Prince Edward Island’s budget, released February 24, forecasts a $93 million deficit for 2022/2023. This is a jump from $26 million in 2021/2022 due to spending on social priorities, despite no overall revenue growth. However, the 2022/2023 deficit may turn out smaller due to a $30 million contingency for COVID-19 and agricultural supports.
The deficit will gradually shrink from about 1% of GDP this year to 0.3% of GDP by 2024/2025 as projected revenues outpace spending increases.
Net debt will grow by almost 8%, to $2.7 billion this year. This is 30% of GDP, but 7 percentage points below the debt ratio a decade earlier. The debt will continue to climb due to operating deficits and capital spending, which remains elevated in 2022/2023.
To ensure long-term fiscal sustainability, APEC’s 20-year fiscal projections indicate the need to align health care costs to revenue growth.Over the last five years, PEI’s health and other spending have been rising faster than own-source revenues.