Today, Standard and Poors re-affirmed its credit ratings for the Cook Islands at 'B+/B' with a stable outlook.
In describing the outlook for the Cook Islands Standard and Poors balanced the Cook Islands' sound economic growth prospects and low level of government debt, against the challenges it faces in overcoming weak political and institutional settings and fostering more robust economic growth.
In describing the Cook Islands debt position Standard and Poors outlined that the government's sizable infrastructure programme which is currently underway is leading to rising, albeit still modest, debt levels.
In commenting on the debt Standard and Poors outlined that:
- The focus on water, sanitation, and road infrastructure, could increase amenity for tourists and help bolster this key sector of the economy if the private sector can capitalize on this
- The concessional and long-term nature of current government borrowings, as well as the government's low debt level, means that general government interest expenditure to revenues is low: estimated to be 1.6% on average between fiscal years 2015 and 2017. But while government debt remains low, a large portion of this debt is exposed to foreign currency movements.
It should be noted that the Cook Islands has over the past couple of years undertaken a programme to consolidate debt into New Zealand dollars with its prominent lender the Asian Development Bank. Currently around a third of Cook Islands’ gross debt is denominated in New Zealand dollars reducing the effect of currency fluctuations.
Standard and Poors further outlined that income is high compared to that of peers, with GDP per capita estimated at USD 22,200 in the year ended 30 June 2014 and project Cook Islands' real per capita GDP growth to average 2.5% over 2015 to 2017.
Standard and Poors has noted that emigration is high in the Cook Islands, averaging 1.6 per cent of the population annually during the past 18 years, reflecting Cook Islanders' rights to live and work in New Zealand and Australia.
Standard and Poors expects moderate further increases in tourist arrivals to support economic growth, with tourism remaining the primary economic activity in the Cook Islands, but has outlined that tourism growth may be held back to some extent in the near term by a high exchange rate, which in particular may encourage New Zealanders to travel to some of the Cook Islands' competing holiday destinations in the Pacific.