Moody's Turns To Canada: Ontario Outlook Revised To Negative, "Softening Economic Outlook" Cited

Tyler Durden's picture

And so the focus shifts to the quietest neighborhood on the block: "The negative [Moody's] outlook on the province [of Ontario] reflects the softening economic outlook, Ontario's growing debt burden, and the extended timeframe to achieving a balanced budget." What's next: someone dares to question the stability of Canadian banks which as we it turns out may have a few hundred billion in hyper-rehypo assets (Canadian Imperial Bank of Commerce (re-pledged $72 billion in client assets), Royal Bank of Canada (re-pledged $53.8 billion of $126.7 billion available for re-pledging)) pledged there... and there... and there... and so, ad inf.

From Moody's:

The change in the outlook reflects Moody's assessment of risks surrounding the province's ability to meet its medium term fiscal targets given the recent slowdown in provincial economic growth and the resulting risks to the province's ability to stabilize the recent accumulation in debt.
"The negative outlook on the province reflects the softening economic outlook, Ontario's growing debt burden, and the extended timeframe to achieving a balanced budget," said Moody's Assistant Vice President Jennifer Wong, lead analyst for the Province of Ontario.
The province's Fall 2011 statement, released in November, revised its forecasts down for provincial growth in 2011 and 2012 to 1.8% and 1.8% from 2.4% and 2.7%, respectively. The provincial economy is particularly affected by the moderation in US growth, given its higher export share relative to other Canadian provinces and the high proportion of international exports (roughly 80%) destined for the US.
The province set out in its 2011-12 budget a plan to return to fiscal balance in 2017-18. Moody's has highlighted that the extended period of fiscal consolidation presents an element of risk in achieving the planned consolidation path, and a risk to stabilizing and reversing the recent deterioration in the province's financial position. At March 31, 2011, Ontario's net direct and indirect debt, at roughly 200% of consolidated revenues, was at the high end of the spectrum for Canadian provinces, whose ratings remain in the narrow range of Aaa to Aa2.
The slowdown in provincial economic growth presents a challenge to the already lengthy planned consolidation path, particularly given the strong expense growth seen in recent years. Expense growth leading up to the recent downturn was relatively robust, highlighting the challenge ahead. Indeed, expense growth averaged 7% annually in the five years to 2007-08, with health expenses having grown at an average of 8%. The fiscal plan presented in the 2011-12 budget assumed expense growth of roughly 2% annually for the duration of the plan.
Nevertheless, Moody's reports that Ontario's high investment-grade rating reflects high debt affordability and the high degree of fiscal flexibility inherent in the institutional framework governing the way Canadian provinces operate. The current low interest rate environment has enabled the province to issue long-term debt bearing historically low coupons. While the proportion of revenues consumed by interest payments has increased with the recent accumulation in debt, this remains manageable given the province's fiscal flexibility. Moreover, the province's large and diversified economy and growing population provides access to a broad and productive tax base and, as such, remains a source of credit strength.
While Ontario retains sufficient fiscal flexibility inherent in the institutional framework to adjust its fiscal outcomes, thereby improving its financial position, difficult policy decisions are required.
"We believe that increased fiscal discipline will be required to sustain debt affordability," said Ms. Wong. "If a credible plan to address the fiscal imbalance and stabilize the debt burden is not implemented in the next provincial budget, expected in March 2012, downward pressure on the province's Aa1 rating would emerge."
Moody's P-1 rating on Ontario's commercial paper program remains unchanged.
The Province of Ontario is Canada's largest province, representing approximately 40% of national GDP. The province's population measured approximately 13.2 million in 2010.
A rating upgrade is unlikely in the near term given the current context of continued consolidated deficits and debt accumulation.
An inability to address continued consolidated deficits and to stabilize the debt burden over the medium term would put downward pressure on the rating. Further downward revisions to growth would also place pressure on the province's ability to achieve medium term fiscal targets and would place negative pressure on the rating. Finally, if debt affordability were to deteriorate due to higher-than-expected increases in debt levels or a significant rise in interest rates, the province's fiscal flexibility would be reduced, exerting downward pressure on the rating.
The methodologies used in this rating were "Regional and Local Governments Outside the US", published in May 2008, and "The Application of Joint-Default Analysis for Regional and Local Governments", published in December 2008.
Please see the Credit Policy page on for a copy of these methodologies.
Although this credit rating has been issued in a non-EU country which has not been recognized as endorsable at this date, this credit rating is deemed "EU qualified by extension" and may still be used by financial institutions for regulatory purposes until 31 January 2012. ESMA may extend the use of credit ratings for regulatory purposes in the European Community for three additional months, until 30 April 2012, if ESMA decides that exceptional circumstances arise that may imply potential market disruption or financial instability. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on
For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on
Information sources used to prepare the rating are the following :
parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.
Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

