NEW YORK, - Credit rating agency Moody's Investor Service says Canada's Aaa credit rating with a stable outlook reflect a large, diversified economy and sound macroeconomic policy management.
And Moody's, in a report issued Thursday, said that political consensus on maintaining relatively low government debt levels, coupled with a benign economic outlook, should allow the federal government to balance its budget within the next few years.
"The Canadian economy is transitioning towards a external-demand growth model from a primarily domestic-demand one," Moody's said. "As it does so, the resource sector will become increasingly important."
"Stronger demand from the U.S. will help the Canadian economy, given the large concentration of exports going to its neighbour as well as the strong financial linkages that exist between the two countries," it added.
Meanwhile, the ratings agency said the main risks to the economy right now would have only a limited impact on Canada's credit quality.
For example, even "in the unlikely event that there is a severe housing market correction, the exposure of the government would be low," it said.
Although household debt has risen throughout the global financial crisis, levels have begun stabilizing "in part because of the authorities' proactive management."
And, despite Canada's current account going into deficit since 2008, the country's net external liability position remains moderate, it said.
The new report, a credit analysis, is an annual update to the markets and does not constitute a rating action, Moody's said.
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