Fitch Downgrades Canada's Ratings From AAA to 'AA+'; Outlook Stable

FITCH RATINGS ^ | 06/24/2020

[SeekAndFind]

Fitch Ratings has downgraded Canada's Long-Term Foreign Currency Issuer Default Rating (IDR) to 'AA+' from 'AAA'. The Rating Outlook is Stable.

KEY RATING DRIVERS

The rating downgrade reflects the deterioration of Canada's public finances in 2020 resulting from the coronavirus pandemic. Canada will run a much expanded general government deficit in 2020 and emerge from recession with much higher public debt ratios. The higher deficit is largely driven by public spending to counteract a sharp fall in output as parts of the economy were shuttered to contain the spread of the coronavirus. Although this will support recovery, the economy's investment and growth prospects face challenges.

The Stable Outlook reflects Fitch's expectation that Canada's consolidated gross general government debt/GDP will stabilize over the medium term, in line with the pre-coronavirus policies, and that the economy will gradually recover, supported by significant counter-cyclical monetary and fiscal policies.

Canada's structural strengths also underpin the ratings. These include its advanced, well-diversified and high-income economy, and Canada's political stability, strong governance and macro policy framework, which has delivered steady growth and low inflation. Canada has a large positive net international investment position, driven by its foreign pension assets. However, reliance on foreign portfolio flows to finance sustained current account deficits is a weakness, which has contributed to a persistent and growing level of net external debt.

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ALSO:

Fitch placed its Canadian bank ratings on Negative Outlook in April (see https://www.fitchratings.com/site/pr/10117236).

Fitch expects that large Canadian banks’ full-year 2020 profitability will meaningfully decline as a result of rapid economic deterioration in 2Q20 due to nation-wide Coronavirus lockdowns. The earnings of seven Canadian commercial banks rated by Fitch fell 50.1% yoy as the banks made unprecedented increases in provisions against performing loans (revenues only fell 4.9% yoy)

[Texas Eagle]

Shouldn’t it be from Triple Eh to Double Eh?

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ALSO:

Canadian household indebtedness remains elevated, above 175% of disposable income since 2016, with debt service averaging 14.7% of disposable income in 1Q20. Housing price appreciation, an important driver, has tempered amid lower real-estate transaction volume and international travel restrictions dampening non-resident and skilled migrant purchases.

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There are now only ten countries in the world that have a AAA credit rating from the three international credit rating agencies, S&P, Moody’s and Fitch. These countries are:

1. Australia
2. Denmark
3. Finland
4. Germany
5. Luxembourg
6. Netherlands
7. Norway
8. Singapore
9. Sweden
10. Switzerland

All of which may explain why the Canadian Loonie is at record lows against gold...

[OttawaFreeper]

Household indebtedness is at a very appallingly high rate in the Toronto area and that’s where the trust fund boy’s electoral support came a great deal from last fall.

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RE: Household indebtedness is at a very appallingly high rate in the Toronto area and that’s where the trust fund boy’s electoral support came a great deal from last fall.

Well, it’s not as if the USA is faring any better when it comes to household indebtedness ...