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JustObserving's picture

When will you downgrade the US of A ?  You need permisssion from the sage of Omaha? Or the CEO likes his job too much?

"and the extended timeframe to achieving a balanced budget"  

Will the US ever have a balanced budget?

"Why do you look at the speck of sawdust in your Canada's eye and pay no attention to the plank in your own eye?"

nope-1004's picture

Because Canadians have been spouting off that their banking system is "secure" and better than the rest of the world.  If you listen to any of the real estate commissions (or read some of the idiotic statements coming from real estate agents themselves) you'd see how naive they are.  Housing has been artificially kept afloat from actions taken by CMHC, securing ALL mortgages in Canada, in effect, transferring all liability onto the taxpayer.

As such, all real estate agents and bankstas have gone orgy wild the last few years pumping housing.  When she blows, look out.  Canada is sitting on the edge of something very painful.


spiral_eyes's picture

maybe america will invade.

jusman's picture

Remember the war of 1812 - 1814?  The one Americans seem somehow to forget? 


flacon's picture

Ontario (government) doesn't like people with disabilities and is determined to get them out of the private and public sector by punishing anyone who hires a disabled person - they even punish employers in other provinces who hire Ontarians who are disabled. Goes into effect January, 2012:

Accessibility for Ontarians with Disabilities Act (AODA)


How will being compliant help my business?
  • Approximately 1.85 million people with disabilities (one in seven) live in Ontario.

  • In Canada, the buying power of persons with disabilities is now estimated to be $25 billion, a figure that more than doubles when you factor in the influence these individuals have on the spending decisions of friends and families. Source: Employment of Persons with Disabilities in the Province of Ontario Research Report; WCG International Consultants Ltd. in cooperation with the Ontario Chamber of Commerce.

  • It makes good business sense to be accessible to people with disabilities; it boosts your bottom line, your image in your community and your relationship with employees.

Will there be costs associated with AODA compliance for our organization?

  • That depends on how much accessibility your organization has already built into its structure, policies and practices. Organizations just starting out can expect upfront costs related to undertaking accessibility assessments, consulting support and training.

  • The other side of the equation, i.e. your return on investment, is well worth considering: companies that take the extra step of offering inclusively designed products, services and environments open doors to a consumer market worth $25 billion. That’s the estimated spending power of people with disabilities, according to an RBC study in 2000 – just the tip of the iceberg when you consider these individuals influence the purchasing decisions of an additional 12 to 15 million Canadians every year.

  • According to research published by The Martin Prosperity Institute (affiliated with the University of Toronto’s Rotman School of Management), the impact of AODA on the Ontario economy over the next five years could result in an annual increase in revenues in the range of $3.9 billion to $11.1 billion for retail and tourism alone.


What happens if my business is not in compliance?
  • Under the Customer Service Standards, the government will apply fines of up to $50,000 per day or part day for Directors and Officers, and fines of up to $100,000 per day or part day for the corporation.


