Fitch Ratings has downgraded Canada’s triple-A credit rating to AA+ in light of “much expanded” 2020 deficits due to billions in emergency spending during the novel coronavirus pandemic.
The decision reflects growing public debt at both the federal and provincial levels. The downgrade of Canada’s long-term foreign currency issuer default rating is the first change since Fitch assigned Canada a AAA rating in that category in August, 2004.
“The rating downgrade reflects the deterioration of Canada’s public finances in 2020 resulting from the coronavirus pandemic,” the agency stated. Wednesday’s announcement says Canada’s rating outlook is stable.
Fitch expects the coronavirus response to raise Canada’s consolidated gross general government debt to 115.1 per cent of GDP, up from 88.3 per cent of GDP in 2019.
“Canada has a track record of fiscal adjustment during the 1990s. However, the structure of Canada’s decentralized fiscal framework increases the complexity of any fiscal adjustment,” the agency said.
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