ M- M M+ H- H H+ VH- VH VH+ + Source: Moody's Investors Service - - - - Economic resiliency VH+ VH VH- H+ H H- M+ M M- L+ L L- VL+ VL VL- + - Government financial strength VH+ VH VH- H+ H H- M+ M M- L+ L L- VL+ VL VL- + - Rating range: B2 - Caa1 Assigned rating: B3 15 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL Comparatives This section compares credit relevant information regarding St. Vincent & the Grenadines with other sovereigns that we rate.
It focuses on a comparison with sovereigns within the same rating range and shows the relevant credit metrics and factor scores.

St. Vincent’s factor scores are roughly on par with those of peers.

Economic strength is assessed as “Low,” which is lower than most B3-rated peers, due to the small size of the economy and low growth levels.

Institutional strength is “Low”, which is above some B3-rated peers due to St. Vincent's low inflation levels and more favorable WGI scores.
Fiscal strength is “Low (+)”, in line with peers because of very high debt ratios and a relatively high share of foreign currency debt.

St. Vincent's “High (-)” susceptibility to event risk, which stems from persistent external imbalances, limited buffers to absorb external shocks, and a high vulnerability to natural disasters, is in line with many B3-rated peers.

Exhibit 17 St. Vincent and the Grenadines Key Peers Rating/Outlook Rating Range Factor 1 Nominal GDP (US$ bn) GDP per capita (PPP, US$) Avg.
real GDP (% change) Volatility in real GDP growth (ppts) Global Competitiveness index Factor 2 Government Effectiveness, percentile [1] Rule of Law, percentile [1] Control of Corruption, percentile [1] Average inflation (% change) Volatility in inflation (ppts) Factor 3 Gen. gov.

debt/GDP Gen. gov.

debt/revenue Gen. gov.

interest payments/revenue Gen. gov.

interest payments/GDP Gen. gov.

financial balance/GDP Factor 4 Current account balance/GDP Gen. gov.

external debt/gen.

gov.


debt External vulnerability indicator (EVI) Year 2016 2016 2012-2021 2007-2016 2017 2016 2016 2016 2012-2021 2007-2016 2016 2016 2016 2016 2016 2016 2016 2018F Moody's calculations.

Percentiles based on our rated universe.
Sources: Moody’s Investors Service, National Statistical Authorities St. Vincent and the Grenadines B3/STA B2 - Caa1 L Belize B3/STA B2 - Caa1 L+ 0.8 11189.9 1.7 1.7 -- L 54.4 61.0 69.8 1.0 3.1 L+ 66.1 223.2 6.9 2.1 0.6 H- -15.9 80.3 53.3 1.7 8328.8 2.0 1.6 -- VL+ 14.7 11.7 45.5 1.0 2.1 VL+ 88.2 291.9 9.9 3.0 -4.2 H -9.4 75.6 16.7 Jamaica B3/STA B1 - B3 L+ 14.1 8962.9 1.4 1.6 4.3 L+ 61.7 38.2 49.2 5.8 5.4 VL- 118.0 421.0 28.4 8.1 -0.3 L+ -0.7 60.9 54.4 Maldives B2/STA Ba3 - B2 L+ 4.2 18245.9 5.7 4.8 -- L 28.6 27.9 23.5 3.0 4.3 L+ 58.8 205.5 6.4 1.8 -10.4 M+ -24.4 30.7 93.1 Gabon El Salvador B3 Median B3/NEG B3 - Caa2 L+ 14.2 19017.7 3.7 3.3 3.8 VL- 8.8 21.3 19.8 2.3 1.9 L+ 63.3 374.6 16.1 2.7 -4.6 M+ -6.0 59.9 93.5 B3/STA B1 - B3 L+ 23.9 8623.2 2.1 1.8 3.8 L- 30.1 16.9 26.4 1.3 2.5 M 69.6 301.0 12.8 2.9 -3.1 H- -2.1 50.5 77.9 B3 B2 - Caa1 L+ 19.0 8476.0 3.5 2.5 3.9 VL+ 18.7 19.5 25.7 5.8 4.1 L+ 61.8 296.4 10.2 2.8 -4.5 H- -4.7 60.9 88.2 Latin America and Caribbean Median Ba3 Ba1 - Ba3 L+ 43.2 14138.0 2.4 2.4 4.1 L 39.7 34.5 38.9 3.2 2.5 M- 44.9 195.9 9.6 2.1 -2.8 M- -2.7 60.2 54.4 16 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL DATA, CHARTS AND REFERENCES Chart pack: St. Vincent & the Grenadines Exhibit 18 Economic growth Real GDP volatility, t-9 to t (ppts) (RHS) Real GDP (% change) (LHS) 3.0 2.0 1.0 0.0 -1.0 -2.0 -3.0 Exhibit 19 Investment and saving Gross investment/GDP Gross domestic saving/GDP 4.0 3.5 3.0
 2.5 2.0 1.5 1.0 0.5 0.0 40 35 30 25 20 15 10 5 0 -5 -10 Sources: Moody's Investors Service, ECCB Sources: Moody's Investors Service, ECCB Exhibit 20 National income Exhibit 21 Population GDP per capita (US$) GDP per capita (PPP basis, US$) Population (Mil.)
(LHS) Population growth (% change) (RHS) 14000 12000 10000 8000 6000 4000 2000 0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 Sources: Moody's Investors Service, ECCB Source: IMFWEO Exhibit 22 Inflation and inflation volatility Inflation rate volatility, t-9 to t (ppts) (RHS) Inflation rate (CPI, % change Dec/Dec) (LHS) 10.0 8.0 6.0 4.0 2.0 0.0 -2.0 -4. Sources: Moody's Investors Service, ECCB Exhibit 23 Institutional framework and effectiveness Government Effectiveness[1] Rule of Law[1] Control of Corruption[1] 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1.2 1.0 0.8 0.6 0.4 0.2 0. Notes: [1] Composite index with values from about -2.50 to 2.50: higher values suggest greater maturity and responsiveness of government institutions.
Source: Worldwide Governance Indicators 17 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL Exhibit 24 Debt burden Exhibit 25 Debt affordability Gen. gov.

