Canada’s sovereign debt gets long-term HR AAA rating; HR+1 for short-term

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Canada’s sovereign debt gets long-term HR AAA rating; HR+1 for short-term

Gets good marks for low ratio of net debt to GDP, low interest cost.

Staff on October 6, 2016

The sovereign debt of Canada has been assigned a long term rating of HR AAA (G) with a Stable Outlook, based upon its low ratio of net debt to GDP, low interest cost, modest fiscal deficits, strong external financial accounts and a well-funded pension system. For short term debt the assigned rating is HR+1 (G). HR Ratings de México assigned the ratings.

Canadian gross debt reached 51.7% of GDP in the fiscal year 2015. However, this metric incorporates pension liabilities and other accounts payable that, due to difficulties in international comparability, HR Ratings does not incorporate within its debt measures. Consequently, when eliminating these liabilities and also deducting financial assets, the data shows that Canadian federal government net debt reached 16.6%.

Factors that justify the assigned rating are:

• YoY inflation in December 2015 reached 1.61%, in June 2016 1.49% with a core yearly inflation of 2.06%. This is well within the Bank of Canada’s range of 2.0% (+/-) 1.0%.


• The Financial Account reached 2.85% of GDP in 2015, 66 basis points above the previous year. Net portfolio investment remains a strong 1.65% of GDP while the other net investments account registered a surplus of 3.36% of GDP.


• In contrast, Canada’s current account deficit reached 3.16% of GDP in 2015, the main contributing factor has been the deterioration of the goods and services balance.
  Also on the negative side: Canada’s economy has been hindered by the decline in oil prices.

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Canada’s sovereign debt gets long-term HR AAA rating; HR+1 for short-term