The latest rating agency to weigh in on Ontario’s prospects has downgraded its ratings on the province.
Moody’s Investors Service Thursday downgraded the Province of Ontario’s issuer and debt ratings to Aa2 with stable outlook from Aa1 with negative outlook.
The move affects approximately $202 billion in debt securities, and is based on the rating agency’s worries about the province’s austerity plans. The downgrade comes on the heels of Standard & Poor’s Ratings Services affirming its ratings, but cutting the outlook to negative. And, DBRS which affirmed its ratings.
As with the other rating agencies, which haven’t downgraded, Moody’s says that it’s worried about the viability of the province’s fiscal plan, which rests largely on significant expenditure restraint. “Expense growth targets appear particularly ambitious in light of growth in expenses averaging 7% annually in the five years to 2011-2012 and continued pressures on health expenses, the province’s largest expense item, due to demographic pressures,” it says.
Moody’s says that the extended period of consolidation and the ambitious expenditure targets pose significant risks to the province’s ability to achieve their medium-term fiscal targets, and ultimately to reverse the recent accumulation in debt.
“The downgrade of Ontario’s rating reflects the growing debt burden and the risks surrounding the province achieving its medium-term fiscal plan given the subdued growth outlook, extended timeframe back to balance and ambitious expenditure targets,” said Moody’s assistant vice president, Jennifer Wong, lead analyst for the province.