Fitch Ratings has affirmed its “AAA” rating for Canada with a stable outlook, the New York-based credit rating agency announced on Friday.
The rating balances structural strengths such as Canada’s advanced economy, political stability and strong governance against high levels of government indebtedness, Fitch says in a news release.
Despite the high debt burden, the government’s deficit is “relatively modest”, Fitch says, and is expected to remain below 1% of gross domestic product (GDP) in the 2018-2020 period.
Fitch expects 2% GDP growth this year, declining to 1.6% by 2020.
On the monetary policy front, Fitch expects the Bank of Canada to follow a more gradual path to higher rates than the U.S. Federal Reserve due to risks stemming from U.S. trade policy and high household debt.
Policy actions have helped slow the growth of household debt, Fitch says, and it believes “that the financial system and individual institutions are robust in the event of a downturn in the housing market.”