Thursday, April 19, 2018

WYNNE'S RESULT: ONTARIO'S CREDIT RATING LOWERED

   Lilley:  Moody’s downgraded Ontario’s credit rating today from “stable” to “negative” and how some warnings about the books in the future. The reason for this downgrade? The Wynne budget that ramped up spending in a bid to stay in power.
    While this budget may not be implemented post-election, in Moody’s opinion it highlights growing spending pressure that will need to be addressed in the near future. As the economy is expected to slow, with real GDP growth forecasted to fall from 2.7% in 2017 to 1.7% by 2021, revenue generation will be slower than previously recorded, limiting the province’s ability to rely on revenue growth to balance the spending pressure.
    Higher spending, slowing economy, that means lower government revenue and more borrowing. Check out what Moody’s said about the province’s debt levels.The province’s debt is expected to measure 233% of revenues in 2017/18, up from Moody’s previous estimate of 227%. Financing to fund deficits and capital spending will continue to push the debt burden higher, with Moody’s expectations that it could exceed 240% by 2021/22. Moody’s assesses this level of debt to be elevated compared to similar rated peers. Increased debt financing will also occur during a time of rising interest rates, which will accelerate the increase of the province’s interest expense.

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