Fitch Ratings Inc. downgraded Canada’s AAA credit rating

On Wednesday, Canada lost its AAA credit rating from Fitch Ratings Inc., which downgraded it to AA+ rating and provided a stable economic forecast.

According to Fitch, the government’s COVID-19 response measures will increase Canada’s debt to 115.1% of GDP this year. Meanwhile, it was 88.3% in 2019.

Nevertheless, the agency predicts Canada’s improving debt-to-GDP over the medium term.

“It would be much worse for Canadians and the national economy to not act at all”, – says Finance Minister Bill Morneau. “Canada’s COVID-19 response provides the necessary support to workers and businesses so that they could withstand this crisis and return.”

“Further, we’ll keep being fiscally responsible and protecting our country and its economy.”

Yves Giroux, Canada’s parliamentary budget officer, says there would be more reasons to worry in case all rating agencies downgraded Canada and left other countries’ ratings unchanged. In addition to it, he says we need to see the plan from the federal government in its July 8 fiscal outlook.

At the same time, Giroux admits that if Moody’s and Standard & Poor’s follow the example, it will be a warning sign.

One of Giroux’s PBO predecessors expects this change to worry the Trudeau government.

“It’s certainly a signal for the federal government,” – noted Kevin Page. “The AAA rating was included into the federal government’s 2019 election platform.”

“There’s only one direction in this case, as you can’t rise above AAA”, – he said. “It remains a very high rating”.

Since the pandemic started, Canada’s AAA rating has been thoroughly investigated, as the federal spending on aid measures exceeded $150 billion.

According to Ontario economic development Vic Fedeli, such spending will have long-term consequences.

“We understand the importance of deficits and debt, but there are many families who need the support today,” – he noted. “And yes, we’ll have to pay the price for it”.