Manitoba has followed Ontario by becoming the second Canadian province to have its credit rating downgraded this week amid concerns about its debt.
New York-based Moody’s Investors Service Inc. downgraded the Manitoba’s senior unsecured ratings to Aa2 from Aa1, citing the province’s deteriorating debt and fiscal situations. Specifically, the credit-rating agency notes that the provincial government extended its planned return to balanced budgets by another two years in its 2015 budget. Moody’s also reports that the province’s debt burden has increased to an expected 143% of revenue at the end of fiscal 2014-15 from 116.7% at the end of fiscal 2010-11.
“The downgrade to Aa2 reflects the deterioration in Manitoba’s financial metrics leading to an increased debt burden and our expectation that the province will face significant challenges in achieving fiscal balance by 2018-19,” says Kathrin Heitmann, Moody’s lead analyst for Manitoba, in a statement.
The stabilization of Manitoba’s debt burden will depend on political willingness to rein in spending, Moody’s says, adding that it views the province’s current spending plans as “challenging.”
The outlook on the Manitoba’s credit rating is stable and Moody’s says it expects the province to outperform Canadian economic growth over the next couple of years, with forecasted real gross domestic product growth of 2.5% in 2015 and 2.3% in 2016.