(Bloomberg) -- Canada’s long-term foreign currency debt rating was downgraded by Fitch Ratings, which cited the deterioration of the nation’s public finances resulting from the Covid-19 pandemic.

The country is expected to run a bigger general government deficit this year and emerge from the recession with much higher public debt ratios, the ratings firm said Wednesday. It cut the country’s rating one step to AA+ from AAA.

“The higher deficit is largely driven by public spending to counteract a sharp fall in output as parts of the economy were shuttered to contain the spread of the coronavirus,” Fitch said in the report. It expects the coronavirus response to raise Canada’s consolidated gross general government debt to 115.1% of gross domestic product in 2020, up from 88.3% last year.

Canada federal government is on track post its largest deficit on record in the 2020-2021 fiscal year. The cash shortfall may reach 12.7% of the gross domestic product during current fiscal year compared with 1.1% last year, according to the Parliamentary Budget Officer. That would be the largest gap since at least the mid-1960s.

The Canadian dollar briefly weakened to a session low and is now flat on the day.

The North American economy is set contract 7.1% in 2020 compared to 1.6% growth last year, according to median consensus of analysts compiled by Bloomberg. The government is rolling out a plan of more than C$230 billion of subsidies, grants and tax referrals in a bid to offset the impact of the pandemic.

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