Ahmeexnal's picture


Oh regional Indian's picture

hhhha! Nice Ahmeexnal. Eeeeeeh indeed.

But what a sight. Downgrades everywhere. Sovreign, state, national, notional, city, state and county.

All down together..... 

Then....NAU....Amero.... trans texas corridor.... en-foldment!



TruthInSunshine's picture

A casual & random Walk Down Ontario's Main Street would tell any half-awake organism all they need to know about the state of Canada's largest (by population and economy) province's health, and I'm quite confident that a perusing of the real books and records of the banks and financial institutions there, despite Globe&Mail protestations and denials, would reveal a similarly depressing tale about the state of its finance/banking health.

Canada & Australia have two of the largest real estate bubbles that have yet to burst in earnest.

Archduke's picture

true.  cost of a 1 bedroom far exceeding 5x salary for example, sometimes 10x.

nobody is debating that there is overvalued realty and a rebalancing is due.


the question is how much risk has been leveraged-in?  have lending standards hit

ludicrous speed?  are there any alt-a liar-loans?  has there been any securitization?

was a fraudulent non-existant guarantee touted?  have they reneged on proper

notarised liens?  has there been any robo-signing?


if not then there's no systemic risk.  it's just an over-exuberant economy biting

back a recession.  people will lose jobs, houses, but insitutions won't go down

dragging the public with them (hopefully).



Cypher_73's picture

I thought the largest real estate bubble around was China? Herp dee derp!

BurningFuld's picture

Is the fucking government of Ontario smoking crack? Time to get the fuck out of Ontario while you still can.

peekcrackers's picture

eat a beaver save a tree ..

maple syrup bubbles pop too!  I am Canadian !

wake up you frozen muff humpers. What did you think was going to happen?

Matt's picture

What does this have to do with hiring? From what you've posted, it looks like if your business doesn't have a wheelchair ramp, you're getting fined.

$50K per day is a hefty fine, holy crap.

It seems like they're forcing people to make modifications to accomodate the disabled, and "encourage" hiring disabled people.

flacon's picture

Here's an example from the mandated "course" (paraphrased):


If a Quebec furniture manufacturing factory has a retail outlet in Ontario and that outlet has a wheelchair disabled person, then the retail store AND THE FACTORY IN QUEBEC must become wheelchair accessable. Disabled people are an extreme LIABILITY come January. 

Thank GOD I'm not disabled. 

Ahmeexnal's picture

According to the IQ test scores of 99% of the population, they ARE disabled.  They just don't know it.

flacon's picture

The course covered that as well. It made sure to point out that there is something called "intellectually disabled". Can you believe it?! 


One in seven (14%) of Ontarians are legally classified as "disabled". God help us! 


If you calculate the purchasing power of the disabled it comes out to $13,000 each.... is that a lot? How much of that is a direct result of government subsidies/benefits? 

flacon's picture

Here's another example from my company's course:


If you own a "no returns" clothing store (Goodwill/Salvation Army etc) and your changing room isn't big enough to fit a wheelchair then you must make good on any returned items from a disabled customer because they were not afforded the opportunity to "try on said piece of clothing". 


How about they go shop somewhere else, or simply absorb the cost themselves?! 


There will be signs on clothing stores "NO WHEELCHAIRS ALLOWED"! That is the unintended consequences of these economic rulings. 

msamour's picture

They cannot enforce a provincial statute in another province. They can try, but the Province of Quebec will send an army of lawyers to the Federal court, and fight this with all the might of the Constitution. There are limitations to what provincial powers can impose. I will be looking forward to seeing this battle in court. I hope Ontario gets kicked in the nuts for this. It's like the Fucking Helms-Burton law the Americans tried to impose on Canadian companies. There is something to be said about fucking power hungry bastards extending their tentacles in places they shouldn't be. Tentacles can be cut off eventually...

