EDMONTON – Alberta’s plan to relaunch its economy is taking a hit right out of the starting gate.
The United States-based Fitch rating agency has announced it’s reducing Alberta’s credit rating to AA- from AA.
Fitch cites a concern with sharply higher borrowing done by the province to deal with the economic fallout of the COVID-19 pandemic.
Premier Jason Kenney is expected to provide details of Alberta’s financial picture in August, but has said this year’s budget deficit is expected to balloon to about $20 billion from $7 billion.
On Monday, the premier announced an extra $1 billion in infrastructure spending on top of about another $9 billion in existing commitments to build roads, schools and health-care facilities to boost short-term employment.
His United Conservative government is also accelerating a cut to corporate income taxes, bringing the rate to eight per cent this week, in the hopes of attracting businesses to a province that has been hit by both the pandemic and a global oil price war.
Fitch, in a news release Tuesday, said the rating drop is due to the “expectation that sharply higher provincial borrowing during the pandemic-driven economic crisis and in the recovery to follow will result in a debt burden relative to GDP that is incompatible with an AA rating.”
Alberta Finance Minister Travis Toews responded to the downgrade in a statement, noting that Fitch takes into account the financial pressures facing Alberta.
“In response to the ongoing crisis, we have announced a number of stimulus and support measures,” said Toews.
“The plan will attract investment creating jobs that get people back to work, build essential infrastructure and diversify the economy. This plan will position the province for a sustainable and expedited economic recovery.”
Opposition NDP Leader Rachel Notley has said the infrastructure spending will work as a short-term “shock absorber” to the job market. But she said cutting corporate taxes didn’t bring in jobs before the pandemic and a further cutting won’t help after the crisis abates.
“Simply put, Kenney’s plan is a failure,” Notley wrote on Twitter.