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Ratings On The Cook Islands Affirmed At 'B+/B', On Sound Tourism Sector And Support From Donors; Outlook Stable

July 20, 2012 | Standard & Poor's

MELBOURNE (Standard & Poor's) July 20, 2012--Standard & Poor's Ratings
Services said today that it has affirmed its 'B+/B' issuer credit ratings on
the Cook Islands. The outlook is stable. The Transfer & Convertibility
assessment remains 'AAA'.

The ratings on the Cook Islands reflect the vulnerabilities associated with
the country's weak policymaking culture and institutional settings that have
the potential to further reverse past strong gains in fiscal consolidation and
debt reduction. In addition, the sovereign has a weak and narrowly-based
economy that suffers from heavy emigration, vulnerabilities relating to
cyclone-related disasters and changing tourism preferences, and a rising
public-sector debt burden. Further constraining the ratings are infrastructure
shortcomings that impair investment in the tourism and allied sectors, and
data deficiencies that constrain analysis of the Cook Islands' external

These factors are offset, in part, by the government's supportive relationship
and high labor mobility with the highly rated New Zealand sovereign; the use
of the New Zealand dollar; the sound outlook for its key tourism sector;
financial and technical assistance from donor agencies; and the country's
insulated financial system.

"The stable outlook balances the Cook Islands' tourism sector prospects and
supportive relationship with New Zealand and donor agencies with the
challenges it faces in overcoming weak political and institutional settings
and infrastructure shortcomings to raise the prospects of the population,"
said credit analyst Kyran Curry. "We would lower the ratings if a weakening in
global economic conditions reduces tourism sector receipts, and in turn,
worsens the government's finances. A weakened commitment to upholding past
fiscal gains through undisciplined spending, and further sharp rises in the
debt burden could also bring pressure on the ratings."

Standard & Poor's sees little prospect for improvements in the Cook Islands'
creditworthiness without sustained gains in policymaking stability and
effectiveness, evidenced by the closing of sizable data deficiencies, strength
in the government's fiscal position, and progress in opening up the economy to
create opportunities for residents to stem the population decline.

Company: Cook Islands

Full company nameCook Islands
Country of riskCook Islands
Country of registrationCook Islands


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