GOSPLAN HERO's picture

Thank God we did not take Canada in 1812.



jackinrichmond's picture

jusman, it was actually two wars.

the americans invaded in 1812 .. lost

then they re-tried in 1814 and lost again..

jonjon831983's picture

lol maybe that's why Harper has been tying Canada to the UK Monarchy lately

Let the Americans remember when the Canadians burnt down the Whitehouse.  Well... with British assistance.

jackinrichmond's picture


the canadian forces worked with the british forces, the french and the indians.   they were still outnumbered 10 to 1, but in the end, superior leadership, tactical brilliance and the americans (well deserved) fear of the indians is what won the battle.   thats why i always am amazed at canadians that have a grudge against the french or the indians..  without their sacrifice there wouldn't be any canada.  the british were busy fighting napolean on the continent and didn't have the resources available to protect the dominion of canada.


another interesting note..  the french helped to finance and arm the american army to fight the british.    now, the americans think the french are crap and the british are their best buddies..  

disabledvet's picture

invade? no, no. they'll emigrate here for some unknown reason.

SGS's picture

Emigrate where to the USA?  You high?  Houses are $25K in Florida wouldn't you think we would pack up and go already?  Not happening champ.

Matt's picture

There are ~3 million snowbirds that migrate to the USA (around 10% of population) every winter. That number will grow as more boomers retire. Cheap houses in Florida and Arizona are nice, but you have to take into account the costs of taxes, insurance, and upkeep - around $5K per year in Sarasota County, FL for a $30K house.

Platinum_Investor's picture

Canada is the best country in the world to live period.

I live in Ontario, it's booming everywhere

I own a company, hiring is NOT easy, construction and condos everywhere all over Ontario.

Plus Ontario in the north has pleanty of natural resources.

No worries about Ontario! move along.  California?  Newyork?

Cypher_73's picture

Personally, I think Canada should repatriate all the north-eastern blue states down to New York. Y'all can keep New Jersey. (shudders)

Kabooms's picture

Let them.  They'll lose another war. Again.

Cheesy Bastard's picture

Yeah, we're really worried about all those Frenchmen up there.

nmewn's picture

lol...but wouldn't this be a swell time to...ya know, approve something that would help out both countries.

A mutually beneficial kinda thing, a lynchpin so to speak, which everything else hinges.

Kinda of a...keystone event ;-)

Cheesy Bastard's picture

I think it's a PIPEdream, this timeLINE of yours.

nmewn's picture

Its remarkable isn't it?

Not even three-four years ago we were told by our best & brightest it takes three-four years to get it all into commercial production.

We can't wait!!!...was the common refrain.

Well...look what time it is now ;-)

Cheesy Bastard's picture

Since 1977 we have heard it will take 10 years to get oil production in Anwar online, so it's just not worth it.  A facility the size of Laguardia airport in an area  the size of Georgia would have been operational 25 years ago.

nmewn's picture

"Since 1977..."

Well, there ya go. No, we're too busy chasing other pipe dreams and pied pipers.

We got it comin out of our ears...but "it" must be made less affordable to the masses so that the pipe dreams of the crony elites can come true.

God, I swear the inmates are running the asylum.

Canadian Dirtlump's picture

I'm in the process of emigrating to the US being that the opportunities and economic outlook are superior to my beloved alberta.

I understand the ratings agencies are working on a new rating quadruple a plus squared cubed which will be bestowed in the USA ASAMFP.

WestVillageIdiot's picture

There are great opportunities to be had in Detroit and Paterson.  You might want to contact their Chambers of Commerce.  Happy days are here again.

Terminus C's picture

At least we know who owns our houses... I think.

prains's picture

Dude if you can't find a good job in Alberta you might want to pick up some breath mints

Desert Irish's picture

Green for you...half of Ontario, nearly all of PEI, the ones that don't speak french in New Brunswick, Nova Scotians and the most of the Newfie's have already discovered that.....

Where else can you go from earning $15 - $20k as a yard boy to hiring Ferraris for the Fort McMurry - Edmington dash in the same year....????



