中诚信国际-加拿大魁北克省2020年后续发行人信用评级报告-2020.8-16页_849kb

Summary of the 2020 Follow-up Issuer Credit Rating Report of the Province of Quebec, Canada

Core Content

This report outlines the credit rating assessment of the Province of Quebec, Canada, conducted by China Chengxin International Credit Rating Co., Ltd. (CCXI). The credit rating committee of CCXI decided to maintain Quebec's national scale credit rating at AAA with a stable outlook. The report evaluates Quebec's economic and fiscal performance, challenges, and outlook for the next 12–18 months.

Main Points

Economic Performance

• Quebec's economy experienced strong growth in 2019, outperforming the national average.
• The unemployment rate dropped to 5.1%, the lowest in annual records.
• Labor participation rate increased to 80% due to immigration integration and women's employment initiatives.
• Real GDP growth in 2019 was 2.7%, higher than Canada's national average of 2.0% and 1.7% in 2018 and 2019, respectively.
• The economic contraction in 2020 is expected to be severe, with a projected decline of 6.5%, but a recovery of 6% is anticipated in 2021.
• Net exports contributed 0.6 percentage points to GDP in 2019, but this contribution is expected to decline significantly in 2020 due to reduced global demand and trade tensions.

Fiscal Performance

• Quebec's fiscal surplus in FY2019/20 reached CAD2,963 million, exceeding expectations.
• Fiscal revenue increased by 2.4% year-on-year, driven by own-source revenue, investment income from the Generations Fund, and federal transfers.
• Fiscal expenditure rose by 4.6%, but was below the expected level due to effective management.
• Public Accounts deficit is projected to be CAD12,373 million in FY2020/21, but budgetary balance can be achieved through the use of the Stabilization Reserve.
• The debt/GDP ratio rose to 50.4% by the end of FY2020/21 due to increased deficit and capital expenditure, but remained manageable due to sufficient liquidity and effective fiscal management.

Credit Strengths

• Quebec has robust economic performance and sufficient fiscal management mechanisms.
• The Generations Fund and Retirement Plans Sinking Fund (RPSF) help in debt reduction and liquidity management.
• Quebec maintains ample liquidity, with over CAD10 billion in prudential liquid assets.
• The debt/GDP ratio remained below 45% in FY2019/20 due to early debt repayment and strong economic growth.

Credit Challenges

• The impact of the COVID-19 pandemic is expected to hinder economic and fiscal performance in 2020.
• The aging population and potential labor shortages are long-term challenges to economic growth and fiscal flexibility.
• Fiscal expenditure is expected to rise sharply, leading to increased debt burden and reduced fiscal flexibility.

Rating Outlook

• CCXI maintains the AAA rating with a stable outlook for the next 12–18 months.
• A downgrade could occur if the economic contraction is worse than expected or if fiscal strength deteriorates significantly.
• Short-term recovery is expected in the second half of 2020, with further recovery in 2021.

Key Information

Economic and Fiscal Data (2017–2020)

Peer Comparison (2019)

Fiscal Revenue and Expenditure (FY2019/20)

Fiscal Balance (FY2017/18–FY2020/21)

Solvency Analysis

• Quebec's debt structure is well-managed, with low interest rate risk and efficient exchange rate risk control.
• Fixed-rate debt accounted for 91.0% of gross debt as of March 2020, with only 3.7% requiring refinancing in FY2020/21.
• Floating-rate debt represented 9.0% of total debt.
• Quebec has no foreign currency debt exposure, which minimizes exchange risk.
• The weighted average maturity of Quebec's gross debt was about 11 years as of the end of FY2019/20, with 12.7% due within one year and over 30% of long-term borrowings with terms of 10 years or longer.

Conclusion

Quebec's AAA credit rating is maintained due to its strong economic performance, effective fiscal management, and ample liquidity. However, the impact of the pandemic and the aging population pose short-term and long-term risks. The government's proactive fiscal and monetary policies are expected to support economic recovery in 2021, but debt levels are likely to rise in the near future. CCXI remains cautious and monitoring the situation closely for potential downgrade triggers.