Canada Maintains its AAA Rating With S & P
Canada's AAA rating has just been confirmed by S & P Global Ratings. The ratings agency mentioned Canada's "ample fiscal and monetary buffer and its diversified economy"
"Canada's public finances were well positioned entering the pandemic to enable a strong policy response to contain its negative impact without weakening sovereign creditworthiness," explained S & P analysts.
S & P's rating is based on the belief of an economic rebound that will narrow Canada's fiscal gap. The Canadian government's deficit may approach 16% of economic output this fiscal year, the biggest since 1945, while the economy is on path to shrink 6.8% in 2020, the most substantial drop in nearly a century.
"We expect the Canadian economy to recover in 2021, which will partially compensate for the loss of output this year, and continued GDP growth thereafter." noted S & P analysts. "This recovery will lead to an improvement in the government's deficit in 2021"
Canada and Gerrmany are the only G7 members who have maintained their AAA ratings with S & P.
"We could lower the ratings over the next two years should the deterioration in the government's fiscal position become more severe and prolonged than we currently anticipate, S & P said. "We could also lower the ratings should a deteriorated fiscal position be accompanied by a substantial weakening in Canada's net external position beyond our current expectations"