In its first post-election Budget, the Province of New Brunswick (N.B.) is projecting a $549 million deficit for FY 2025/26 (or 1.1% of GDP), before accounting for a newly-introduced $50 million contingency fund. This comes after a $400 million deficit in FY 24/25, which was revised from a modest $40 million surplus shown in last year’s budget.  That ended a seven-year streak of black ink.

The government is keeping with its election pledge by pushing forward with priority spending in areas like health care, housing, and education. The budget also established a business support package of $112 million to combat against U.S. tariff uncertainty.

Economic Projections Acknowledge Some Risks Around Trade

The government is anticipating real GDP growth in 2025 to slow to 1.1% from an estimated gain of 1.5% the year prior. The forecast attributes the slowdown to a deceleration in population growth and trade uncertainty (although regarding the latter, no explicit tariff assumptions were provided). Real GDP growth is then projected to accelerate slightly to 1.3% next year and average 1.5% in the outer years of the forecast horizon. 

These projections are below our own comparable March projections of around 0.5% this year and next.  We have incorporated both conservative assumptions around U.S. tariffs as well as disproportionately deeper impacts relative to most other Canadian provinces.   However, the budget has adopted cautious assumptions around GDP inflation, which leaves nominal GDP forecasts roughly in line with our own. Additionally, the projected 3.2% gain in 2025 nominal GDP is below the province’s long-term average. 

Consistent with the moderate nominal growth, revenue is expected to rise by 4.0% this year, with revenue gains being scaled evenly across personal and corporate income taxes. No significant tax measures were incorporated in the Budget. Further, the budgeted $50 million contingency is enough to offset lower GDP growth of roughly 0.2 to 0.3 ppts – any downside to growth materializing past this will weigh further on the bottom line.

New Brunswick Economic Assumption

[ Percent Change Unless Otherwise Noted ]

Brisk Spending Gains in FY 25-26, More Modest Increases Beyond 

On the opposite side of the ledger, expense growth is projected to expand at a 4.9% rate after last year’s robust 9.2% spending growth. New spending of $30 million is earmarked for the health care sector to improve access to primary care. Other focus areas include education and housing, with a planned increase of $18.8 million for the New Brunswick Housing Corp. to build more homes. Expense growth subsequently slows to under 2.5% per year over the remainder of the forecast horizon. 

Meanwhile, the province has ramped up capital spending with a $1.26 billion plan for FY 2025/26, representing a near 10% year-on-year gain. Capital spending growth is almost entirely focused on transportation infrastructure and health care.

Bottom Line

The New Brunswick government is projecting moderate deficits for the foreseeable future as it continues to keep its foot on the spending pedal in the face of economic uncertainty. Nonetheless, the province’s continues to boast a relatively low debt burden that provides some wiggle room alongside this year’s healthy contingency reserve.