Moody's Investors Service announced a downgrade of the Province of New Brunswick's baseline credit assessment (BCA), moving it down one notch to aa3 from aa2, and changed the province's outlook to negative from stable. Despite the BCA reduction, Moody's confirmed the province's Aa1 and (P)Aa1 long-term senior unsecured debt and shelf ratings. The rating agency also upheld the Aa1 long-term backed senior unsecured debt rating for the New Brunswick Municipal Finance Corporation, while assigning that rating a negative outlook as well.
Moody's cited several interrelated factors behind its decision. The negative outlook reflects increased downside risks to New Brunswick's fiscal trajectory and its ability to generate revenue, driven in part by ongoing trade uncertainty with the United States and broader global macroeconomic pressures. The province itself projects a consolidated deficit of CAD 1.4 billion in fiscal 2026-27 - equal to 9.8% of revenue - followed by sustained deficits of CAD 1.3 billion in both 2027-28 and 2028-29.
Concerns about the financial position of NB Power also contributed to the downgrade. Moody's highlighted the utility's struggle to maintain reliable generation from its nuclear facility and noted that NB Power has relied on substantial annual rate increases, adding stress to the province's fiscal outlook and raising the possibility of further government support should the utility's finances deteriorate.
The lowered BCA reflects Moody's expectations that New Brunswick will record narrower operating margins over the next four to five years as the province contends with structural deficits. Revenue growth has slowed markedly and is forecast to remain weak as the provincial economy adjusts to an uncertain trade environment linked to US tariffs and to slower population growth associated with federal immigration policies. Against this backdrop, Moody's projects that the province's debt burden will climb above 180% by 2028, up from 139% in 2024, while the interest burden is expected to increase to 7.4% in 2028 from 5.1% in 2024.
At the same time, Moody's decision to keep the Aa1 long-term debt rating in place reflects its assessment of New Brunswick's institutional strengths. The agency pointed to a very strong institutional framework that gives the province broad and unfettered access to revenue measures and high flexibility to control spending. Moody's noted New Brunswick's track record over the past 15 years of often producing stronger fiscal outcomes than provincial peers during periods of widespread negative impacts.
The Aa1 rating also incorporates Moody's evaluation that there is a high likelihood the Government of Canada - rated Aaa with a stable outlook by Moody's - would intervene to prevent a provincial default if necessary. That central government support assumption underpins the maintained Aa1 long-term rating despite the downgrade to the province's standalone BCA.
Moody's outlined paths that could alter the outlook. The negative outlook could be stabilized if New Brunswick presents a credible fiscal plan demonstrating capacity to limit further weakening in operating outcomes and the accumulation of debt, and to return the province to a path toward fiscal equilibrium. Conversely, downward rating pressure could intensify if the province fails to implement spending restraint measures, proposes a protracted timeline for returning to balance, or if NB Power's financial condition worsens to the point where government support becomes more likely.
Context limitations - The assessment and projections cited above reflect Moody's analysis as stated in its rating action. The province's fiscal forecasts and NB Power's operational trajectory will be key to how these risks evolve.