debt/GDP (%) (LHS) Gen. gov.

debt/gen.

gov.

revenue (%) (RHS) Gen. gov.

interest payment/GDP (%) (LHS) Gen. gov.

interest payment/gen.

gov.
gov.

revenue (%) (RHS) 80 70 60 50 40 30 20 10 0 250 200 150 100 50 0 3.0 2.5 2.0 1.5 1.0 0.5 0. Sources: Moody's Investors Service, ECCB, Ministry of Finance Sources: Moody's Investors Service, ECCB, Ministry of Finance Exhibit 26 Financial balance Exhibit 27 Government liquidity risk Gen. gov.
financial balance/GDP (%) Gen. gov.

primary balance/GDP (%) Gen. gov.

debt/GDP (%) (RHS) Gen. gov.

external debt/total gen. gov.
debt (%) (LHS) 4 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 90 80 70 60 50 40 30 20 10 Sources: Moody's Investors Service, ECCB, Ministry of Finance Sources: Moody's Investors Service, ECCB, Ministry of Finance Exhibit 28 External vulnerability risk 12.0 10.0 8.0 6.0 4.0 2.0 0.0 80 70 60 50 40 30 20 10 0 External debt/CA receipts (%)(LHS) External vulnerability indicator (%)(RHS) 160 140 120 100 80 60 40 20 Source: Moody's Investors Service 140 120 100 80 60 40 20 0 18 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL Rating history Exhibit 29 St. Vincent and the Grenadines Source: Moody's Investors Service 19 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL Annual statistics Economic structure and performance Nominal GDP (US$ bil.)
Population (Mil.)

GDP per capita (US$) GDP per capita (PPP basis, US$) Nominal GDP (% change, local currency) Real GDP (% change) Inflation (CPI, % change Dec/Dec) Gross investment/GDP Gross domestic saving/GDP Nominal exports of G & S (% change, US$ basis) Nominal imports of G & S (% change, US$ basis) Openness of the economy[1] Government Effectiveness[2] Government finance Gen. gov.

revenue/GDP[3] Gen. gov.

expenditures/GDP[3] Gen. gov.

financial balance/GDP[3] Gen. gov.


primary balance/GDP[3] Gen. gov.

debt (US$ bil.

)[3] Gen. gov.

debt/GDP[3] Gen. gov.

debt/gen.

gov.

revenue[3] Gen. gov.

interest payments/gen.

gov.

revenue[3] Gen. gov.

