The overall credit outlook for Canadian companies remains stable, says a report published Wednesday by New York-based Moody’s Investors Service.
Moody’s outlook for Canadian non-financial corporates is stable for 2019, despite tepid growth and continued trade tensions. Resilient global demand and pricing for commodities help underpin the outlook, the report says.
“Some of the key credit themes looking ahead include the ability of companies to generate higher revenue, driven by good demand while EBITDA will be pressured by rising labor and raw material costs,” says Peter Adu, vice president at Moody’s, in a statement. “Trade disputes and protectionism will dampen export growth, but the reworked U.S.-Canada-Mexico trade agreement removes uncertainties.”
The upside potential for the Canadian economy is limited. “High debt levels coupled with rising interest rates will limit household consumption,” the report says. “However, government spending and business investment will lend support.”
Additionally, environmental, social and governance factors will become more important to companies in the years ahead as emissions regulation tightens, according to the report.
“Auto manufacturers, building materials, chemicals, mining, oil and gas exploration and production, oil and gas refining and marketing, steel, shipping and transportation and logistics are exposed to environmental risks that could be material to credit quality within three to five years,” it says.