We know we did good during the recession, right? Our banks remained stable, our housing market didn’t collapse, and while our job market took a few hits, it still remained relatively intact. But we were shaken in June when Moody’s lowered the rating of several of our banks, showing that we might not be standing on the solid ground we had originally thought. Now though, Moody’s has taken another look and changed our rating back to triple-A to reflect our stable economy. And that’s not just lip service – Moody’s says so themselves.
“Canada did not experience a financial crisis such as the one that affected the U.S. and a number of European countries,” said the Moody’s report. This, the report continues, is due to financial federal policies and a strong economy. It’s also due to the fact that during the recession Canada reacted “better than most other top-rated sovereigns.”
Given this week’s findings that our debt levels are now at an eight-year high, it may not be surprising to find that the Moody’s report also noted that there has been an increase in our debt ratios. But Moody’s also said that even with that information, our debt position was improving (don’t tell BoC Governor Mark Carney) and that our debt is not nearly as bad as it is in other triple-A countries.
But what about that housing market that’s set to burst any day now? Moody’s sees the “risk to be manageable in terms of its potential effect on federal finances.” In fact, the report even commended our housing market, saying that it was one of the best in the world.
By the end of the report Canada had ranked 11th out of 113 sovereigns in regards to the size of our economy; and 14th out of 109 when it comes to our GDP per capita. Want to know the reasons why we’re doing so well?
The report says that it’s simply due to our high incomes per capita, the size of our economy, the sheer diversity of our economy, and strong financial markets, including that of housing.
“On the public finance front,” the report concluded, “Canada’s ratios of general government debt to GDP and to revenue moved significantly downward over the decade through 2008. In facing the global crisis, the federal government’s balance sheet started from a strong position.”
But it’s not often that you get all good news all at once, with nothing to work on. Canada does have some room for improvement; luckily it’s nothing major. If anything, Canada just like so many other sovereign countries, could reduce our dependency on oil.
But even that is not enough to take away from the fact that we have, according to Moody’s, “a low susceptibility to event risk.” Meaning that should another recession hit, the chances are very good that we would once again, be okay.