“From the beginning of the pandemic, the Canada was in an excellent position to deploy its power to tax to protect Canadians, and this is what we have done,” said the minister of Finance, Bill Morneau.
June 24, 2020 19h32
Updated at 20h35
Canada lost its AAA credit rating
The canadian Press
OTTAWA — The minister of Finance, Bill Morneau, went to the defense of the state of the finances of the country after an international agency has deprived Canada of its AAA rating.
Canada is in a financial position stronger than many other countries in the G7 and G20, the minister underlined Morneau, noting that the global investment supported in the canadian bond market helps to reduce the cost of the loan.
In a statement, Mr. Morneau stated that the federal government will continue to be “fiscally responsible” while doing the necessary to protect the national economy.
His comments came after the agency Fitch Ratings has lowered on Wednesday the credit rating of the country to “AA +”, citing what it called “the deterioration in the public finances of Canada” because of the pandemic of COVID-19.
The public health measures needed to slow the spread of the new coronavirus and the drop in oil prices “will cause a serious recession in Canada this year, said Fitch in a notice online, providing an economic contraction of 7.1 %.
Canada recorded an annual growth of about 1.7 % in advance of the pandemic, but Fitch says that the growth prospects in the medium term in the country are limited and inferior to those of many of his peers.
In addition, the international monetary Fund (IMF) unveiled Wednesday an update to its outlook for the global economy, in which it is forecasting a contraction of 8.4% for the canadian economy – that is, 2.2 percentage points higher than that referred to in the previous forecast, which date back to April.
The latest estimate of the liberals in regards to the costs of all care related to the pandemic was about 153,7 billion $. An analysis from the parliamentary budget officer has assessed these costs to 169,2 billion $.
“From the beginning of the pandemic, the Canada was in an excellent position to deploy its power to tax to protect Canadians, and this is what we have done”, the minister said Morneau.
“The plan of Canada to meet the COVID-19 is to give workers and businesses the financial support they need to overcome this crisis and return in force.”
Fitch has indicated that federal spending would have to increase even more to help the provinces short of cash, including those who have suspended their plans to reduce the deficit.
The agency has also stressed that the minority liberal government had already postponed its promise to stabilize the net debt of the federal government “to respond to the priorities of the minority parties allied”.
For the future, Fitch noted that the country’s rating could rise if governments began to roll back debt expressed as a percentage of the economy, but that it could also be lowered again if the politicians fail to do so in the medium term.