Canadian gross debt reached 51.7% of GDP in the fiscal year 2015. However, this metric incorporates pension liabilities and other accounts payable that, due to difficulties in international comparability, HR Ratings does not incorporate within its debt measures. Consequently, when eliminating these liabilities and also deducting financial assets, the data shows that Canadian federal government net debt reached 16.6%.
Commenting on this rating, Felix Boni, Chief Credit Officer, said: "Canadian Federal fiscal policy has been characterized by its prudential management as reflected in low debt levels and the recent declines as a percentage to GDP. This extends to the strength of its pension system. However, with an aging population and slow growth, attributable in part to larger global trends, Canada needs to carefully guide the current more stimulatory approach in order to maximize its impact and to respond appropriately should the results be less than expected."
Others factors that justify the assigned rating are:
- YoY inflation in December 2015 reached 1.61%, in June 2016 1.49% with a core yearly inflation of 2.06%. This is well within the Bank of Canada's range of 2.0% (+/-) 1.0%.
- The Financial Account reached 2.85% of GDP in 2015, 66 basis points above the previous year. Net portfolio investment remains a strong 1.65% of GDP while the other net investments account registered a surplus of 3.36% of GDP.
- In contrast, Canada's current account deficit reached 3.16% of GDP in 2015, the main contributing factor has been the deterioration of the goods and services balance.
- Also on the negative side: Canada's economy has been hindered by the decline in oil prices.
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SOURCE HR Ratings