Bond rating agency gives provincial government negative outlook
S&P Global Ratings is warning the Newfoundland and Labrador government could face a credit rating downgrade in the next two years if it doesn’t take meaningful action to address its debt and deficits.
The agency held the province’s credit rating at “A”, but changed the outlook from stable to negative. A downgrade could happen even if the province achieves a new deal for Churchill Falls.
“The Province of Newfoundland and Labrador has significant economic opportunities for growth, such as the potential energy deal between Newfoundland Hydro (NLH) and Hydro-Quebec. Although not included in our current projections, the deal could generate considerable additional revenue for the province,” the agency said in a release.
“Nevertheless, higher healthcare costs and new affordability measures will lead to widening operating deficits and elevated after-capital deficits, with the province’s already high debt burden projected to keep rising.
“Accordingly, S&P Global Ratings revised the outlook to negative from stable and affirmed its ‘A’ long-term issuer credit and senior unsecured debt ratings, as well as its ‘A-1’ short-term issuer credit and commercial paper (CP) ratings on Newfoundland and Labrador.
“The negative outlook reflects our expectation that, despite robust economic activity and without a fiscal response by the government, weaker budgetary performance could persist, leading to a very high debt burden and escalating debt service costs.”
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