Standard & Poor’s Ratings Services affirmed its ratings on the Province of Quebec today. The outlook is stable.

“The ratings on Quebec are supported by its continuing compliance with the Balanced Budget Act in the past seven years as a result of robust revenue growth and prudent expenditure management,” says Standard & Poor’s credit analyst Mario Angastiniotis. The Act requires that the province maintain a balanced budget (excluding capital spending).

The province also benefits from a large and well-diversified economy that has strong manufacturing and service sectors, S&P says. “Although Quebec’s economy under performed in 2004, its growth was still respectable despite the sharp rise in both oil prices and the Canadian dollar, which were a big drag on economic growth,” it adds.

Quebec still has a significant public sector debt burden, which still remains high relative to peers, S&P notes. The province’s net public sector debt (net tax-supported debt plus unfunded pension liabilities) is expected to move modestly lower to 54.8% of gross domestic product in fiscal 2006, from 55.8% in fiscal 2005.

The stable outlook reflects S&P’s expectation that, despite reduced financial flexibility resulting from the relatively small targeted tax measures and near-term budgetary pressures, “the government will stay the course with its stated objectives of maintaining a balanced budget and will continue to make progress in reducing the province’s overall public sector debt burden.”