BELIZE CITY, Mon. Nov. 14, 2016–Belize is battling a recession, upsets in the finance sector due to the loss of correspondent banking and shrinking foreign reserves due to huge payments to settle compensation for the nationalization of utility companies in 2009 and 2011, resulting in a ratings downgrade by Standard and Poor’s, an international ratings agency based in the US.

“On Nov. 14, 2016, S&P Global Ratings lowered its long-term foreign and local currency sovereign credit ratings on Belize to ‘CCC+’ from ‘B-’. The outlook on both long-term ratings is negative,” the announcement said.

“We also lowered our short-term foreign and local currency ratings to ‘C’ from ‘B’. At the same time, we lowered our transfer and convertibility (T&C) assessment to ‘CCC+’ from ‘B-’,” it added.

The rating action came less than a week after the Government of Belize announced that it would move to renegotiate the terms of the 2038 super bond, which would be the third move since the bonds were issued in 2003 to renegotiate the external debt.

“The country’s recent history of debt restructurings continues to negatively affect our ratings,” S&P said.

The report added that, “The negative outlook reflects at least a one in three potential for a downgrade within the next 12 months, if liquidity pressures remain acute and the government’s funding options become even more limited.”

S&P said that it would likely lower the ratings if it sees a higher likelihood of the government delaying interest payments or seeking a commercial debt rescheduling, including through a potential debt exchange.

In detailing the economic challenges which Belize has been facing, the agency said that, “Belize’s financial sector has been hurt by the loss of CBRs, which in turn has hurt the entire economy…”

It noted that economic growth in Belize continues to be sluggish.

“Falling primary output, damage caused by Hurricane Earl, the loss of CBRs, and the appreciation of the inflation-adjusted exchange rate underpin the economic contraction in 2016. We project a GDP contraction of 1.6% this year, down from growth of 1.2% in 2015,” S&P said.

It said, though, that the Belize economy may modestly rebound over the period 2017-2019 based on growth in the tourism and agriculture sectors.