Moody’s reports brighter outlook for Ontario

By Staff | May 4, 2023 | Last updated on May 4, 2023
2 min read
Ontario Queen's Park Legislative Building
istock/JHVEPhoto

Moody’s Investors Service is turning positive on Ontario’s fiscal future, upgrading its rating outlook to positive from stable.

In a new report, the rating agency boosted the province’s baseline credit assessment to a1 from a2 and upgraded its rating outlook. Moody’s also affirmed Ontario’s issuer rating and its long-term and short-term debt ratings.

“The positive outlook for Ontario reflects Moody’s analysis that the risks related to the province’s fiscal and debt dynamics are skewed to the upside,” it said.

While the slowing economy and ever-growing demands on government spending will challenge the province’s ability to keep its budget balanced, Moody’s said it now sees “a material probability” that Ontario gets back to balance faster than it previously thought.

This view is supported by the province’s revenue collection and “a building track record of controlling spending even when revenue exceeds prior expectations,” it said.

Balancing the budget sooner would allow the province to reduce its debt and keep its debt service costs under control, despite higher interest rates, the rating agency noted.

“The lower debt burden and nearly balanced budget also provide for greater shock absorption abilities than the province previously possessed, should Ontario [be required] to implement policies to address a markedly slowing economic environment,” Moody’s said.

The positive outlook means Ontario’s credit ratings are unlikely to be downgraded, and that they could be upgraded “if clear evidence emerges that the province’s planned fiscal path of near balanced budgets remains resilient even as economic activity and inflation slow, accompanied by a continued decline in the province’s debt burden.”

Advisor.ca staff

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.