Moody’s Investors Service says that Canada’s Aaa ratings are supported by its superior economic performance, and government finances that have held up better than most other top-rated sovereigns in the wake of the global recession.
In its annual report on Canada, Moody’s also notes that the country did not suffer a financial crisis as serious as the one that affected the U.S. and a number of European countries. “Although the recession caused a reversal of the improvement in the debt ratios, they did not deteriorate as much as in most other Aaa-rated countries, are now on an improving trend, and remain compatible with the country’s Aaa rating,” says the Moody’s report.
“On the public finance front, Canada’s ratios of general government debt to GDP and to revenue moved significantly downward over the decade through 2008,” says the Moody’s report. “In facing the global crisis, the federal government’s balance sheet started from a strong position.”
The rating agency’s report also highlights the country’s “very high degree of economic resiliency, its very high government financial strength, and its low susceptibility to event risk”. It argues that the economy’s resilience is demonstrated by very high per capita income, the large scale of the economy, and its diversity. A reduced dependence on external financing also contributes to ability to avoid event risk.