CANADA: Moodys Affirms Canada’s Aaa Rating – Maintains Stable Outlook

Monday November 7 2016

Moody`s Investors Service has affirmed Canada`s Aaa government issuer ratings, the Aaa senior unsecured rating, the (P)Aaa senior unsecured MTN and shelf ratings, and the (P)P-1 short-term rating. The stable outlook is maintained.

The main factors supporting the rating affirmation are:

• Canada`s flexible and competitive economy, supported by exceptionally strong institutions and economic policy management, which underpins its capacity to absorb negative economic shocks and bolsters its robust growth potential
• Moody`s expectation that government debt ratios, including a low federal debt burden, will remain stable in the next two years and decline gradually in subsequent years, alongside the demand for Canadian assets from long-term investors which we expect to continue to foster stable financing conditions
• Strong institutions that underpin a well regulated financial system that would absorb a potential housing shock with minimal fiscal costs for the government

The ongoing adjustment to a prolonged period of low oil and gas prices and somewhat slower growth in the US, combined with financial risks from rising house prices and household debt levels pose downside risks to our economic and fiscal projections. However, Moody’s base their stable outlook on the expectation that continued vigilance by Canadian authorities reflective of very strong institutions will succeed in mitigating such risks, thereby preserving Canada`s Aaa sovereign credit profile.

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