Credit rating agency issues negative long-term outlook on Alberta finances
DBRS keeps current AA(high) rating, but says another downgrade will likely happen within the year
Credit rating agency DBRS issued a negative long-term outlook on Alberta's finances Friday, citing the province's unwillingness to raise taxes, its continued focus on rising oil prices as the key to economic recovery, and its lack of "fiscal resolve."
"Despite a slowly-improving economic outlook, the 2017-18 budget fails to demonstrate meaningful action by the government to address its substantial budgetary gap," the agency said in a news release.
The province is forecasting a deficit of $10.3 billion at the end of the current fiscal year. The province is $33.3 billion in debt.
DBRS says the deficit is 4.2 per cent of Alberta's GDP, the largest of all Canadian provinces. The agency said Alberta has yet to provide a "credible" plan to return to balanced budgets.
"The government has articulated a desire to return to balance by 2024," the report said.
"However, given their reluctance to use additional tax room and the continued focus on maintaining services and funding growth, this objective is highly uncertain since it relies on a sustained recovery in economic activity buoyed by higher oil prices."
The agency adds that given Alberta's record of "weak fiscal discipline" and continued uncertainty in the price of oil, a downgrade in its long-term rating will likely happen in the next year.
DBRS said it is maintaining Alberta's current AA(high) credit rating for now.
In a statement, Finance Minister Joe Ceci focused on that bit of good news while ignoring the negative long-term outlook.
"DBRS has maintained our AA(high) credit rating, recognizing our province's strong fiscal fundamentals and the many positive economic trends and signs of recovery happening in our province right now," he said.
Ceci said the government will constrain spending to a rate below population growth plus inflation and that Alberta will lead or top economic growth in Canada.
Wildrose finance critic Derek Fildebrandt was shaking his head over Ceci's positive spin.
"Joe Ceci's news release was nearly Orwellian in its ability to spin bad news into good — "They haven't downgraded us today,' " he said.
"Well, we've already suffered many credit downgrades and this is a clear warning from DBRS that we will be suffering yet another credit downgrade if we don't get our fiscal house in order."
CBC News requested an interview with Ceci to discuss the outlook. His press secretary said the minister was tied up with Stampede events and didn't have time to respond.