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Research Announcement:

Moody's highlights Nova Scotia’s modest budget deficits indicate the less severe credit impact of the pandemic

29 March 2021


Toronto, March 29, 2021 --

  • Province outlines a four-year path to return to balance
  • Debt burden will remain within a manageable range of 130% - 137% of revenue

Moody's Investors Service notes in a new report on Nova Scotia's 2021-22 budget that the province is expected to experience limited credit impact over the next four years, as the coronavirus pandemic has led to less budgetary pressure than other provinces.

"In contrast to many other provinces which are facing outsized deficits and rapidly rising debt, Nova Scotia's forecast of modest deficits, with a return to balance in four years, has limited negative impacts to the credit profile of the province," noted Michael Yake, a Senior Vice President with Moody's. "Nonetheless, to return to balanced budgets which the province had prior to the pandemic, Nova Scotia faces execution risk to its budget plan due to the target of controlling spending growth over the next four years."

The province expects revenue growth to average 2.2% over the four-year budget horizon as the economy recovers gradually and vaccination becomes more widespread. At the same time, controlling the growth rate of expenses – which rose as a result of the pandemic – will remain challenging according to Moody's. Controlling the growth of health and education spending, the two largest budget lines, will be key in managing the plan to return to balance.

The projected fiscal improvement is based on a robust 4% average real GDP growth rate in 2021 and 2022 as vaccinations accelerate and industrial output recovers to pre-pandemic levels, followed by weaker 0.8% average growth in 2023 and 2024 reflecting the slower long-term economic growth of the Atlantic region.

The province's debt burden is expected to rise to 130% of revenue in 2020-21, from 121.5% in 2019-20, reflecting financing of the deficit and the capital plan, and will rise only modestly to 137% of revenue by 2023-24, largely in line with Moody's prior expectations.

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Michael Yake
Senior Vice President/Manager
Sub-Sovereign Group
Moody's Canada Inc.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Alejandro Olivo
MD-Sovereign/Sub Sovereign Group
Moody's Investors Service, Inc.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Releasing Office :
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

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