Don’t Judge the Provinces’ Books by Their Covers - Five Themes from the 2024 Provincial Budget Season, and Why Things Aren’t as Bad as They Seem

Many taxpayers and investors are feeling less optimistic about the future now that budget season 2024 has come to a close, as budget balances deteriorated nearly across the board.

However, no province is expecting to run a record shortfall as a share of GDP in the coming fiscal year. Moreover, while the provinces’ combined net debt-to-GDP ratio is set to rise in the year ahead, projections for this metric are lower than they were for most of the decade before the pandemic.

Spending increases drove the bulk of deficit deterioration, but that doesn’t mean governments are being irresponsible. If we only look at headline spending numbers, we’ll miss important fiscal planning nuances. We also need to consider population growth and aging.

We continued to see meaningful changes to the tax base in budget season 2024, and these remain a risk going forward. That said, contingency funds are still sizeable and offer upside potential for the bottom line.

Alberta and New Brunswick projected particularly impressive fiscal metrics, while markets gave Ontario’s plan a warmer welcome than we might have expected following increases to its deficit forecasts.

The short-run economic outlook, the effects of potentially higher-for-longer interest rates, and the consequences of population aging remain question marks going forward.