Standard & Poor’s Ratings Services today said that the Conservative government’s Budget Plan 2008, will not affect the ratings on Canada (AAA/Stable/A-1+).

“The budget won’t affect the ratings even though the federal government is planning for smaller surpluses than in recent years,” said S&P credit analyst Nikola Swann, in a release.

The budget foresees debt reduction of $10.2 billion in fiscal year 2007-2008 (ending March 31), $2.3 billion in 2008-2009, and $1.3 billion in 2009-2010. Both weaker economic growth and tax reductions will reduce revenues in the coming fiscal year as expenses continue to grow.

S&P says the budget matches its previous expectations of near-zero or very small federal surpluses, as the budget predicts debt reduction of less than 1% of GDP in 2007-2008, and declining (though still positive) in the following two years.

“Planning is less conservative than previous budgets that contained contingency reserves to ensure balance. By the government’s own estimate, a 1% decline in real GDP growth in 2008-2009 would cause a small deficit in the coming two fiscal years,” S&P says.

“Still, the most likely outcome remains balance or slightly better, which implies Canada’s fiscal performance will continue to top those of ‘AAA’ rated G-7 countries (including the U.S., the U.K., France, and Germany), while remaining significantly weaker than those of the ‘AAA’ rated Scandinavian nations (Sweden, Denmark, Finland, and Norway),” S&P concludes.