Moody’s has downgraded the Province of Alberta’s credit rating, citing the province’s continued dependence on oil and ongoing fiscal pressures as reasons for pessimism.
Alberta’s credit rating has officially been downgraded to “Aa2 stable” from “Aa1 negative.”
The downgrade by Moody’s credit rating agency reflects an “opinion of a structural weakness in the provincial economy that remains concentrated and dependent on non-renewable resources … and remains pressured by a lack of sufficient pipeline capacity to transport oil efficiently with no near-term expectation of a significant rebound in oil-related investments.”
The agency’s rating stated that continued spending cuts will be needed for the provincial government to balance the budget by its set target of 2022. “Moody’s notes that the province’s forecast of a cumulative 3% decline in operating expenses by 2022-23 is somewhat ambitious which will require sustained political discipline,” said the agency in a news release.
Alberta Finance Minister Travis Toews said he was disappointed by the rating downgrade, which he blamed on the previous provincial government’s policies. Minister Toews did note in a news release that Moody’s did give the province a stable outlook and said since the release of the province’s budget in October that many economists and financial institutions have signaled that the budget is “getting our province back on track.”
Alberta is projected to end the 2019-20 financial year with an $8.7-billion deficit, up from $6.7 billion for 2018-19. Moody’s also downgraded the long-term debt ratings of the Alberta Capital Finance Authority and the long-term issuer rating of ATB Financial to Aa2 from Aa1.