Edmonton city center with River and bridge

Despite a downgrade of Alberta’s long-term debt ratings, Moody’s Investors Service says its outlook for the Canadian provinces in the year ahead is stable.

On Dec. 3, Moody’s downgraded Alberta’s rating to Aa2 from Aa1, citing concern about the provincial economy’s heavy dependence on oil and other non-renewable resources.

The reliance on resources “causes volatility in financial performance, and remains pressured by a lack of sufficient pipeline capacity to transport oil efficiently with no near-term expectation of a significant rebound in oil-related investments,” Moody’s said.

With the downgrade, Moody’s moved its outlook on Alberta’s ratings to stable from negative.

On Wednesday, Moody’s said its outlook for the Canadian provincial government ratings overall is stable for 2020 due to expectations for “continued modest economic growth, affordable debt and low exposure to ESG-related risks.”

The rating agency said that the Canadian provinces are “well positioned” to meet the challenges of both recession risks and ESG risks in 2020.

“We forecast that Canada’s real GDP growth will be 1.6% in 2020 which will support provincial revenues,” said Michael Yake, vice president at Moody’s, in a statement.

“Although the economic growth is modest, this is within an environment of sound fundamentals including low unemployment and strong population growth,” he added.

Moody’s said debt service for the provinces will remain in line with recent levels in 2020 “as a result of persistent low interest rates, even as debt levels continue to rise.”

“The overall pace of provincial debt accumulation will continue to slow in 2020, but oil producing provinces will record a more rapid rise to finance operations and capital plans,” it added.