DBRS Confirms the Province of Manitoba at A (high) and R-1 (middle)

DBRS has today confirmed both the Short-Term and Long-Term Debt ratings of the Province of Manitoba (Manitoba or the Province) at R-1 (middle) and A (high), respectively. The trends on both ratings are Stable. The Province has made steady progress over the past five years at reducing its debt burden, generating consistent economic growth and improving financial transparency, although the current economic turmoil introduces a significant amount of uncertainty. DBRS notes that Manitoba is one of the best-positioned provinces within its current rating to weather a significant downturn, with considerable financial flexibility and a track record of above-average economic resilience in recessionary periods. Provided the Province remains fiscally responsible and makes further progress towards containing debt growth, DBRS would likely review its position on the rating once economic conditions stabilize.

Fiscal results were stronger than expected in 2007-08 as the Province posted a DBRS-adjusted deficit of $174 million (including capital expenditures, as incurred, rather than as amortized by the Province). Strong income tax revenues, solid results at Manitoba Hydro and lower-than-expected capital expenditures more than offset small spending increases in other program areas. For 2008-09, the budget points to a DBRS-adjusted deficit of $354 million as health and education spending will continue to offset modest revenue growth.

Manitoba’s debt burden continued to steadily improve, down from 31.0% in 2006-07 to 29.3% in 2007-08. While capital spending plans will lead to debt growth in nominal terms, the Province’s debt-to-GDP ratio is expected to remain relatively flat in 2008-09, but could face modest upward pressure next year if GDP growth stalls.

In light of rapidly deteriorating economic conditions, the recent private-sector consensus calls for real GDP growth of 2.3% in 2008 followed by 1.4% in 2009. This outlook is noticeably weaker than the 2.7% growth assumed in both years by the Province at the time of the budget, but compares favourably with provincial peers. Furthermore, DBRS notes that the forecast for growth in Manitoba has not been cut as drastically as in other provinces, and that speaks to the resilient and diversified nature of its economy.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Canadian Provincial Governments, which can be found on our website under Methodologies.

This is a Corporate (Public Finance) rating.