FREDERICTON – Standard & Poor’s has reaffirmed New Brunswick’s credit rating of ‘AA-‘ and describes the province’s credit outlook as stable.
“This is based on the province’s historically strong record in managing its finances, stable debt burden, and ample liquidity,” states a report released by the rating agency.
“The stable outlook reflects our expectation that New Brunswick will remain on track with its plan “to return to a balanced budget position in the medium term.”
Acting Finance Minister Jack Keir says the rating reflects confidence in the Liberal government’s handling of the economy.
“This is the third credit agency that has looked at our plan for the finances of New Brunswick and said we’re headed in the right direction,” said the MLA for Fundy-River Valley.
“It’s a great news story. I think New Brunswickers should take some comfort from this.”
According to Keir, New Brunswick continues to have the highest credit rating of any province east of Ontario.
The Standard & Poor’s report says the province has a number of credit strengths. It cites New Brunswick’s historically “robust” budgetary performances, even though the province is currently in the red and is facing the prospect of “weakening” finances over the next three fiscal years.
“The province expects to continue facing extraordinary budgetary pressures, which we believe could result in operating shortfalls through the next three fiscal years,” the report states.
But the agency is encouraged by the significant financial support that is to come from the federal government, in the form of equalization payments and transfers for health and other social programs.
It notes that 38 per cent of the province’s revenue in fiscal 2009 came from Ottawa.
Yet the positive credit rating doesn’t come without some concerns. For example, the global economic recession could continue to dampen or reverse growth of the province’s haul of sales tax, personal income tax and corporate income taxes. And a decline in the rest of the country could mean less money in equalization payments flowing from Ottawa in fiscal 2011 and beyond, the report notes. As well, the state of the province’s pension assets are a lingering concern because of continuing volatility in the financial markets.
Standard & Poor’s notes the province will have large borrowing requirements over the next three fiscal years as it struggles through deficit spending. The Grits’ 2009 budget projected a $741-million deficit, though the Opposition Conservatives estimate that shortfall has already reached $1 billion because of declining tax revenue. The Graham government’s efforts at fighting the economic downturn have mainly focused on an expanded capital budget – aimed to create jobs and pump money into the economy.
Charles Cirtwill contends the credit rating is a positive sign for the Liberal government, and politically speaking, comes at a good time.
“It would have been nicer to see it go to a AAA rating, but that’s unlikely to happen in a recession,” said Cirtwill, of the Atlantic Institute for Market Studies, a Halifax-based think-tank.
“This isn’t the gold standard, but it’s pretty good news for Mr. Graham and his friends.
“I think it’s a reasonably strong endorsement.”
The Standard & Poor’s rating follows a rating by the Dominion Bond Rating Service in June, which confirmed New Brunswick’s credit rating at A (high) with a stable outlook.