DEFICIT WIDENS ON LOWER MANITOBA HYDRO PROFIT, WILDFIRE EXPENSES
- The FY26 deficit forecast has roughly doubled, despite using up the $200 mn contingency reserve set aside in the Spring Budget. The new forecast for the FY26 budget balance is -$1.7 bn (-1.7% of nominal GDP), compared to the Budget forecast of -$0.8 bn (-0.8%) (chart 1). Modest spending growth going forward will be needed to meet the object of balancing the budget in 2027–28, amid ongoing economic headwinds.
- Total revenue for FY26 has been revised down by $756 mn (-3%) compared to Budget 2025 to $24.5 bn. While some of the downward revision in total revenue compared to Budget 2025 is from lower federal transfers (-$133 mn), the majority of the gap is concentrated in lower net income from government business enterprises (-$725 mn). Manitoba Hydro is projected to have a net loss of $464 mn this year owing to drought conditions (-$684 mn relative to Budget 2025). The drop in expected revenues has been partially offset by using the full $200 mn revenue contingency budget for the year. Overall, revenues are now expected to be 0.6% higher in FY26 compared to FY25.
- Total spending for FY26 has been revised up by $311 mn (+1.2%). The higher spending is almost entirely driven by higher-than-expected wildfire costs (+$324 mn), as increases to Health (+$50 mn) and Justice (+$20 mn) were more than offset by reduced Agriculture spending (-$83 mn). Meanwhile, debt servicing costs are unchanged relative to the Spring Budget at $2.3 bn. Total FY26 expenses are now projected to be 2.6% higher than FY25.
- Net debt for FY26 has been revised to $38.1 bn (38.2% of nominal GDP), up from $36.5 bn (36.9%) in Budget 2025 (chart 2). Net debt levels are projected to increase by 7.9% y/y relative to FY25, compared to the forecast for nominal GDP growth of 3.7% in 2025 that is a tick higher than the 3.6% forecast in Budget 2025. Meanwhile real GDP growth for 2025 was revised down by 0.6 percentage points to 1.1% owing to economic headwinds from the wildfires and uncertainty from trade tensions.
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