S&P Global Upgrades Cook Islands Credit Rating to BB-

S&P Global Ratings has upgraded the long-term sovereign credit rating of the Cook Islands to BB- from B+, citing a robust recovery in tourism and disciplined fiscal management. The agency assigned a stable outlook to the nation, while affirming its short-term sovereign rating at B and maintaining its transfer and convertibility assessment at AAA. The upgrade is primarily attributed to buoyant economic conditions fueled by strong tourist arrivals. Additionally, government spending has remained below budget, particularly regarding wages and capital expenditure. While a small fiscal deficit is anticipated for the current year due to the withdrawal of budget support from New Zealand and increased capital investments, S&P expects tourism income and expenditure reprioritization to mitigate long-term impacts. The Cook Islands' net debt has seen a significant reduction, falling to 16.4% of GDP in fiscal 2025 from a peak of 37.6% in fiscal 2022. This improvement was supported by rising tourism revenue and concessional financing from donors. S&P projects that net debt will continue to decline after 2026, stabilizing between 15% and 20% of GDP over the subsequent three years. Despite the upgrade, the rating remains constrained by several factors. These include a narrow economic base, limited statistical capacity, and the absence of an independent monetary policy. The nation also remains vulnerable to external shocks, such as fluctuating fuel costs and potential strains in diplomatic relations with New Zealand.