A major credit rating agency is warning Ottawa that sustained deficits will make Canada more vulnerable to an economic downturn.

In a report Wednesday, Fitch Ratings Inc. also said the country’s debt levels are higher than other top-rated countries.

“Canada's gross general government debt, combining federal and provincial fiscal accounts, is higher than other 'AAA' rated sovereigns, excepting the U.S, and remains close to a level that is incompatible with 'AAA' status,” the report said.

The warning came after the federal government forecast a higher deficit of $19.8 billion in 2019-20 and $19.7 billion for 2021-22, before shrinking to $9.8 billion by 2023-24, in its budget on Tuesday.

“My reaction to Fitch is: Thank-you very much,” said Norman Levine, managing director of Portfolio Manager Corp., in an interview with BNN Bloomberg Thursday.

“When opposition politicians, when Street economists talk about it, the government poo-poos it. But when a rating agency says it, that means something.”

“In Canada, you have a government that’s a tax and spend government with no signs of ever changing that – they just keep moving the goal post further out,” Levine added. “But in Canada, the bigger risk I think is some of the provinces, which are in even worse financial shape than the federal government.”

Fitch said the increased deficits remain relatively modest at less than one per cent of GDP, and it maintains its forecast the government’s debt ratio will fall toward 85 per cent GDP over the medium-term.

A spokesperson for Finance Minister Bill Morneau touted that outlook in response to a request for comment from BNN Bloomberg.

"The federal debt-to-GDP ratio is projected to fall in every year of the forecast horizon; and, Canada has, by far, the lowest net debt-to-GDP ratio among G7 countries," said Pierre-Olivier Herbert via email, without commenting directly on the rating agency's warning that federal and provincial debt could eventually threaten Canada's AAA rating.

"We continue to manage deficits carefully," he added.