REGINA – Newfoundland and Labrador is expected to have a tougher time weathering low oil prices than its resource-rich brethren in the West, according to a new report by Moody’s Investors Service.
The credit-rating agency says Newfoundland and Labrador, Alberta and Saskatchewan have enough flexibility to maintain their credit profile even if crude fell to US$60 per barrel and stayed there through the 2015-2016 fiscal year.
All three provinces have a track record of adjusting their spending to market conditions and have strong liquidity positions, but Moody’s says a prolonged slump would hit government coffers.
Newfoundland and Labrador, which anticipates a $538-million deficit for 2014-2015, is expected to come under the greatest pressure as it has not built up contingency funds to the same extent as Alberta and Saskatchewan.
Even though Alberta is Canada’s biggest oil-producing province, Moody’s says it has the strongest protection against price volatility. It forecasts a $1.4-billion surplus and its direct oil royalties account for 18 per cent of its total revenues, providing some wiggle room.
Saskatchewan is budgeting for a surplus of just $75 million, but oil royalties account for only 11 per cent of revenues and it has been putting money into a Growth and Financial Security Fund.