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One of the world’s biggest bond raters has cut Ontario’s credit rating to its lowest in 16 years, saying that revenue cuts by the Progressive Conservative government will exacerbate the province’s deficit and debt problems.

In a report issued Thursday afternoon, Moody’s Investors Service announced it had reduced Ontario’s long-term debt rating to Aa3 from Aa2. It was Moody’s second downgrade of the province this decade; the previous one was in 2012.

The move follows the province’s release of its fall economic statement last month, in which the first-year government of Premier Doug Ford estimated that it will run a deficit of $14.5-billion for the fiscal year ending March 31, 2019 – more than double what the previous Liberal government had projected in last spring’s budget. It also follows the release of the Financial Accountability Office of Ontario’s latest budget and economic outlook, which projected that the province’s deficits will inch higher over the Ford government’s four-year term – in part due to tax cuts that will take a bite out of revenues.

“While the province has not presented a multiyear budget plan, Moody’s expects that Ontario will post multiple years of material consolidated deficits, extending the current period of consolidated deficits that began in 2008-09,” the rating agency said. “Financing requirements for deficits and capital expenditures will result in an increase in the province’s already elevated net direct and indirect debt level.”

Ontario is the country’s most indebted province, with about $325-billion of net debt. Its debt-to-GDP ratio is expected to top 40 per cent this year, second only to Newfoundland and Labrador.

Moody’s said that it expects Ontario’s economic growth to “moderate” to below 2 per cent annually over the next three years, which will hurt provincial revenue growth, "increasing the challenge of returning to balanced budgets.

“Recent actions undertaken by the province have included measures that reduce revenue levels, adding to budgetary pressure,” it noted.

The new credit rating matches the one set by Moody’s when Premier Mike Harris came into office in the mid-1990s, famously vowing to clean up the fiscal mess left behind by previous NDP and Liberal governments. After years of austerity by the Harris government, Moody’s upgraded the province to Aa2 in 2002. It raised it again to Aa1 – its second-highest rating – in 2006. The highest ratings are typically reserved for national governments.