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Finance
March 3, 2011

Newfoundland and Labrador Gets an A+ with Latest Credit Rating Upgrade

The latest upgrade to Newfoundland and Labrador’s credit rating reflects the Provincial Government’s effective management of financial resources and sound economic conditions, the Honourable Tom Marshall, Minister of Finance and President of Treasury Board, said today.

Standard & Poor's Rating Services announced today that it has raised the credit rating assigned to the province from ‘A’ to ‘A+’. This is the highest rating that Standard & Poor’s has ever given to Newfoundland and Labrador. A jurisdiction’s credit rating is a key factor influencing its ability to borrow and attract investment in bonds.

“At a time when much of the world continues to grapple with the lingering effects of the global recession, it is yet another encouraging sign for Newfoundland and Labrador that one of the world’s leading credit rating agencies has acknowledged the strength of our fiscal performance and raised the province’s rating,” said Minister Marshall. “Looking ahead, we are poised to record another budget surplus in 2010-11, making it our fifth surplus of the last six years. Because of our responsible fiscal approach and our investments to stimulate economic activity throughout the global recession, our province has been able to quickly rebound from the downturn and regain our economy’s momentum.”

Minister Marshall noted that the province’s debt burden has been stabilized and lowered over the last several years, which has been an important factor in enhancing fiscal capacity and creditworthiness. Provincial net debt has been reduced to $8.2 billion in 2009-10 from a high of nearly $12 billion in 2004-05. As well, Newfoundland and Labrador has become more financially self-reliant in recent years, with approximately 80 per cent of total revenues being generated from provincial sources.

Newfoundland and Labrador is also experiencing strong economic expansion, with GDP growth of more than five per cent. In addition, employment in the province reached an all-time high last year, the retail and housing sectors are seeing robust growth, incomes are rising, and growth in capital investment in this province leads the country.

In issuing the rating upgrade, Standard & Poor’s highlighted the province’s much improved economic standing, declining debt burden, solid budgetary performance, and strong liquidity position. Standard & Poor’s also noted the positive impact that major projects, such as Hibernia South, Hebron, the Long Harbour hydromet facility, and the Lower Churchill, will likely have on the local job market going forward.

Notwithstanding Newfoundland and Labrador’s strengths, Standard & Poor’s also pointed out certain potential factors that could partially counter these strengths, including the volatility of commodity prices.

“The recent spike in oil prices underscores the volatility of this revenue source,” said Minister Marshall. “Prices can go in the other direction just as quickly and unpredictably, and we therefore need to maintain a steady and sustainable approach as we manage our fiscal resources for the future.”

Credit ratings published by agencies such as Standard & Poor’s are primarily intended to provide investors and market participants with information about the relative credit risk of issuers and credit quality of individual debt issues. In rating an issuer, such as a province or corporation, a review is conducted to assess financial performance, policies, and risk management strategies, as well as the business and economic environment in which the issuer operates.

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Media contact:
Mark King
Director of Communications
Department of Finance
709-729-6830, 699-3454
MarkKing@gov.nl.ca 

2011 03 03             5:00 p.m.

 
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