Provinces are bracing for record deficits. What’s causing budgets to see red?
Global News
From trade tensions to a shrinking workforce and existing inflation, several factors are leading to provinces posting sometimes record-breaking budgets.
Budget season for Canada has kicked off with three provinces already posting steep deficits, a trend economists say is the result of several factors impacting every part of the country.
On Tuesday, British Columbia unveiled their budget that comes with a record $13.3 billion deficit in the next fiscal year.
In recent fiscal updates, New Brunswick announced a record-breaking $1.33 billion shortfall and Nova Scotia last month said its deficit is estimated at $1.4 billion. Alberta is also forecasting a $6.4 billion shortfall for the 2025/26 fiscal year.
“The increase in deficits is something that is being experienced across the country to various extents,” said Jesse Hajer, associate professor of economics at the University of Manitoba.
Hajer said two of the most common factors are the high economic uncertainty given trade tensions with the U.S., and a change in immigration that is reducing the labour force and slowing economic growth.
But he added there are also specific issues different provinces are facing.
He used Alberta as an example, saying oil prices are pulling down the revenue of the provincial government. Meanwhile, in Manitoba, the province is seeing what Hajer calls a “structural deficit,” in which its revenue base is “not enough to keep up with funding our baseline expenditures.”
“When we hit a challenging time like we are faced with today where the expectations of government are high, the revenues aren’t necessarily there to support and meet those expectations,” he said.
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