British Columbia: Fall 2024 Update - Post-Election Update Just in Time for the Holidays

British Columbia’s fiscal year 2024–25 (FY25) to-date has been challenged by expenses edging modestly higher than planned while revenues are coming in close to their Budget 2024 forecast. As a result, the province’s headline deficit is modestly larger than estimated last February.

The slight widening in BC’s in-year deficit estimate through FY25 can largely be chalked up to increased spending on health authorities and other service delivery agencies, and to a lesser extent fighting wildfires and a higher bill for interest expenses.

Relatively stable headline revenues since Budget 2024 mask some major moves under the hood, with a meaningful reduction in expected corporate income taxes revenues broadly offset by gains in other revenue sources. Conservative natural gas price forecasts in previous projections helped to minimize the fiscal hit from lower gas prices.

The modestly larger deficit in FY25 is expected to push the debt-to-GDP ratio higher than in Budget 2024, to 22.3% from 21.0%. About $7B of gross borrowing requirements remains for the fiscal year, which will be funded through a combination of both long-term and short-term issuance. But this doesn’t change the fact that BC remains in an enviable debt position relative to its provincial peers. And if its prior medium-term projections hold, this relative advantage is likely to be maintained even if the province’s debt rises gradually higher as a share of the economy.

While the changes to BC’s FY25 plan were relatively minor, the risks to the outlook are to the downside just as they are for the rest of the country. From potentially lower-than-expected population growth and the impending mortgage renewal wall to tariffs on Canadian exports destined for the US and the inevitability of climate change, cautious fiscal planning is of paramount importance. Fortunately, BC is known for its leading prudence among Canadian provinces.