Credit rating agency raises N.L. debt rating to A level

Newfoundland and Labrador's credit rating has been raised bycredit rating agency DBRS Morningstar.

The agency announced Thursdaythe province's issuer and long-term debt ratings have improved from stable to positive. The ratingincreased from an A (low) rank to an A rank.

The upward trend is the the result of "Newfoundland's improving fiscal outlook," said the agency,which includes the commissioning of the Muskrat Falls hydroelectric project.

"While electricity rate mitigation plans will be subject to future general rate applications by Newfoundland and Labrador Hydro, DBRS Morningstar assumes that rate mitigation will ultimately be successful," the agency wrote in a press release Thursday.

"As such, DBRS Morningstar believes the risks of stranded debt related to the project are considerably reduced and the negative overlay is no longer warranted."

The agency added that the province's trajectory for debt appears to be favourable as Newfoundland and Labrador moves on from the COVID-19 pandemic.

The release said the province is expected to increase its real gross domestic product due to higher mineral production and more capital investment.

However, it also notes GDP growth could soften as the prices of Newfoundland and Labrador's commodities drop, which could stall or potentially reverse economic growth in the future.

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