CALGARY, Alberta (Reuters) - S&P lowered its debt rating for Alberta To ‘AA’ From ‘AA+’ on Thursday, the latest ratings agency to downgrade the Canadian province that has struggled with the impact of tumbling oil prices.
The agency, which kept its negative outlook on Alberta, said the downgrade reflects the province’s very weak budgetary performance and high debt burden, which it expects to “increase rapidly” over the next three fiscal years.
“The negative outlook reflects continuing uncertainty about the province’s willingness to take additional fiscal measures to improve its structural budget shortfalls within the next two years,” S&P said in a statement.
The one-notch downgrade comes as the province battles a wildfire that has blackened more than 505,000 hectares (1950 square miles) and caused a cut of a million barrels a day in Canadian oil output.
It also comes a month after Alberta’s left-leaning NDP government said it expects the once-booming province to be C$57.6 billion ($43.99 billion) in debt by 2019, while Finance Minister Joe Ceci said Alberta could run deficits until 2024.
Alberta, home to Canada’s oil sands and the No. 1 exporter of crude to the United States, has been hammered by a plunge in prices to around $48 a barrel from $105 in mid-2014.
The provincial government said it expects oil and gas revenue this year to be almost 90 percent lower than 2014.
In April, the Canadian Association of Petroleum Producers said capital investment in the industry has dropped C$50 billion in two years and more than 100,000 oil and gas workers have been laid off.
Also in April, both Moody’s and Dominion Bond Rating Service downgraded the province, citing its worsening fiscal position and resulting rapid rise in debt. Standard & Poor’s stripped Alberta of its AAA credit rating in December.
Ceci, the finance minister, said on Thursday that the government would not consider boosting revenue with a new sales tax, and was going to “stick with its plan” of working to diversify the economy beyond oil and gas, and to build infrastructure.
“What will help our financial position in the long term is a better economy,” Ceci told reporters.
With additional reporting by Jeffrey Hodgson in Toronto; Editing by David Gregorio and Chris Reese