Standard and Poor’s (S&P) Global Ratings has downgraded Alberta’s credit rating from “AA” status to an “A+.”
In a news release issued Friday afternoon, S&P said “continuing budgetary performance deterioration and growing debt” were behind the move.
“Alberta’s projected deficits after (capital expenditures) over the next two years are among the highest of rated non-U.S. local and regional governments and, absent other measures, our expectation is that this will lead to further rapid growth in the province’s debt burden.”
The agency said low oil prices and elevated capital spending will continue to put pressure on the province’s budget and debt, and that the credit rating downgrade reflected that reality.
The credit rating agency said it’s unlikely they will give the province another downgrade in the next two years.
“We could lower the rating by one notch if the province significantly depleted its liquidity to address its structural budget shortfall. Such a depletion, coupled with a scenario that included prolific debt issuance and a lack of impactful fiscal policy responses, would cause us to weaken our financial management assessment.”
However, S&P also said if an improvement in energy prices leads to GDP growth and higher tax and resource revenues, the agency could upgrade Alberta’s rating by one notch.
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In a written statement, Alberta Finance Minister Joe Ceci continued to defend the province’s fiscal plan in the face of the downgrade.
“Our government had a choice. Had we made deep cuts that might have satisfied some bond raters, it would have resulted in a much deeper and longer recession,” Ceci said. “We take a longer-term view of Alberta’s economy.
“I believe this rating change overlooks many of the positive things happening in our province right now.”
Opposition Leader Brian Jean used the credit rating downgrade to once again take aim at the NDP’s fiscal plan, calling the government’s budgets and policies “disastrous.”
“These ongoing downgrades will mean millions more in debt-servicing costs coming out of the pockets of everyday Albertans,” Jean said in a written statement. “This is totally unacceptable for a province that once led the world in fiscal prudence.”
Progressive Conservative caucus leader Ric McIver believes the downgrade is going to hit the province in the pocketbook.
“It’s going to make everything the government does more expensive,” McIver said. “This really speaks to how backwards this NDP government is.”