Fitch Ratings confirms Canada's rating at AA+, maintaining stable outlook
Date
7/24/2024 3:05:17 AM
(MENAFN) On Tuesday, Fitch Ratings confirmed Canada's long-term foreign currency issuer default rating at AA+, maintaining a stable outlook for the country. The rating reflects Canada's strong governance, high per-capita income, and a macroeconomic policy framework that has generally supported steady economic growth and low inflation. These factors contribute to Canada's robust financial standing and economic stability.
However, Fitch noted that these strengths are somewhat counterbalanced by a significant public debt burden. The agency anticipates that Canada's government deficit will rise to 1.5 percent of GDP this year. Despite this increase, the deficit is projected to slightly decrease to 1.4 percent in 2025 and further to 1 percent in 2026. This anticipated decline in the deficit is attributed to the expectation of more controlled expenditure growth and potentially improved economic conditions.
Fitch's statement highlights concerns about Canada's fiscal position, which has been weakened by rapid expenditure growth in the context of a stagnant economy. Additionally, higher interest costs are expected to continue exerting pressure on government finances.
On June 5, the Bank of Canada reduced its policy rate by 25 basis points, marking its first rate cut in over four years. The central bank is anticipated to maintain this reduced rate in its upcoming meeting, which will conclude on Wednesday. Fitch forecasts that Canada's economy will grow by 1 percent this year, with an expected expansion of 1.5 percent in both 2025 and 2026. This projection reflects a cautious but optimistic outlook for Canada's economic performance in the near term.
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