VICTORIA – A skidding provincial economy has prompted a warning salvo from the company that sets credit ratings on British Columbia’s debt.
Moody’s Investors Service has revised its outlook on B.C.’s AAA rating from stable to negative, a move that Moody’s says affects the province’s approximately $39.8-billion in debt securities.
The change follows the release of the province’s second quarterly financial report last month by Finance Minister Mike de Jong, who reported the province’s annual deficit was projected to reach $1.47 billion, up from an earlier forecast of $1.1 billion.
De Jong blamed the problem on falling property taxes and lower prices for coal and natural gas, but insisted the government will still balance the budget next February.
Moody’s assistant vice-president Jennifer Wong, lead analyst for the province, was keeping close tabs on that pledge.
“The negative outlook reflects Moody’s assessment of the risks to the province’s ability to reverse the recent accumulation in debt with the softened economic outlook, weaker commodity prices and continued expense pressures,” said Wong.
“Should the province achieve its fiscal targets and stabilize and then reverse the recent accumulation in debt, the outlook could revert back to stable,” said added.
The Moody’s warning is not a downgrade of the province’s AAA credit rating, but changes the rating outlook from stable to negative.
NDP finance critic Bruce Ralston said Wednesday the Moody’s revision makes it difficult to believe de Jong will be able to reverse the economic tide.
“It speaks to … the bet that they made on natural gas revenue. They said it would go up and it has in fact gone down, and Moody’s points that out. That’s part of the reason for their concern,” said Ralston.
But Attorney General Shirley Bond, who is also vice-chair of the Treasury Board, said the change instead is a warning sign that serves to strengthen the government’s resolve to control spending.
“No question, tough choices will be required, but we have the discipline to make them and the ability to do it in a balanced way that preserves funding for health care, education and critical infrastructure,” she said in a statement released later Wednesday.
“We cannot forget that a major cause of the global economic downturn is economic jurisdictions that overspent.”
Bond noted the province has had seven consecutive credit upgrades from major credit rating agencies since 2004, which she said is a testament to the government’s fiscal discipline.
Note to readers: This is a corrected story. An earlier version incorrectly stated B.C.’s credit rating had been downgraded.