FY26 DEFICIT FORECAST BROADLY UNCHANGED
- The deficit is slightly higher but lower capital spending has led to a smaller projected increase to net debt. More moderate spending growth going forward will be needed to return to balance, especially given rising interest charges and ongoing economic risks.
- British Columbia’s Q2 report forecasts a deficit mostly in line with Budget 2025 at -$11.2 bn (-2.5% of nominal GDP) in FY26 (chart 1). The public accounts for 2024–25 present a stronger hand-off from which the deficit was -$7.3 bn (-1.7%) in FY25 compared to -$9.1 bn (-2.1%) estimated in the Spring budget.
- Total revenue for FY26 was revised down by $0.2 bn compared to Budget 2025 to $83.8 bn which would be a 0.3% contraction from FY25 levels. Forecasts for both personal income tax and corporate income tax were revised higher by $0.75 bn and $0.98 bn respectively, reflecting stronger 2024 preliminary tax assessments. Meanwhile, the elimination of the carbon tax effective April 1, 2025, is estimated to reduce revenue by $2.8 bn in FY26, and is partially offset by the one-time $2.7 bn windfall from the tobacco settlement, both of which were added in the Q1 update.
- Total expenditure is estimated to be $0.05 bn higher than Budget 2025 at $95.0 bn in FY26. Higher fire management costs (+$0.5 bn) combined with other expenses are offset by lower refundable tax credits (-$0.6 bn) mostly resulting from the elimination of the climate action tax credit. Contingencies remains unchanged from Budget 2025 at $4 bn which the forecasts assumes will be fully spent.
- Net debt level forecast for FY26 was revised down by $1 bn to $117.7 bn (26.4% of nominal GDP) compared to $118.7 bn (26.7%) in Budget 2025. Taxpayer-supported capital spending for FY26 is planned to be $13.9 bn, down from $15.4 bn in Budget 2025, as the timing for spending on some projects related to health (-$0.76 bn) and transportation (-$0.63 bn) is shifted to future years. Real GDP is projected to grow 1.4% in 2025 and 1.3% in 2026, down from 1.8% and 1.9% respectively in the Spring budget, reflecting lower investment and exports.
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