Moody’s changes Ontario outlook to negative from stable amid deficit fears

TORONTO – Moody’s credit rating agency has changed Ontario’s debt and issuer ratings to negative from stable, while at the same time reaffirming its Aa2 ratings.

Moody’s Investors Services says the change reflects its assessment of the province’s ability to meet its medium term fiscal targets, especially with weak growth and higher than anticipated deficits projected for the next two years.

The ratings agency didn’t wait for the Liberals to introduce their budget July 14, but Premier Kathleen Wynne has said it will be identical to the May 1 budget that was rejected by the opposition parties, triggering the June 12 election.

Moody’s vice president Michael Yake says the agency viewed the May budget as “credit negative” for the province.

Finance Minister Charles Sousa says the recently re-elected Liberal government remains committed to eliminating the $12.5 billion deficit by 2017-18 even though it did “adjust” its short term deficit targets.

Sousa says the Liberals have cut expenses and become the leanest government in Canada with the lowest per-capita spending of any province.

But Moody’s says Ontario is facing a greater challenge to return to balanced budgets than previously anticipated, and warns the government will need to make “a considerable shift from recent trends” on spending if it is to meet its deficit targets.