FC & FC-indexed debt/gen.

gov.
debt[3] 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018F 2019F 0.7 0.1 6,380 9,893 1.7 -0.5 9.4 33.1 1.4 -1.0 7.1 92.2 0.7 29.3 29.9 -0.6 1.9 0.3 38.9 132.9 8.5 57.9 0.7 0.1 6,192 9,759 -2.9 -2.0 -2.2 26.5 -2.5 -8.5 -9.9 86.0 0.8 29.9 31.6 -1.7 1.1 0.3 45.9 153.6 9.4 54.6 0.7 0.1 6,250 9,639 0.9 -2.3 0.9 29.0 -1.3 -4.7 0.3 84.0 0.7 27.1 30.0 -2.9 0.0 0.3 50.8 187.4 10.5 61.1 0.7 0.1 6,147 9,852 -0.7 0.2 4.7 25.4 -3.2 -0.2 -3.2 82.7 0.8 27.9 30.6 -2.7 -0.2 0.4 57.0 204.4 9.0 64.2 0.7 0.1 6,299 10,154 2.5 1.3 1.0 25.4 -5.0 4.3 6.6 85.4 0.8 27.0 29.0 -2.1 0.3 0.4 61.2 226.9 8.8 57.4 0.7 0.1 6,556 10,564 4.1 2.5 0.0 26.9 -5.9 -4.6 4.2 83.2 0.9 26.9 33.0 -6.2 -3.7 0.4 61.2 227.8 9.2 57.9 0.7 0.1 6,595 10,771 0.6 0.3 0.1 25.1 -6.4 2.2 -1.6 82.4 0.1 29.4 31.5 -2.1 0.3 0.5 68.3 232.2 7.9 60.4 0.8 0.1 6,878 10,971 4.3 0.9 -2.1 25.3 1.7 1.2 -6.4 75.8 0.0 28.1 30.0 - -- 29.3 29.7 -0.4 1.9 0.5 64.5 220.0 7.8 66.0 0.8 0.1 7,433 -- 4.1 2.3 1.5 26.8 2.9 6.1 2.5 77.3 -- 29.0 30.3 -1.3 1.4 0.5 64.5 222.4 9.4 67.2 0.9 0.1 7,730 -- 4.0 2.5 1.5 26.8 3.2 2.0 2.5 76.1 -- 29.0 30.2 -1.2 1.4 0.5 62.8 216.6 9.0 67.9 20 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL External payments and debt Nominal exchange rate (local currency per US$, Dec)
 Real eff.
exchange rate (% change) Current account balance (US$ bil.)

Current account balance/GDP External debt (US$ bil.

)[4] Public external debt/total external debt[4] Short-term external debt/total external debt External debt/GDP[4] External debt/CA receipts[5][4] Interest paid on external debt (US$ bil.

)[4] Amortization paid on external debt (US$ bil.

