Press Release

DBRS Morningstar Confirms Province of Nova Scotia at A (high) and R-1 (middle), Stable Trends

Sub-Sovereign Governments, Utilities & Independent Power, Other Government Related Entities
November 10, 2022

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating and Long-Term Debt rating of the Province of Nova Scotia (Nova Scotia or the Province) at A (high) and confirmed the Province’s Short-Term Debt rating at R-1 (middle). Concurrently, DBRS Morningstar confirmed the Guaranteed Long-Term Debt and Guaranteed Short-Term Debt ratings of the Nova Scotia Municipal Finance Corporation at A (high) and R-1 (middle), respectively, and the Nova Scotia Power Finance Corporation's Series AM Government Guaranteed Debt at A (high). All trends are Stable.

For 2022–23, the Province forecast a deficit of $506.2 million; although, this has since been revised to a shortfall of $554.2 million in the first-quarter update. DBRS Morningstar makes adjustments to reported results to recognize capital spending as incurred rather than as amortized, and exclude nonrecurring items to arrive at an adjusted deficit. On a DBRS Morningstar-adjusted basis, the first-quarter update points to a deficit of $1.3 billion, or 2.5% of GDP. Other provinces have seen strong growth in provincial own-source revenues, suggesting a further upside to Nova Scotia's forecast, while the impact of Hurricane Fiona in late September 2022 and the associated costs add some uncertainty to the Province's near-term fiscal outlook.

Based on the Province's medium-term fiscal plan, DBRS Morningstar-adjusted deficits are expected to range between 2.5% and 1.0% of GDP from 2023–24 to 2025–26. DBRS Morningstar notes this forecast is clouded by a weakening global growth outlook, which is likely to require additional fiscal measures, if fiscal targets are to be adhered to.

DBRS Morningstar-adjusted debt is projected to rise by approximately $1.2 billion in 2022–23, or to 33.4% of GDP; however, this likely overstates the increase in debt given better-than-expected 2021–22 results reported in public accounts, and the likelihood of fiscal improvement in 2022–23. Over the medium term, the adjusted debt-to-GDP ratio is expected to hover around 34.0%, although, increasing concerns about slowing growth could lead to upward pressure on this metric.

Based on Nova Scotia's first-quarter update, the Province anticipates real GDP growth of 2.0% in 2022, followed by 1.7% in 2023. DBRS Morningstar notes this forecast was developed in May 2022, with the current private-sector consensus pointing to real growth of less than 1.0% in 2023 as persistent concerns about high inflation are leading to aggressive monetary policy tightening and the potential for a more marked slowdown.

A positive rating action could arise from a sustained improvement in fiscal performance, improving debt-to-GDP ratio, and an understanding that financial risk metrics will not materially worsen in an environment of softening economic growth conditions. While firmly placed in the current rating category, downward pressure on the rating could arise from a sustained deterioration in fiscal performance and material increase in debt, in conjunction with deterioration in critical risk factors.

There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at (May 17, 2022).

All figures are in Canadian dollars unless otherwise noted.

The principal methodologies are Rating Canadian Provincial and Territorial Governments (June 1, 2022; and DBRS Morningstar Criteria: Guarantees and Other Forms of Support (April 4, 2022;, which can be found on under Methodologies & Criteria.

A description of how DBRS Morningstar analyzes corporate finance transactions and how the methodologies are collectively applied can be found at:

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at [email protected].

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

DBRS Morningstar will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at [email protected].

For more information on this credit or on this industry, visit or contact us at [email protected].

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