New York's Fitch downgrades Canada’s credit rating below “AAA” for the first time



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New York's Fitch downgrades Canada’s credit rating below “AAA” for the first time

The New York-based Global credit rating agency, Fitch, often contemplated as one of the “big three” credit agencies across the globe alongside Moody’s and S&P, had downgraded Canada’s credit rating to “AA+” from a prior “AAA” for the first time on record citing that the nation would likely to witness a daedal deterioration at its public finances due to the ongoing pandemic outbreak.

Nonetheless, while Fitch had downgraded Canada’s sovereign credit rating below “AAA,” both S&P and Moody’s had maintained a triple-A rating for Canada citing a robust fiscal infrastructure that might just avert the inevitable for the world’s 10th largest economy by nominal GDP (Gross Domestic Product) and the 16th-largest by PPP (Purchasing Power Parity).

However, at its statement published on Wednesday, Fitch was quoted saying that the northern American country’s fiscal budget deficit for the year would likely to hit 16.1 per cent of the nation’s entire GDP, which in turn would lead to a much higher public debt ratio when the economy would emerge from the pandemic-driven recession.

Canada’s consolidate Govt. debt to spike to 115.1% of national GDP this year

On top of that, the New York City-based Global credit rating agency had also added on its Wednesday’s statement that a havoc-scale pandemic bailout package would raise Canada’s consolidated gross general debt up to 115.1 per cent of national GDP in 2020, up from a 88.3 per cent last year.

In point of fact, Canada had rolled out over C$150 billion in direct aid to back the nation’s ailing economy thus far. Nevertheless, pointing towards the shimmering end of the line, a Vice President of Capital Markets Economics at Scotiabank, Derek Holt said shortly after Fitch’s announcement, “Canada is still a very strong credit in a relative sense.

Ratings are just not a major market driver in relation to all other influences upon bond markets and such actions often lag developments that markets have already digested.