)[4] Net foreign direct investment/GDP Net international investment position/GDP Official forex reserves (US$ bil.)
Net foreign assets of domestic banks (US$ bil.)
Monetary, external vulnerability and liquidity indicators M2 (% change Dec/Dec) Monetary policy rate (% per annum, Dec 31)[6] Domestic credit (% change Dec/Dec) Domestic credit/GDP M2/official forex reserves (X) Total external debt/official forex reserves Debt service ratio[7] External vulnerability indicator (EVI)[8] Liquidity ratio[9] Total liabilities due BIS banks/total assets held in BIS banks "Dollarization" ratio[10] "Dollarization" vulnerability indicator[11] 2.7 -0.5 -0.2 -33.1 0.2 99.7 -- 33.4 93.5 0.0 0.0 22.9 -- 0.1 0.1 6.4 6.5 3.0 48.9 4.8 280.0 12.4 98.7 13.3 36.3 5.9 10.3 2.7 6.2 -0.2 -29.2 0.2 92.4 -- 36.5 106.1 0.0 0.0 16.3 -- 0.1 0.1 1.4 6.5 2.0 51.4 5.3 327.2 15.6 112.9 17.0 47.1 5.1 9.9 2.7 -1.9 -0.2 -30.6 0.3 93.9 -- 43.4 132.2 0.0 0.0 14.3 -- 0.1 0.1 2.6 6.5 1.8 51.8 3.7 267.1 16.2 130.6 18.8 52.7 5.3 9.6 2.7 -4.1 -0.2 -29.4 0.3 92.4 -- 45.0 139.1 0.0 0.0 12.7 -- 0.1 0.1 -0.3 6.5 1.5 53.0 4.7 346.5 16.0 88.2 18.3 53.6 5.8 11.9 2.7 6.1 -0.2 -27.8 0.3 92.0 -- 41.6 119.7 0.0 0.0 16.7 -- 0.1 0.0 6.6 6.5 4.9 54.3 4.0 264.0 15.2 111.3 15.8 48.9 3.9 8.5 2.7 -2.1 -0.2 -29.2 0.3 92.6 -- 43.2 126.2 0.0 0.0 17.6 -- 0.1 0.0 8.5 6.5 1.2 52.8 3.6 234.2 13.2 89.2 20.6 57.1 5.1 10.3 2.7 0.0 -0.2 -25.8 0.3 92.0 -- 47.0 111.4 0.0 0.0 16.1 -- 0.2 0.0 9.6 6.5 -0.2 52.3 3.3 218.4 9.9 72.9 46.7 60.4 5.4 11.1 2.7 11.7 -0.1 -14.9 0.3 92.7 -- 45.1 102.5 0.0 0.0 7.2 -- 0.2 0.0 4.8 6.5 2.5 51.4 3.3 207.2 10.1 66.0 25.7 32.8 6.0 12.2 2.7 1.0 -0.1 -15.9 0.4 92.7 -- 48.4 110.0 0.0 0.0 11.9 -- 0.2 0.1 3.0 6.5 0.6 51.1
 2.9 193.6 9.5 57.3 40.7 49.5 5.5 9.9 2.7 -1.8 -0.1 -14.6 0.3 92.5 -- 42.5 94.8 0.0 0.0 11.8 -- 0.2 0.1 4.1 6.5 0.7 50.2 3.3 185.2 9.1 50.0 44.7 49.4 5.5 10.6 2.7 -- -0.1 -13.9 0.4 92.6 -- 43.3 97.6 0.0 0.0 11.8 -- 0.2 -- -- -- -- -- -- 208.5 8.8 53.3 -- -- -- -- 2.7 -- -0.1 -13.6 0.4 92.6 -- 42.6 97.9 0.0 0.0 11.8 -- 0.2 -- -- -- -- -- -- 219.5 8.8 57.2 -- -- -- -- [1] Sum of Exports and Imports of Goods and Services/GDP [2] Composite index with values from about -2.50 to 2.50: higher values suggest greater
 maturity and responsiveness of government institutions [3] Central government [4] Public sector only [5] Current Account Receipts [6] Bank discount rate [7] (Interest + Current-Year Repayment of Principal)/Current Account Receipts [8] (Short-Term External Debt + Currently Maturing Long-Term External Debt + Total Nonresident Deposits Over One Year)/Official Foreign Exchange Reserves [9] Liabilities to BIS Banks Falling Due Within One Year/Total Assets Held in BIS Banks [10] Total Foreign Currency Deposits in the Domestic Banking System/Total Deposits in the Domestic Banking System [11] Total Foreign Currency Deposits in the Domestic Banking System/(Official Foreign Exchange Reserves + Foreign Assets of Domestic Banks) 21 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL Moody’s related publications » Rating Action: Moody's affirms St. Vincent and the Grenadines' B3 ratings, maintains stable outlook, April 2018 » Credit Opinion: St. Vincent and the Grenadines - B3 stable: update following rating affirmation, outlook changed, April 2018 » Sector In-Depth: Small island credit profiles resilient to near-term climate shocks, but climate trends pose longer-term risks, December 2017 » Country Statistics: Government of St. Vincent and the Grenadines, November 2017 » Outlook: Latin America & Caribbean: 2018 outlook stable as growth momentum offsets rising debt and policy uncertainty, January 2018 » Rating Methodology: Sovereign Bond Ratings, December 2016 To access any of these reports, click on the entry above.
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(“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO.

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(“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK.

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Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings.
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MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No.

2 and 3 respectively.


MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000.
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For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

REPORT NUMBER 1119467 23 18 May 2018 Government of St. Vincent and the Grenadines - B3 Stable: Annual credit analysis