Independent credit rating agency S&P Global has downgraded its outlook for Newfoundland and Labrador from stable to negative, citing that despite strong economic activity, weaker budgetary performance, a persistently high debt burden, and rising debt-servicing costs could continue without a fiscal response from government.
Our former Liberal Government celebrated upgrades in our province’s outlook from negative to positive in 2022, and maintained that stable outlook throughout the rest of its tenure. Additionally, in 2023 Newfoundland and Labrador received its first upgraded credit rating from DBRS Morningstar from A from A (low).
“During several debates in the House of Assembly this sitting, we warned the Finance Minister that this could happen,” says Opposition Leader John Hogan. “With the cancellation of the Future Fund and a Budget that forecasts billion dollar deficits for the next 5 years, it’s no surprise that credit rating agencies have less confidence in the long-term outlook of Newfoundland and Labrador.”
Premier Wakeham and the Conservative government have also introduced significant uncertainty and a lack of transparency to the Churchill Falls and Gull Island developments. This increases investment hesitancy and puts at risk billions of dollars of revenue to the province and even more in economic development.
“The Conservative government has turned its back on meaningful effort to lower the deficit and save for the future. The government is still planning a significant deficit, even with re-directing all the funds set to go into the Future Fund from last year, now going toward government spending,” says Finance Critic Sarah Stoodley. “It is concerning that despite acknowledgement of ‘healthy economic activity’ in our province, S&P Global expects weaker fiscal outcomes.”
This downgrade is a warning sign that government’s fiscal choices are weakening confidence in Newfoundland and Labrador’s long-term financial outlook, and it should serve as a wake-up call for the Premier and his Finance Minister.
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