The outlook for Canada’s provinces, which has been negative since the onset of the recession in 2008-2009, has improved to stable for 2016, says a new report from Moody’s Investor Services.
The improved outlook “reflects the fact that the provinces are approaching balanced budgets and stabilizing their debt burdens,” the rating agency says in a statement.
A brighter economic forecast is also key to the improved outlook for the provinces Moody’s says, noting that an improving U.S. economy, a weak Canadian dollar, and the promise of several large infrastructure projects, look likely to bolster the economy.
“We expect that economic growth will pick up next year and in 2017,” says Michael Yake, vice president and senior analyst at Moody’s. “Continued economic growth in the U.S. should help many of Canada’s provinces through increased exports.”
Additionally, the fiscal position of most provinces is improving “as deficits narrow and debt burdens moderate,” the Moody’s statement says. Recent tax increases should help provincial revenues grow next year, too, it adds.
On the spending side, “The modest pace of economic growth will help temper wage expectations for public sector workers, holding down a key cost for provincial governments,” the Moody’s statement says.