The Fitch Ratings agency said today that the Canadian economy looks to be heading for slower-than-expected growth and at risk of shocks from the euro zone, while jobs are being lost, after a strong 2010 boosted by higher commodity prices and government stimulus measures.

"Still, the Canadian government's demonstrated ability to put forth a credible long-term fiscal consolidation plan provides critical support for the country's triple-A rating," Fitch said in a statement. "The government's commitment to eliminate the federal budget deficit by the middle of this decade even in the context of weaker growth puts Canada ahead of other peers rated triple-A."
It also noted that Finance Minister Jim Flaherty has said he's ready to step in with more stimulus "in a pragmatic way" should conditions sour even more. Indeed, Mr. Flaherty said this again as recently as yesterday.

Canada has built-in buffers that will help defend the triple-A credit rating, the agency said.

"The growth outlook for Canada remains tightly connected with that of the U.S., which accounts for approximately three-quarters of Canada's exports," Fitch said.

"Nevertheless, the macro prudential policies in place, a strong banking system, and the haven status of the Canadian dollar are likely to provide shock-absorbing support for the rating in a scenario where the euro zone crisis worsens and undermines global growth prospects further."
Standard & Poor's reaffirmed Canada's triple-A rating in the summer.