One of the world's largest bondholders, cut Ontario's credit rating to its lowest level in 16 years, saying that a reduction in revenues by the progressive conservative government would worsen the province's deficit and debt problems.
In a report published Thursday afternoon, Moody's Investors Company announced that it had reduced Ontario's long-term debt rating to Aa3 from Aa2. It was Moody's second-ranking county in this decade, the previous was in 2012.
The move followed the county's release of last month's economic downturn, in which the first-year prime minister Doug Ford estimated it would trigger a $ 14.5 billion deficit for fiscal year ending March 31, 2019 – more than double what the previous liberal government expected in the spring budget. It is also following the release of the Ontario Financial Accounting Office of the latest budget and economic forecast, which is expected that the province's deficits will be higher than the four-year Ford government's term – partly due to tax cuts that will take bite of revenue.
"While the county has not presented a multi-year budget plan, Moody's expects Ontario to publish several years of substantial consolidated deficits, extending the current period of the 2008-2009 consolidated deficits," the rating agency said. "Funding requirements for deficits and capital expenditures will lead to an increase of the level of clean turnover has been direct and indirect of the province.
Ontario is the most hidden province in the country, with about $ 325 billion in net debt. The ratio of debt to GDP is expected to reach 40% this year, and the second only to New-Pound and Labrador.
Moody's said she expects Ontario's economic growth to "moderate" to below 2 percent a year in the next three years, which will hurt regional revenue growth, "thus increasing the challenge of returning to a balanced budget.
"Recent actions by the province included measures that reduce income levels, adding to budgetary pressure," he noted.
The new credit rating matches that set by Moody's when Prime Minister Mike Harris took office in the mid-1990s, sworn to the famous clean up of the fiscal litter left behind by the previous NDP to liberal governments. After years of austerity by the Harris government, Moody's improved the province to Aa2 in 2002. He raised it back to Aa1 – the second largest rating – in 2006. The highest ratings are usually reserved for national governments.