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1、2020 Follow-up Issuer Credit Rating Report of the Province of Quebec, Canada Project leader: Du Lingxuan Project members: Wang Jialu Zhang Jingxin Tel.: (010)66428877 Fax: (010)66426100 August 28, 2020 China Chengxin International Credit Rating Co., Ltd. 3 2020 Follow-up Issuer Credit Rating Report
2、of the Province of Quebec, Canada China Chengxin International Credit Rating Co., Ltd. Building 6, Galaxy SOHO, No.2 Nanzhugan Lane, Chaoyangmennei Dongcheng District, Beijing 100010 The Province of Quebec, China Chengxin International Credit Rating Co., Ltd. (“CCXI”) has conducted a regular follow-
3、up rating for the Province of Quebec. CCXIs Credit Rating Committee decided to maintain the national scale credit rating of the Province of Quebec at AAA with Stable Outlook. Yours faithfully, China Chengxin International Credit Rating Co., Ltd. August 28, 2020 This is a translation of CCXIs Rating
4、Confirmation Letter “CCXI Credit Rating Committee Notice No. 2020跟踪3536”. If there is any disparity between the Chinese and English versions, the Chinese one shall prevail. China Chengxin International Credit Rating Co., Ltd. 4 2020 Follow-up Issuer Credit Rating Report of the Province of Quebec, Ca
5、nada Rating Opinion: China Chengxin International Credit Rating Co., Ltd. (hereinafter referred to as “CCXI”) maintains the national scale credit rating of the Province of Quebec, Canada (hereinafter referred to as “Quebec”) at AAA, with a stable outlook. CCXI affirms that Quebec had a robust econom
6、ic performance in 2019, and enjoys sufficient fiscal management mechanism, flexible fiscal policies and ample liquidity. However, CCXI also notices that the COVID-19 pandemic will impose negative impacts on Quebecs economic and fiscal strengths, and the increasingly aging population will pose challe
7、nges to Quebecs economy in the longer term. Overview Economic data 2017 2018 2019 2020F Nominal GDP (CAD100 million) 4,192 4,394 4,587 4,405 Real GDP growth (%) 2.8 2.5 2.7 -6.5 Inflation (CPI, %) 1.0 1.7 2.1 0.7 Unemployment rate (%) 6.1 5.5 5.1 9.5 Fiscal data 2017/18 2018/19 2019/20 2020/21F budg
8、etary balance (CAD100 million) 26.22 48.03 29.63 0.00 General government debt/GDP (%) 48.0 45.3 43.4 50.4 Debt service/fiscal revenue (%) 8.5 7.6 6.5 7.2 Credit Strengths Quebecs economy experienced strong growth in 2019. Improved labor market coupled with accelerated investment growth, has contribu
9、ted to a better-than-expected economic growth rate of Quebec in 2019, which outperformed the average level of Canada. Quebec government boasts sufficient fiscal management mechanism and pursues flexible fiscal policies. Thanks to the sound economic performance, the governments effective management o
10、f fiscal expenditure, and better-than-expected revenue from the Retirement Plans Sinking Fund (RPSF), Quebec recorded a fiscal surplus of CAD2,963 million in FY2019/20, which was higher than projected. Based on the long-term goal for debt reduction and the operation of the Generations Fund, Quebec g
11、overnment manages debt prudentially, and obtains sufficient liquidity thanks to pre-financing strategy and ample liquid assets. Given the accelerated early repayment of debt by using Generations Fund and the strong economic growth, the debt/GDP ratio of Quebec government continued to fall below 45%
12、in FY2019/20. Quebec features ample liquidity due to the pre-financing strategy and more than CAD10 billion prudential liquid assets. Credit Challenges The COVID-19 pandemic will pose negative impacts on Quebecs economic and fiscal strengths. The pandemic will plunge the Quebec economy into recessio
13、n in 2020, and the fiscal balance will face greater challenges with the soaring fiscal expenditure. Moreover, affected by the mounting fiscal expenditure in FY2020/21, Quebecs debt is expected to increase significantly. The aging population and the potential labor shortage remain long term challenge
14、 to Quebecs economy. The decline of birth rate highlights the aging issue and continuously reduces the labor force, posing a challenge to the mid-to-long-term economic growth and fiscal flexibility of Quebec. Rating Outlook CCXI holds that the credit rating of Quebec will remain stable for the next
15、12-18 months. Impacted by the coronavirus crisis, Quebec will be in economic contraction in 2020, struggled to maintain the fiscal balance, and dealt with the mounting debt burden. However, the Quebecs economy is well-founded, with sufficient fiscal management mechanism and ample liquidity, which co
16、uld underpin its debt solvency. Possible triggers to a downgrade: CCXI will consider downgrading the credit rating of Quebec, if the economy runs into a sharper-than-expected recession and the continuous deterioration of fiscal strength leads to debt unsustainability. Note: Figures followed by “*” are available in FY2019/20, RMB/USD=6.98:1, CAD/USD=1:0.75. Peer Comparison Peer revi
