-- Weaker revenue and higher spending have led Prince Edward Island to anticipate larger deficits and a faster increase in debt than previously projected, despite some efforts to find fiscal savings and target new affordability measures, said Scotiabank.
The decline in the deficit in future years will depend in large part on the achievement of the planned $200 million annual savings through a spending review at the Canadian province, as well as the planned slowdown in health spending growth, noted the bank.
The FY26 deficit is estimated to be $450 million, or 4% of nominal gross domestic product, up from $367 million, or 3.2% of NGDP, in the mid-year update, and is projected to decline from $410 million (3.5%) in FY27 to $338 million (2.6%) by FY29.
Real GDP growth is assumed to grow 2% this year and in 2027, down from an estimated 2.4% in 2025.
The higher deficits for longer will further drive up the province's net debt over the outlook, pointed out Scotiabank. Net debt is projected to rise from $3.77 billion, or 33.2% of GDP, in FY26 to $4.50 billion (38.1%) in FY27 and $4.89 billion (39.8%) in FY28, before reaching $5.13 billion (39.9%) in FY29.
The province's cash requirements remain elevated amid the large deficits and capital program, added the bank. For FY27, total cash needs are estimated at $918.4 million, down from $1.05 billion in FY26, driven by the consolidated deficit ($410 million), $486.5 million in capital asset acquisitions, and $105.1 million in net borrowing on behalf of Crown corporations, which is partially offset by $166.2 million in amortization.
These borrowing requirements are planned to be met through $900 million in long-term borrowing and $18.4 million in short-term borrowing and working capital.