Moody’s maintains Canada Aaa credit rating

Moody’s Investor Services is renewing Canada’s triple-A debt rating, the highest possible.

In its annual report on Canada's sovereign ratings, the firm said the Aaa rating was warranted due to the country’s high degree of economic resiliency, efforts by Ottawa and the provinces to deal with their debt ratios over the coming years and other factors.

The economy’s very high degree of resiliency is demonstrated by a high per capita income, the large scale of the economy, and its diversity, says the Moody’s report. Natural resource industries, a competitive manufacturing sector, and a well-developed and well-regulated financial market also support the country’s resiliency.

While Canada’s public finances deteriorated as a result of the global financial crisis, the federal government and the provinces are now on a track of fiscal consolidation that will improve general government debt ratios over the next few years, according to Moody’s.

Although general government debt, including the debt of the provinces and municipalities, is similar to that of other large Aaa-rated countries, the federal government’s debt position by itself is relatively low. As the provinces are highly rated, Moody’s considers the contingent liability from this source to be low, despite the relatively large size of provincial debt.

Canada’s current account balance returned to surplus in 1999 and remained there until 2008, bringing down the reliance on foreign capital inflows. This has risen somewhat in the past two years but is still not considered a risk to financial stability. Canada’s susceptibility to event risk is low and is related to the housing market and to Quebec’s sovereignty issue.

S&P affirms Canada rating, lauds fiscal discipline

Reuters) - Ratings agency Standard and Poor's affirmed Canada's AAA rating on Friday and lauded the country's strong finances compared with its Group of Seven peers.

The review stood in sharp contrast to growing pressure on the ratings of many Western countries, highlighted by this week's downgrade to Greece's sovereign debt by Moody's Investors Service. [ID:nLDE63L28G]

Standard & Poor's affirmed Canada's AAA long-term and A-1+ short-term sovereign credit ratings with a stable outlook.

"Canada has what we view as strong public finances, a relatively diversified economy, stable public policy, and a sound financial sector," the agency said in a statement.

"The stable outlook reflects our opinion that Canada has the political capacity and will to respond quickly to changing conditions, and the strongest fiscal position of the five 'AAA' rated G7 sovereigns."

The other G7 nations with AAA ratings are the United States, France, Germany and Britain.

S&P cut the outlook on Britain's AAA rating to "negative" on May 21, 2009, a move that typically carries a one in three chance of a downgrade. [ID:nLL292085]

Some analysts have speculated the top-tier credit rating of the United States could be cut one day, an idea rejected by U.S. Treasury Secretary Timothy Geithner. [ID:nN16225360] [ID:nN18366282].

Canada's Conservative government, in presenting its annual budget last month, pledged to turn off the stimulus tap and curtail spending sharply after the economy recovers. [ID:nCFB000108]

"We expect the prevailing consensus on the need for robust public finances, across Canadian regions and political parties, to avoid a return to recurring, structural deficits, in the medium term," S&P said.

The agency also said Canada's financial system is well-developed and sound. The nation's banks did not require government bailouts during the economic crisis and have been ranked as the world's soundest by the World Economic Forum. (Reporting by Jeffrey Hodgson; editing by Rob Wilson)