Press Release

Morningstar DBRS Confirms the Province of Prince Edward Island Credit Ratings at "A" and R-1 (low), Stable Trends

Sub-Sovereign Governments
June 27, 2025

DBRS Limited (Morningstar DBRS) confirmed the Issuer Rating and Long-Term Debt rating of the Province of Prince Edward Island (PEI or the Province) at "A" as well as the Short-Term Debt rating at R-1 (low). All trends are Stable.

KEY CREDIT RATING CONSIDERATIONS
The credit ratings remain underpinned by ongoing economic growth and the government's commitment to responsible fiscal policy. However, a weaker financial outlook with a return to balance not anticipated over the medium term and quickly rising debt are eroding flexibility within the current credit ratings.

CREDIT RATING DRIVERS
A credit ratings upgrade could result from a combination of improvement in one or more critical rating factors, a sustained recovery in operating results and a notable decline in the debt-to-GDP ratio. A credit ratings downgrade could result from a weaker assessment of the Province's fiscal management in conjunction with sustained weakness in the financial risk metrics.

CREDIT RATING RATIONALE
The 2026 budget forecasts larger deficits than previously estimated as ongoing program spending outpaces the growth in revenues. For 2025-26, the budget projected a deficit of $183.9 million, including a $32.0 million Tariff and Trade Contingency Fund. On an adjusted basis, Morningstar DBRS estimates shortfalls will gradually shrink to approximately 2.2% of GDP in 2027-28 (from 4.8% of GDP in 2025-26). This is in contrast with Morningstar DBRS prior expectations of adjusted deficits below 1.0% through the medium term.

PEI's debt outlook has also worsened as larger deficits and a sizable capital program are fuelling debt growth over the forecast horizon. Based on Morningstar DBRS' adjustments, the debt-to-GDP ratio will increase to 46.5% over this period (previously estimated to average slightly above 40.0%), and it could be even higher if economic growth falters. Morningstar DBRS notes that an increase in this ratio to more than 47.0% because of ongoing sizable deficits and an inability to restrain the rise in debt could further reduce flexibility within the current credit ratings category.

The Province expects real GDP growth of 2.5% in 2025 and 2.0% in 2026, compared with private sector consensus of 1.6% and 1.2%, respectively. The growth outlook is supported by ongoing strength in shipments and exports, construction, and public and business investment. However, a marked slowdown in population growth, volatility in fuel prices and potential supply chain disruptions, and unfavourable agricultural commodity prices could temper the Province's growth forecast.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

There were no Environmental, Social, or Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196

CRITICAL RISK FACTORS (CRFs) AND FINANCIAL RISK ASSESSMENT (FRA)
(A) Weighting of CRFs
In the analysis of PEI, the CRFs are considered in the order of importance contemplated in the methodology.

(B) Weighting of FRA Factors
In the analysis of PEI, the FRA factors are considered in the order of importance contemplated in the methodology.

(C) Weighting of the CRFs and the FRA
In the analysis of PEI, the CRFs carry greater weight than the FRA.

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

Morningstar DBRS applied the following principal methodology:

Rating Canadian Provincial and Territorial Governments (April 25, 2025)
https://dbrs.morningstar.com/research/452575

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (February 3, 2025) https://dbrs.morningstar.com/research/447186 which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodology has also been applied:

Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

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 info-DBRS@morningstar.com.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

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

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 600
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

Ratings

Prince Edward Island, Province of
  • Date Issued:Jun 27, 2025
  • Rating Action:Confirmed
  • Ratings:A
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • Date Issued:Jun 27, 2025
  • Rating Action:Confirmed
  • Ratings:A
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • Date Issued:Jun 27, 2025
  • Rating Action:Confirmed
  • Ratings:R-1 (low)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.