In a move that raises concerns about B.C.'s economic trajectory, Moody's Investors Service has downgraded B.C.'s debt outlook to "negative" from "stable."
The credit-rating agency has warned that $39.8 billion in debt securities are at risk of a ratings downgrade.
"The negative outlook reflects Moody's assessment of the risks to the province's ability to reverse the recent accumulation in debt with the softened economic outlook, weaker commodity prices and continued expense pressures," said Jennifer Wong, Moody's assistant vice-president and lead analyst for B.C.
The ratings agency noted that the Economic Forecast Council has lowered its forecasts for B.C.'s provincial growth for 2012 and 2013 to 2.1% and 2.2% from 2.2% and 2.5% respectively. It also noted that a slowing in B.C.'s economy, weakened natural gas prices, and a delay in the sale of B.C.'s Little Mountain property have widened B.C.'s projected deficit for 2012-13 to $1.5 billion rather than the $1 billion projected at budget time.
Moody's noted, however, that B.C. maintains a triple-A debt rating due to factors such as high debt affordability and strong fiscal management.
The ratings agency said that B.C. could regain a "stable" outlook on its triple-A rating if it achieves its fiscal targets, allowing it to stabilize and reverse its recent debt accumulation over the medium term.
Shirley Bond, Minister of Justice, Attorney General and vice-chair of the Treasury Board, responded to the downgrade, emphasizing "growing uncertainty of the global economy" and a need for fiscal prudence.
"It serves as a warning sign to us, and to all economies, to control spending and balance the budget," she said. "This kind of scrutiny from investors and bond rating agencies reminds us not to become complacent because economic risk remains."
