Canada's pandemic spending necessary, Trudeau says in response to Fitch rating cut

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OTTAWA (Reuters) – Canada’s emergency spending to help the country bridge the downturn caused by the COVID-19 pandemic was needed to lay the groundwork for a recovery, Prime Minister Justin Trudeau said on Thursday in response to Fitch’s rating downgrade.

Fitch cut Canada’s rating to “AA+” from “AAA” on Wednesday, making it the first time since August 2004 that the ratings agency did not give Canada top marks.

“In this historic, unprecedented pandemic, we needed to help Canadians. We came into this situation with one of the best balance sheets in the G7, and we put that to work for people,” Trudeau said in a news conference when asked about Fitch’s move.

Canada had been one of the few countries with a AAA rating from all three of the main agencies, a point often made by Trudeau in the past when he was questioned about the sustainability of the emergency spending.

Standard & Poor’s and Moody’s (NYSE:MCO) still give Canadian debt the highest rating.

Ottawa is rolling out more than C$150 billion in direct aid to support the economy, and Fitch said this would significantly drive up the deficit and debt this year.

Trudeau said the emergency spending provides the foundation for the economy to “come roaring back” once the pandemic restrictions are lifted.

As of Wednesday, Canada had registered 102,242 cases of the coronavirus, with 65,091 patients recovered, and 8,484 deaths.

With the spread of the virus slowing, all 13 of the country’s provinces and territories have started to gradually reopen their economies in recent weeks.