Canada's Fall Economic Statement: Political Turmoil Trumps Canada's Fiscal and Economic Update

On December 16, 2024, the Government of Canada (Canada; rated AAA with a Stable trend by Morningstar DBRS), released its much-delayed 2024 Fall Economic Statement (the FES). The statement follows the surprise resignation of the Finance Minister, Chrystia Freeland, and has been released amid mounting speculation that the current minority Liberal government's days are numbered.

Key Highlights
-- We believe the prime minister is faced with the difficult choice of waiting for opposition parties to force an early election or resigning and triggering a leadership race that may extend the current term of the government.
-- Deficit projections have increased for F2024-25 and for the medium term, although the debt-to-GDP ratio remains on a downward trend.
-- Canada's AAA ratings are supported by the country's strong fundamentals and have the flexibility to withstand a period of heightened uncertainty.

"Despite the modest deterioration in the fiscal outlook, and ongoing political uncertainty, Canada's AAA ratings are underpinned by the country's considerable fundamental strengths," said Travis Shaw, Senior Vice President and Sector Lead, Global Sovereign Ratings. "This reflects our view that the country has ample flexibility to withstand a period of heightened political uncertainty."