Alberta, Saskatchewan finances in best shape among provinces, says Conference Board
Pressures from the trade war are expected to push every Canadian province into fiscal deficit this year, but their fortunes going forward could be radically different, according to a new report released by the Conference Board of Canada on Tuesday.
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While all provinces currently face budget shortfalls brought on by pandemic debt and increased spending due to trade war uncertainty, Alberta and Saskatchewan are currently in the best fiscal position thanks to prudent debt management and revenue from the natural resources sector.
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'Alberta has a younger population and has a really strong foundation in the oil and gas sector, which helps to boost their royalty revenues,' said Richard Forbes, principal economist at the board.
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The report forecasts Alberta's fiscal position will improve from a $4.3 billion expected deficit in 2025-2026, to a surplus of $3.9 billion by the end of the decade.
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Saskatchewan's shortfall is expected to improve as well, with the deficit shrinking from $373 million in 2025 to $172 million in 2026, with small budget surpluses for the remainder of the decade.
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Forbes noted Saskatchewan and Alberta remain heavily reliant on resources and could face volatility.
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On the flip side, the Atlantic provinces face tougher headwinds on the fiscal front, including declining population, lower investment and lower revenues.
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None of the Atlantic provinces' deficits are expected to return to balance by the end of the decade, with Newfoundland and Labrador and New Brunswick in particular contending with aging populations.
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'Demographics is a really big driver of government finances,' said Forbes. 'In eastern provinces and Quebec, their populations are bit more senior, and their median ages are higher.'
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Forbes said as people get older, they contribute less to tax revenues and generally spend less in the economy. In addition, as the population ages, the demand for healthcare services increases, a key area of spending for provinces.
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British Columbia also currently faces a record-breaking deficit of $9.1 billion, which is 70 per cent higher than the record deficit it posted during the pandemic. In April, S&P Global Ratings downgraded the province's credit rating from AA to A+. The province's deficit is expected to remain elevated at $9.3 billion in 2029-30.
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Forbes said there is no indication the province will come back to balance by the end of this decade, but cited potential revenue from the resources sector as a reason to remain optimistic.
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