May 10, 2022
Provincial budgets improving, but spending falls: Desjardins
, BNN Bloomberg
What provincial governments are doing with their revenue windfall
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A new report from Desjardins is casting a positive light on provincial budgets as the domestic economy recovers from the worst ravages of the pandemic.
In a report to clients, Randall Bartlett, senior director of Canadian economics at Desjardins, said improving economic conditions had delivered a windfall for the provinces.
“Christmas came early for the federal and provincial governments this budget season. With real GDP growth, inflation and labour market indicators topping early 2021 expectations, it came as little surprise that revenues outperformed,” he said.
“Spending also came in lower than expected, albeit more modestly, particularly in those areas most closely linked to the economy such as COVID‑19-related measures.”
Every province saw fiscal conditions improve from previous estimates, with New Brunswick and Nova Scotia on track to post a surplus this fiscal year.
However, there was a divergence in spending intentions, with Ontario, B.C., Nova Scotia, and Prince Edward Island all planning to increase spending relative to gross domestic product compared to fiscal 2021-22.
Though spending intentions are rising in those provinces, Bartlett said that Canada remains more spendthrift than many of its developed-market peers.
“In the context of total public debt outstanding, Canada has the lowest net debt-to-GDP ratio in the G7. And while higher than prior to the pandemic, Canada’s total government debt position continues to compare very well to other major advanced economies,” he said.
“This was reinforced when Standard & Poor’s re-affirmed the Government of Canada’s AAA credit rating with a stable outlook at the end of April 2022.”
In a report to clients, Randall Bartlett, senior director of Canadian economics at Desjardins, said improving economic conditions had delivered a windfall for the provinces.
“Christmas came early for the federal and provincial governments this budget season. With real GDP growth, inflation and labour market indicators topping early 2021 expectations, it came as little surprise that revenues outperformed,” he said.
“Spending also came in lower than expected, albeit more modestly, particularly in those areas most closely linked to the economy such as COVID‑19-related measures.”
Every province saw fiscal conditions improve from previous estimates, with New Brunswick and Nova Scotia on track to post a surplus this fiscal year.
However, there was a divergence in spending intentions, with Ontario, B.C., Nova Scotia, and Prince Edward Island all planning to increase spending relative to gross domestic product compared to fiscal 2021-22.
Though spending intentions are rising in those provinces, Bartlett said that Canada remains more spendthrift than many of its developed-market peers.
“In the context of total public debt outstanding, Canada has the lowest net debt-to-GDP ratio in the G7. And while higher than prior to the pandemic, Canada’s total government debt position continues to compare very well to other major advanced economies,” he said.
“This was reinforced when Standard & Poor’s re-affirmed the Government of Canada’s AAA credit rating with a stable outlook at the end of April 2022.”
