2 credit rating agencies downgrade B.C. due to COVID-19 debt

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A pair of credit rating agencies have downgraded their scores for the province of British Columbia in recent weeks, citing pandemic-induced deficits and the resulting increase in long-term debt as reasons for the move.

S&P Global Ratings announced its change on Wednesday, lowering the provincial score from AAA to AA+. Fitch Ratings made a similar move on June 25.  

"The rating action reflects Fitch's expectation that the province's debt burden will rise substantially over the coming years as it addresses the economic and fiscal disruption caused by the pandemic," the latter agency wrote in its update.

Fitch also cited the "rapid increase" in borrowing by the federal government during the pandemic as a factor weighing down its rating of B.C.

Both Fitch and S&P described their outlooks for the province as "stable" and said they expect B.C.'s finances to improve as COVID-19 vaccination rates rise and economic conditions return to normal.

S&P notes in its "downside scenario," however, that a weaker-than-expected economy or sustained, significant deficits could lead to further lowering of B.C.'s credit rating.

"We could revise the outlook to negative or lower the ratings in the next two years if a resumption of weakening economic conditions or poor fiscal policy choices result in the derailment of the province's fiscal recovery path," S&P wrote in its analysis.

Asked to respond to the most recent downgrade, B.C. Finance Minister Selina Robinson provided a statement via email.

“The province remains the highest rated among all provinces by each of the main international and domestic rating agencies, including S&P, despite this revision," Robinson said. "S&P shares our expectation that B.C. will experience a robust rebound in 2021 and 2022, and that strong recovery will help us moving forward."

The minister noted that B.C. entered the pandemic in "a solid financial and fiscal position," and characterized the investments the province made to fight COVID-19 and support businesses as "the right thing to do."

"B.C.’s recovery won’t happen overnight, but we’re focusing on the opportunities that come with recovery and setting ourselves on a path to create a more sustainable, inclusive and innovative economy," she said.

The most recent ratings from other agencies posted on the province's website show no changes to B.C.'s scores.