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Credit agency Morningstar DBRS says B.C’s. economy is strong and stable, but warns of years of deficits ahead.
The U.S.-based agency said on Tuesday that its short and long-term debt credit rating for B.C.’s economy remained high.
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“The credit rating confirmations reflect the underlying strength and diversity of the Province’s economy, its disciplined management practices, and its strong balance sheet,” the agency reported.
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It noted that with a provincial election coming this October it is a time of spending for the NDP government.
“The (NDP) government is prioritizing public investments over austerity in response to economic challenges that households are facing,” the report stated.
The 2024 B.C. budget plans for increased spending, funded by debt.
“Morningstar DBRS expects (this) to result in reduced flexibility in the years to come. However, the Province’s historically prudent fiscal approach and track record of outperformance continue to lend stability to its credit profile,” the company said.
The 2024-2025 budget calls for a deficit of $7.9 billion, following a $5.9 billion deficit for 2023-2024. More deficit years are forecast for the medium term.
“In line with the past two budgets, B.C.’s 2024 budget does not present any plan for a return to balance, however, it continues to advocate for modest year-over-year declining deficits. Morningstar DBRS notes that the Province has historically Incorporated prudent budget assumptions, which leaves room for some outperformance,” the statement read.
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The growing debt will drive up the province’s interest payments.
In B.C’s last budget under Premier John Horgan, debt servicing accounted for $1.3 billion annually. In the year starting April 1, 2024 that climbed to $2 billion — more than the government currently spends on the ministries of housing, public safety, forests, attorney general or transportation.
In two years, annual interest payments are forecast to reach $3 billion.
With a file from Vaughn Palmer
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