Canada retains top credit rating

Posted Aug 16, 2012 by Ken Hanly
Moody's Investors Service has renewed the triple-A rating for Canada. A review by the company found that Canada's economic performance and financial situation was sufficiently strong to retain the high rating.
Bank of Canada
The Bank of Canada Building in Ottawa
Photo by Peregrine981
The Moody's report noted:"Although the recession caused a reversal of the improvement in the debt ratios, they did not deteriorate as much as in most other Aaa-rated countries, are now on an improving trend, and remain compatible with the country's Aaa rating."
Before the recession began, the federal government actually had been running budget surpluses for a number of years. With the recession, however, the Harper Conservative government spent on infrastructure and other projects meant to stimulate the economy. These expenditures and falling tax revenues because of the recession led to rising debt.
Many countries have had their credit ratings downgraded, particularly in Europe, and Canada remains among the few with triple-A ratings. Economist Dana Peterson and strategist Brett Rose claim that Canada has both political and fiscal stability and predict that rating agencies "will likely retain Canada's triple-A status in both the near and long term." Citigroup also had favorable predictions for Canada, noting that Canada was well ahead of schedule to cut the Canadian deficit by half by next year. The group said:
"Much of the savings are anticipated to come from restrained government program spending as well as moderately improved Canadian economic prospects...These actions may place additional drag on real output this year, but should be favourable for the Canadian economy over the longer term."
Credit ratings are one of the factors that determine the prices of bonds and also interest rates. High ratings are needed for certain funds such as pension plans. Often the ratings are used by politicians to show how well they are doing or by the opposition to show how badly a government is doing!