Arkadaba's picture

I have an offer in from an American company but really trying to figure it out. Love Canada, better for prepping, tons of family here.  On the downsiide - no innovative companies, no big money. 


FrankDrakman's picture

I did consuliting work in the US for two years in the Y2K run up. Met a lot of different Americans, generally nice people, although most were awfully ignorant about the world outside their border (and this was in Detroit, just across the river from Canada).

Biggest reason I wouldn't move to the US: health care. I worked with Blue Cross/Blue Shield of Michigan. They had employees there who, having been there 25 years, were allowed 5 weeks vacation a year. In the department I worked with, the manager (a 50+ spinster who lived with her mom) didn't take more than 2 weeks, and so wouldn't allow any of her staff to take more than 2 weeks either. She simply wouldn't approve vacation requests.

I asked one staffer why she didn't complain to HR. She responded that if Eva Braun got wind of it, she'd first make her life hell, and then find some pretext to fire her. Then, she told me, she has two kids at home, she's divorced, and even if she could find a new job (these were the late 90's boom time remember), she'd probably have to go into an HMO, whereas at BCBS, she had full coverage. Bottom line: she, and all the others, ate Eva's fecal matter to keep their jobs (note: in other departments, such as the IT group, people enjoyed their five weeks. One guy arranged it so that he only worked 3 day weeks in July and August, enjoying his cottage in northern Michigan the rest of the time).

So, people stayed in jobs they hated because of health care, and that gave bosses enormous power to treat them like crap. Here in Canada, even though I've been unemployed a few times over the last ten years, I haven't had to worry about my diabetes treatment. Bosses can still treat you like crap, but you don't have to worry about getting sick if you quit.

Never mind the crime, the urban blight, and the race warfare differences; I'd stay in Canada just so I can keep my self-respect at work.

WestVillageIdiot's picture

But they have the tar sands and now the Winnipeg Jets.  Certainly, nothing bad can ever happen to Canada.  Their housing is still underpriced and under supplied.  Just ask their real estate agents. 

It is so funny that all of the hockey teams left Canada because they couldn't compete with such a weak Canadian dollar.  Their dollar got strong and they lured back the Jets.  They will probably get the Phoenix Coyotes and a couple of other ridiculous American hockey teams.  I'm looking at you Nashville.  What are the chances these teams will return just in time for the Looney to get crushed and the Canadian economy begins to make the American economy look good? 

Just check out the real estate prices in Canada sometime.  Yikes.  We are talking Florida ugly.  Good luck, hosers.

sabra1's picture

downpayments of 25% or more do not have to be insured thru the CHMC, it's carried directly by the banks. we don't do robo-signing here, we do credit checks, our nickels have beavers on 'em, and.... most americans think canada borders pakistan. bet y'all didn't know that the oBLAHma's have millions stashed at the royal bank! i wonder why! gotta go, rainbow country is on, followed by the forest rangers! 

Davalicious's picture

Canada is being set up for a fall, where their assets will be stripped away for pennies on the dollar by the likes of Souros. It doesn't take many of the tribe to put the essentials in place; loose money, reduced social cohesion through multiculturalism. Their department for immigration is also their multicultural department, and Canada doesn't accept any more white immigrants.

jackinrichmond's picture

you should take some time to read about how CMHC works.

Herkimer Jerkimer's picture

Spot on!


My dad called it "The Goezintas".


2 goezinta 4 twice.


How much money does the average Joe Slob need to make a payment on a 3.5% 40 year amortized mortgage on an average house that's now worth about $500, 000? @#$% all! And what happens when that rate goes 5%? Well, it's more and they can't afford that extra. Canucks are maxed out.


It's 1988 all over again.


Canada is toast. Our housing prices are going up 5% per month, year over year. Our personal debt is growing and we're now over a trillion in debt personally.




Savvy's picture

Yup banks are lending to anyone who can fog a mirror. It'll implode soon enough.