A leading global credit agency has given B.C.’s credit rating the highest possible grade — AAA — and a stable outlook for the future, inclusive plenty of praise for the strength of the provincial economy.
B.C.s credit profile, which remains unchanged from Moody’s Investor Service’s last assessment, reflects what the agency calls “a resilient economy with a diversified sector base” whose key industries include real estate, wholesale and retail trade, tourism and construction.
“This economic strength is also supported by an important natural resources sector, primarily natural gas and forestry products and we expect that increased global demand for Canadian resources will further support the province’s natural resources sector,” it reads.
Overall, B.C. has a broad tax base, which ensures that the province won’t be strongly impacted if one sector declines. B.C. also has a relatively low level of taxation, which means it can raise taxes if necessary while still remaining competitive.
“These factors support the province’s attractiveness to businesses and individuals, and also contribute to strong domestic migration from other provinces and international immigration,” it reads.
Overall, Moody’s assessment sees the province well-prepared for any future economic headwinds because of its diverse economy and “significant fiscal conservatism, including large contingencies.”
This assessment comes after S&P Global Ratings downgraded British Columbia’s credit rating from AA+ to AA and revised its outlook from stable to negative in April.
Two other rating agencies — Fitch Ratings and DBRS Morningstar — had confirmed their respective ratings of B.C.’s credit rating at AA+ with a stable outlook and AA (high) with a stable outlook.
These ratings essentially cast judgement about B.C.’s ability to charge money against its credit card and economic management with consequences for the public purse. Higher ratings mean British Columbia pays lower interest rates when borrowing money, meaning more money is available for purposes apart from paying interest.
Moody’s report, however, also contains some warnings.
The future deficits facing B.C. not only reflect slower economic growth and spending in priority areas such as housing and affordability, but also more money going toward fire and flood management, it reads.
The report also points out B.C.’s vulnerability to trade interruptions in the Asia-Pacific region. It has seen growing tensions in the face of specific threats by Communist China against the democratic island of Taiwan and general efforts by the United States and other western powers including Canada to contain China’s growing economic and political influence.
Finance Minister Katrine Conroy sees Moody’s assessment as confirmation that B.C.’s economy is heading in the right direction.
“B.C. is an economic and financial leader among provinces, with the highest ratings across the four rating agencies,” she said. “Investing in the services people need, including through continued record levels of capital investments, has helped us maintain our economic strength. These assessments validate our strong fiscal management plan to continue supporting people and communities through challenging times.”