WELLINGTON, April 1 (Reuters) – S&P Global Ratings raised the Cook Islands’ long-term sovereign credit rating to BB- from B+ late on Tuesday, citing a tourism-driven economic rebound and fiscal prudence that has strengthened government finances.
It assigned a stable outlook to the rating and affirmed the Pacific island nation’s short-term sovereign rating at B and kept its transfer and convertibility assessment at AAA.
S&P said the upgrade reflected “buoyant” economic conditions helped by strong tourist arrivals and government spending coming in below budget, particularly on wages and capital expenditure.
Although S&P expects a small fiscal deficit in the current year, reflecting the withdrawal of budget support from New Zealand and higher capital spending, it said stronger-than-expected tourism income and reprioritised expenditure should cushion the impact in later years.
The agency expects Cook Islands’ net debt to continue falling after 2026, remaining around 15% to 20% of GDP over the following three years. Net debt dropped to 16.4% of GDP in fiscal 2025 from a peak of 37.6% in fiscal 2022, aided by rising tourism revenue and concessional donor financing.
Still, the agency said the rating remained constrained by the Cook Islands’ narrow economic base, weak statistical capacity, lack of independent monetary policy and exposure to external shocks, including higher fuel costs and strains in relations with New Zealand.
(Reporting by Lucy Craymer in Wellington, New ZealandEditing by Matthew Lewis)
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