Provincial Updates

December 17, 2024 | 17:50

B.C. FY24/25 Mid-Year Fiscal Update

Economist

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

The Province of British Columbia is estimating a $9.4 billion deficit for FY24/25 (2.3% of GDP), in the first refresh of the books following the October election. That's running deeper than both the 2024 budget ($7.9 billion) and the Q1 update ($8.9 billion). Note that this fiscal update doesn't incorporate what turned into an election campaign full of promises, so we could see even more pressure on finances in the 2025 budget. The Province did not update the medium-term fiscal plan, but pre-election messaging suggested little priority to balance the books.

Total revenues are running very slightly below budget levels at $81.4 billion for FY24/25. Personal income taxes are tracking $500 million higher, but corporate income taxes and some various other components have offset that increase.

Compared to the budget, the provincial economic outlook has been nudged up for this year, but trimmed for 2025. The real GDP growth estimate of 0.9% in 2024 is a tick higher than previously assumed, but trails BMO Economics' most recent view (1.2%). The forecast for next year is also below our call at 1.9% (BMO is at 2.1%), but a little prudence is warranted given some of the risks on the economic front. At it stands now, domestic demand (notably housing) is picking up some momentum into 2025 and, given deeper ties to Asia, it's notable that B.C. has relatively low trade exposure to the U.S. when compared to the provincial peer group.

Meantime, spending is tracking higher than both the budget and the Q1 update. Total spending of $90.9 billion is running $1.4 billion above the original estimate. Increases in fire-related costs and interest charges account for most of the upside since the budget.

Total gross borrowing requirements are now pegged at $26.0 billion for FY24/25, down slightly from the $27.1 billion expected in the Q1 update. About $7.0 billion remains to be completed, with the Province expecting both short- and long-term issuance. The taxpayer-supported debt-to-GDP ratio is tracking somewhat higher at 22.0%, as the larger deficit is offset partially by slightly lower capital spending.

The Bottom Line: British Columbia's fiscal balance continues to slip further into deficit, and a handful of election promises are still in the pipeline to absorb. For now, B.C. spreads are trading back of Ontario and near the widest end of their multi-year range...it doesn't seem like there's much to change that momentum.