Ratings agency Moody’s has lowered its credit rating for the Northwest Territories government due in part to concern about the territory’s economic forecast.
According to a Wednesday news release from the territory, the NWT’s credit rating has been downgraded from Aa1 to Aa2 – the third-highest rating available from Moody’s.
The territory says the change is due to “continued economic pressures” and the likelihood that its economy will not return to pre-pandemic levels for at least two to three years.
While NWT finance officials have said the territory’s economy has largely recovered from the Covid-19 pandemic, some sectors – like tourism, hospitality and wholesale trade – have yet to bounce back.
There are other financial worries as the territory’s diamond mines age, inflation rises, and limited economic growth is projected in 2022.
Yet the NWT government said its debt – projected to reach $1.7 billion by the end of the current fiscal year – remains manageable and the territory’s financial position is stable as it can rely on “substantial” federal transfers.
In a statement, finance minister Caroline Wawzonek said ratings agencies’ concerns about the NWT’s economic outlook “are not new and stem from the GNWT’s prioritization of a large capital budget in 2022-23 to provide the foundation for further economic development.”
Wawzonek said the Moody’s rating “reflects its confidence in the GNWT’s ability to responsibly manage its budget and expenditures and to retain the fiscal capacity to respond to further challenges.”
The NWT government said its current credit rating is “of high quality and is subject to very low credit risk.” The territory said that will help ensure affordable borrowing costs.