As the global economy reels and oil prices plunge, DBRS Inc. says that the credit ratings of Canada’s key energy-producing provinces will suffer.

The rating agency has downgraded Alberta and put its ratings for Saskatchewan and Newfoundland and Labrador under review with negative implications.

“The rating actions stem from the deteriorating global economic conditions and the sharp decline in global oil prices caused by the outbreak of [Covid-19] and measures taken by Saudi Arabia and Russia to recapture market share,” DBRS said.

“If sustained, DBRS Morningstar believes that these factors will have a material impact on the provincial economic activity and public finances of Canada’s main oil and gas-producing provinces,” it added.

DBRS downgraded Alberta’s issuer rating and its long-term debt rating to AA (low) from AA. It also reduced its short-term debt rating to R-1 (middle) from R-1 (high) and changed the trend on Alberta’s short-term debt to stable from negative.

“DBRS Morningstar believes that Alberta’s credit profile is no longer consistent with a AA rating and that risks remain firmly tilted toward the downside,” the rating agency said.

For Newfoundland, DBRS said that it expects the decline in oil prices to “significantly and adversely affect the oil & gas activity and government revenue, prompting a deterioration in budgetary results and further debt growth.”

However, the rating agency said that it has not yet determined whether rating action is necessary, as “the full extent of the deterioration is not clear at this time.”

DBRS also said that “Saskatchewan’s economy and government finances will be adversely affected by the downturn in oil prices, but the extent to which its credit profile will deteriorate is less clear than for Alberta and Newfoundland and Labrador.”

“In contrast with the other two provinces, Saskatchewan’s budget was balanced before the economic shock, its O&G industry is relatively less important to its economy, and O&G royalties account for a smaller share of its revenue,” DBRS said.

DBRS aims to resolve the review on Saskatchewan’s and Newfoundland’s ratings in the next three months.