Provinces no longer 'negative'
Moody’s now sees the outlook for Canada’s provinces as “stable” for the first time since the financial crisis.
The oil-dependent provinces still face troubles, of course, as do public sector workers striving for major wage gains in an era of restraint.
But the new report from the U.S. credit rating agency will no doubt be a welcome change for provincial governments.
“The outlook for Canadian provinces has improved to stable for 2016, having been negative since 2008/09, the start of the Canadian impact stemming from the global financial crisis,” Moody’s said.
“The provinces are approaching balanced budgets, growth in their debt burden is moderating, and the deterioration in their credit profile that has occurred in recent years is slowing as a result,” it added.
“Fiscal pressures are now specific to each province rather than systemic, with oil-producing provinces facing the greatest challenge due to the downturn in global oil prices.”
Moody’s also now projects economic growth in Canada of between 1.5 and 2.5 per cent next year.
Fiscal “pressures” are easing, and the provinces now have a good record of restraint, it added, though there are issues.
“Pressure from low oil prices is largely restricted to oil-producing Alberta and Newfoundland and Labrador,” the agency said.
“Several provinces face a growing infrastructure investment backlog, which will be a key debt driver once they balance their budgets.”
Provincial revenues could still fall short of next year’s goals because of the weaker economy, Moody’s said, but “fiscal conservatism” will shelter credit quality.
“Modest economic growth will also temper wage expectations within the public sector, a key component of cost inflation for provincial program spending.”
Bank of Canada holds the line
The Bank of Canada held its key rate at 0.5 per cent today, signalling it will stand pat even as the Federal Reserve heads toward a rate hike.
After cutting rates twice this year to counter the hit from the commodities slump, Canada’s central bank kept rates unchanged for the third straight time, The Globe and Mail’s Barrie McKenna reports.
“The ongoing terms-of-trade adjustments and shifting growth prospects across different regions are contributing to exchange rate movements,” the central bank said in a statement. “In this context, [monetary] policy divergence is expected to remain a prominent theme.”
The bank also warned that GDP growth in the final three months of this year has likely slowed from the strong 2.3-per-cent pace reached in the third quarter. But it said economic growth would start to move “above potential” in 2016.
RBC profit climbs
Royal Bank of Canada is coming off a $10-billion year.
The bank today posted a 2015 profit of more than $10-billion, or $6.73 a share, up 11 per cent from 2014’s $9-billion or $6.
Fourth-quarter profit also climbed 11 per cent, to $2.6-billion or $1.74 a share.
Chief executive officer Dave McKay noted in a statement that “we face industry headwinds” in 2016.