Standard & Poor’s affirms Saskatchewan’s good credit rating

REGINA — Less than a week after rival Moody’s Investors Service gave a thumbs up to Saskatchewan’s finances, Standard & Poor’s has affirmed Saskatchewan’s credit rating.

The bond rater kept Saskatchewan at an triple-A rating, saying this “reflects our view of the province’s strong real and nominal GDP growth in 2011 and prospects for a repeat in 2012, low and stable tax-supported debt burden, robust liquidity, and support from the Canadian federal system.”

S&P said this stable outlook reflects its belief “the province’s tax-supported debt burden will remain low and stable in the next two years, real GDP growth will continue to exceed two per cent annually, and operating surpluses will exceed five per cent of operating revenues with after-capital results close to balance.”

Last week, the Toronto office of Moody’s Investors Service — which uses different rating terms — raised the outlook on Saskatchewan’s credit rating to Aa1 (positive) from Aa1 (stable), also citing the ongoing improvement in the province’s financial position, including a sustained low debt burden and an anticipated return to a consolidated surplus.

But like Moody’s, S&P worried about the province’s hefty economic exposure to the primary products or resources sector, like grain, potash, oil and uranium, saying, “its revenues are closely linked to the royalties and taxes those industries generate.

“The four commodities are a large proportion of Saskatchewan’s exports and are priced in global markets. Swings in commodity prices can have a definite impact on operating revenues.”

It said Saskatchewan’s revenue growth “has been somewhat volatile in the past, with annual rates ranging from a 12 per cent decline to a 68 per cent increase from fiscal years 20022012. The establishment of a stabilization fund, the Growth and Financial Security Fund, has mitigated this risk somewhat.”

S&P calculated federal payments as being $2.2 bil- lion in fiscal 2012, or about 17 per cent of operating revenues.

Looking ahead, S&P expects Saskatchewan’s real GDP to rise 2.8 per cent in 2012.

“Despite projected employment growth of about 1.0 per cent, we expect new entrants to the labour market to push up the unemployment rate slightly, to 5.1 per cent,” the ratings agency said.