Standard & Poor’s Ratings Services affirmed its AAA ratings on the province of Alberta, with a stable outlook.
The rating agency says that Alberta has almost fully recovered from the recession. It reports that real GDP rose about 3.5% in 2011, outpacing the national rate of 2.5%, returning to prerecession levels, and employment surpassed its prerecession peak too.
For 2012 and 2013, it says the province expects real GDP in both years to rise close to 4.0%, and employment to rise more than 2.0% each year as the unemployment rate falls to 4.9% in 2012 and 4.6% in 2013.
S&P says that the chief risks to the Alberta economy are softening commodity prices due to a weak U.S. recovery, recession in the eurozone, and slowing growth in emerging economies.
“Alberta’s liquidity levels are very positive, in our opinion,” added S&P credit analyst, Stephen Ogilvie, noting that the province has very large holdings of cash and temporary investments, totaling $38 billion at fiscal year-end. After factoring in equity and bond holdings, it estimates that Alberta had free cash and liquid assets of about $25 billion at that time, which represents more than 5x projected fiscal 2013 debt service costs.
S&P says that the stable outlook reflects its expectations that the province’s tax-supported debt burden will remain moderate (below 60% of operating revenues) in the next two years and that cash and temporary investment holdings will remain very strong after a modest decline in fiscal 2013.