Moody‘s Investors Service downgrades Alberta credit rating, cites weak economy

EDMONTON — The Alberta government‘s credit rating has been downgraded by an agency that cited the province‘s reliance on oil revenue and what it calls its high environmental risk.

Moody‘s Investors Service has adjusted the province‘s rating to Aa2 stable from Aa1 negative.

The rating service cites weakness in the provincial economy that remains concentrated and dependent on non-renewable resources – mainly oil.

It says reliance on such resource revenue causes volatility in financial performance and remains pressured by a lack of sufficient pipeline capacity to transport oil efficiently.

Moody‘s also focused on climate change.

“In Moody‘s assessment, environmental considerations are material to Alberta‘s credit profile and Moody‘s considers environmental risk to be high,” the report said.

“Alberta‘s oil and gas sector is carbon intensive and Alberta‘s greenhouse gas emissions are the highest among provinces.

“Alberta is also susceptible to natural disasters including wildfires and floods which could lead to significant mitigation costs by the province.”

United Conservative Finance Minister Travis Toews blamed the lower rating, which affects how much interest the government pays on borrowed money, on previous governments.

“Over the past four years, the previous government drove Alberta into a fiscal crisis with policies that weakened growth and business competitiveness,” Toews said Tuesday in a release.

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“That‘s why balancing Alberta‘s budget, growing the economy and creating jobs are our top priorities.”

Toews says that Moody‘s did provide Alberta with a “stable outlook” that he says is clear recognition that its plan to balance the budget has merit.

Moody‘s noted that expected improvements in deficits over the next three years will lead to a moderation in the pace of debt accumulation.

But the report also says the government‘s plan, including reduction in the corporate income tax rate and elimination of the carbon tax, will pressure revenues over the next few years. At the same time, other economic factors, which influence oil-related revenue growth and private sector investments in the oil sector, remain outside the government‘s control.

“As a result, the government‘s fiscal projections are subject to material execution risk,” Moody‘s said.

NDP finance critic Shannon Phillips said the report shows the government is not moving to diversify the economy and that its corporate tax cut plan is risky.

“We also have further proof the UCP economic plan is not working,” Phillips said in a release. “The $4.7 billion corporate giveaway has created no jobs to date.”

Moody‘s has also downgraded the long-term debt ratings of Alberta Capital Finance Authority and the long-term issuer rating of ATB Financial to Aa2 from Aa1.

This report by The Canadian Press was first published Dec. 3, 2019.

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