Moody’s Investors Service says that Canada’s credit ratings have been reinforced by improving trends in the external financial position and the government’s debt ratios.

“The Canadian economy continues to deliver strong economic results, as befits its Aaa rating,” says Steven Hess, Moody’s lead analyst on Canada. “Consistently good macroeconomic management and structural reforms over the last 15 years have resulted in one of the world’s highest standards of living.”

Hess adds that, as the fifth largest energy producer in the world, Canada will continue to reap the benefits of high oil prices, which are expected to remain around US$70 per barrel over the next two years.

“With growth in output and jobs, the unemployment rate is at its lowest level since the early 1970s, and inflation is within the target range,” says Hess. “The government’s budget surpluses have been used prudently, with debt reduction creating room for the fiscal flexibility needed to tackle challenges common to advanced industrialized countries, including health care and the costs associated with an aging population.”

In addition, the country’s net external liability position has improved significantly, making Canada less vulnerable to external shocks than in the past, Moody’s says. Canada’s net international investment debt has declined from 31.9% of GDP in 1997 to 7.2% of GDP in 2006.

Canada’s close ties with the United States mean that the fortunes of the two nations are closely tied. According to the IMF, a 1% fall in U.S. GDP would reduce Canadian GDP by 0.3% to 0.7%. “Even so, despite some slowing in the U.S. economy in recent months, we expect Canadian real GDP growth to remain a solid 2.4% in 2007,” says Hess.