Canada’s long-term foreign currency debt rating was downgraded by Fitch Ratings, which cited the deterioration in its public finances resulting from the Covid-19 pandemic.
The country is expected to run a bigger government deficit this year and emerge from the recession with much higher public debt ratios, Fitch said on Wednesday. It cut the country’s rating one notch to AA+ from AAA.
Canada still has a AAA rating with S&P Global Ratings, making it only one of two countries left in the Group of Seven to hold that status; Germany is the other. Moody’s Investors Service also gives Canada its highest rating.
“The question is what took so long. Canada’s excessively leveraged national balance sheet has looked a lot like China, Italy and Greece for quite a while,” said David Rosenberg, founder of Rosenberg Research and Associates and former chief North American economist at Merrill Lynch. “This won’t be the last ratings cut, I can assure you.” He had predicted the downgrade in an April research note that said the “Great Canadian Debt Surge has come home to roost”.
Canada’s national government is on track to post its largest deficit on record in the 2020-2021 fiscal year. The shortfall may reach about 12 per cent of gross domestic product during the year, compared with 1.1 per cent last year, according to the Parliamentary Budget Officer.
“Canada continues to be in a stronger financial position than many other countries in the G7 and G20,” Finance Minister Bill Morneau said in a statement. “We will continue to be fiscally responsible while acting to protect our country and its economy.”
Fitch said in its report that Canada's higher deficit “is largely driven by public spending to counteract a sharp fall in output as parts of the economy were shuttered to contain the spread of the coronavirus”.
It expects the coronavirus response to raise Canada’s consolidated gross general government debt to 115.1 per cent of GDP in 2020, up from 88.3 per cent last year.
The Canadian dollar briefly weakened to a session low, hitting C$1.3618 to the US dollar, before rebounding.
“Markets don’t seem to care, rightly so in my view,” said Derek Holt, an economist at Bank of Nova Scotia.
“Every sovereign is under the same pressure. Ratings are a relative game and even at that there is a long list of more dominant market factors. It’s one agency that stripped Canada of some political bragging rights, but the tangible impact is scant to non-existent.”
For Bipan Rai, head of foreign exchange strategy at Canadian Imperial Bank of Commerce, things may get volatile for the loonie if another agency follows. “The question is who’s next to downgrade? If it’s Moody’s, then there is a risk of portfolio outflows,” he added, noting that Canada’s current account deficit is financed heavily by foreign fund inflows.
The North American economy is set to contract 7.1 per cent in 2020 compared to 1.6% growth last year, according to median consensus of analysts compiled by Bloomberg.
Canada’s government is rolling out a plan of more than C$230 billion (Dh620.9bn) of subsidies, grants and tax referrals in a bid to offset the impact of the pandemic.
Company%20profile
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The specs
- Engine: 3.9-litre twin-turbo V8
- Power: 640hp
- Torque: 760nm
- On sale: 2026
- Price: Not announced yet
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
UAE currency: the story behind the money in your pockets
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How to apply for a drone permit
- Individuals must register on UAE Drone app or website using their UAE Pass
- Add all their personal details, including name, nationality, passport number, Emiratis ID, email and phone number
- Upload the training certificate from a centre accredited by the GCAA
- Submit their request
What are the regulations?
- Fly it within visual line of sight
- Never over populated areas
- Ensure maximum flying height of 400 feet (122 metres) above ground level is not crossed
- Users must avoid flying over restricted areas listed on the UAE Drone app
- Only fly the drone during the day, and never at night
- Should have a live feed of the drone flight
- Drones must weigh 5 kg or less
GAC GS8 Specs
Engine: 2.0-litre 4cyl turbo
Power: 248hp at 5,200rpm
Torque: 400Nm at 1,750-4,000rpm
Transmission: 8-speed auto
Fuel consumption: 9.1L/100km
On sale: Now
Price: From Dh149,900
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
Specs
Engine: Electric motor generating 54.2kWh (Cooper SE and Aceman SE), 64.6kW (Countryman All4 SE)
Power: 218hp (Cooper and Aceman), 313hp (Countryman)
Torque: 330Nm (Cooper and Aceman), 494Nm (Countryman)
On sale: Now
Price: From Dh158,000 (Cooper), Dh168,000 (Aceman), Dh190,000 (Countryman)
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'Panga'
Directed by Ashwiny Iyer Tiwari
Starring Kangana Ranaut, Richa Chadha, Jassie Gill, Yagya Bhasin, Neena Gupta
Rating: 3.5/5
Springtime in a Broken Mirror,
Mario Benedetti, Penguin Modern Classics
Lexus LX700h specs
Engine: 3.4-litre twin-turbo V6 plus supplementary electric motor
Power: 464hp at 5,200rpm
Torque: 790Nm from 2,000-3,600rpm
Transmission: 10-speed auto
Fuel consumption: 11.7L/100km
On sale: Now
Price: From Dh590,000
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A meeting of young minds
The 3,494 entries for the 2019 Sharjah Children Biennial come from:
435 – UAE
2,000 – China
808 – United Kingdom
165 – Argentina
38 – Lebanon
16 – Saudi Arabia
16 – Bangladesh
6 – Ireland
3 – Egypt
3 – France
2 – Sudan
1 – Kuwait
1 – Australia
The bio
Favourite food: Japanese
Favourite car: Lamborghini
Favourite hobby: Football
Favourite quote: If your dreams don’t scare you, they are not big enough
Favourite country: UAE