Moody’s has negative outlook for provinces in 2021

Canada’s provincial governments will be under pressure from the effects of Covid-19 in 2021, particularly the energy-dependent provinces, according to Moody’s Investors Service.

The rating agency said its outlook for the provinces in 2021 is negative as government finances will face continued spending pressures due to the pandemic.

For the oil producing provinces, the pandemic effects will be augmented by the added fiscal challenge stemming from low oil prices, which Moody’s said “are too low to encourage significant private sector investment and will continue to suppress provincial oil royalties.”

“Multi-year deficits are expected to arise for most Canadian provinces,” said Michael Yake, senior vice president at Moody’s, in a release.

“Although some recovery in budgetary imbalances will begin in fiscal year 2021-22, we expect material deficits to continue as provinces delay implementation of fiscal consolidation measures until pandemic pressures have fully eased,” he added.

Moody’s noted that the provinces will continue to benefit from federal supports and the low interest rate environment will enable governments to carry higher debts.

Still, it expects provincial debt issuance will remain high in 2021 “with the aggregate provincial debt burden is expected to increase to 222% in fiscal year ending March 31, 2022.”

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.