Fitch Ratings has warned that Canada’s coveted AAA credit rating may be at risk if Prime Minister Mark Carney’s newly elected Liberal minority government follows through on its $130 billion platform.
Carney, who replaced Justin Trudeau as Liberal leader in March, led the party to a narrow fourth consecutive election win last week.
However, with only 168 seats, the Liberals are forming another tenuous minority government and must rely on opposition parties to pass legislation.
Fitch estimates that if the Liberals deliver on all of their spending promises, Canada’s general government deficits will rise to 3.1% of GDP in 2025 and 3.2% in 2026, far above the pre-pandemic average. In contrast, the agency had projected deficits of 2.7% and 2.4% respectively with former prime minister Justin Trudeau.
The rating agency said these deficit levels, approaching those seen only during the 2008 recession and COVID-19 pandemic, risk pushing Canada’s gross general government debt above 90% of GDP, nearly double the median for AA-rated peers.
Currently, Canada holds an AA+ rating with Fitch. Other major credit rating agencies like S&P, Moody’s and DBRS have rated Canada with AAA.
Federal deficits alone are set to hit $54.6 billion this year and $43.4 billion next year under the platform, up significantly from earlier forecasts.
“The current Liberal plan needs to be modified or it will put the financial viability of the federal government at risk,” said Jean-Philippe Fournier, former policy advisor to Quebec’s Ministry of Finance.
In a post on X, Fournier said he had warned the platform could threaten Canada’s AAA rating—and now, Fitch has confirmed it.
“I didn’t necessarily want to be right,” he wrote, “but here it is.”
Fournier also noted the timing of Fitch’s release coming after election day was likely intentional to avoid accusations of interfering with the vote. “Unfortunate that they post this after the election,” he wrote, “but it makes sense because this is a serious firm.”
Yet the Liberals claim only partial offsets through new taxes and efficiency measures, many of which Fitch says rely on overly optimistic assumptions, including uncertain revenues from retaliatory tariffs and government productivity gains.
In December, Fitch had projected a 1.1% deficit for 2025.
Now, under the Carney agenda, it sees a risk of deficits nearly triple that amount.
In this same report, economic growth in Canada is forecast to slow to just 0.1% in 2025 and 0.5% in 2026.