- Category: Economic
- Published Monday, January 18, 2016
- CTV News
EDMONTON -- A second major bond rating agency has changed its credit outlook for Alberta.
Moody's is shifting its outlook to negative from stable, but Alberta retains its triple-A rating.
"The negative outlook for the province of Alberta reflects the rising risk that the province's fiscal position will deteriorate further than previously expected in an environment of protracted low oil prices and deterioration of economic activity," Moody's said in a release Monday.
"Moody's forecasts that revenue shortfalls stemming not only from direct natural resource royalties but also from the broad economic impact of the slump in the oil sector will lead to larger deficits in the short- and medium-term than those budgeted by the province," the release said.
"This will translate into higher debt burdens and a faster draw on reserves than previously anticipated."
Tanking oil prices that now are hovering under US$30 a barrel for West Texas Intermediate have already hit the province hard. This year's budget calls for a deficit of more than $6 billion and thousands of oilpatch workers have been laid off.
Standard and Poors downgraded Alberta's rating to double-A-plus from triple-A in December.
"There is no question that Alberta's and the broader Canadian economies are now facing serious shocks," Finance Minister Joe Ceci said at a late-afternoon news conference. "The government of Alberta does not control the price of oil."
He tried to put the move by Moody's in perspective.
"They have affirmed our triple-A credit rating, so that is great," he said. "They have put us on a watch, which really just is a result of oil and where that's at and its impact on our economy."
Increased spending on health and education as promised in last May's election campaign is not going to be pared down, Ceci said. He also pointed to a report by former Bank of Canada governor David Dodge last summer that suggested the province is "on the right track" with its plans to ramp up infrastructure spending.
Those plans, along with increased expenditures in core areas, are forecast to send Alberta more than $47 billion into debt by the end of the decade.