EXPECTING BALANCED BUDGETS FOLLOWING REVENUE WINDFALLS IN FY24
- Budget balance forecasts: surplus of $247.4 mn (0.5% of nominal GDP) in FY24, $40.9 mn (0.1%) in FY25, $39 mn (0.1%) in FY26, and $30 mn (0.1%) in FY27 (chart 1).
- Net debt: 26.8% in FY24, relatively unchanged at 26.7% in FY25, and declining to 26.0% in FY26 and 25.6% in FY27 (chart 2).
- Real GDP growth forecasts: +1.1% in 2023, slowing to 0.7% in 2024, and picking up to 1.7% in 2025.
- Borrowing program: $1.7 bn in FY25, of which $150 mn is on behalf of NB Power.
- This budget largely holds the line with only modest new spending announced ahead of pending elections, despite a larger-than-anticipated windfall in FY24. This is a prudent plan as economic conditions soften.
OUR TAKE
New Brunswick’s Budget 2024–25 delivers windfall revenues in FY24 but otherwise contains a projected fiscal balance path that looks almost identical to last year. The province now expects a surplus of $247.4 mn (0.5% of nominal GDP) in FY24 owing to higher own source revenue that is only partially offset by greater program spending relative to the mid-year update. The budget balance outlook looks set to return to surpluses between $30–41 mn, approximately 0.1% of nominal output, for fiscal years 2024–25 through 2026–27.
Total expenditure is expected to increase from $12.5 bn in FY24 to $13.3 bn in FY25, as program spending increases from $11.9 bn to $12.6 bn in 2024–25. Program spending in FY24 is expected to be $388 mn above last year’s budget plan, and rise further in FY25. The budget continues to allocate spending towards health (above last year’s budget by $212 mn in FY24, adding $7 mn in FY25), early childhood and post-secondary education (+$35 mn FY24, +$239 mn FY25 combined), social development (+$68 mn FY24, +$100 mn FY25), and transportation and infrastructure (-$11 mn FY24, +$153 mn in FY25). Debt servicing costs are expected to increase to $608 mn, up from $542 mn, but remain at a low 4.6% of total revenue. Total expenditure is expected to grow faster than revenue, 6.4% versus 4.7% respectively, in FY25. The province’s own source revenue is projected to increase 4.3% in FY25 primarily owing to higher harmonized sales tax, personal income tax, and corporate income tax. Total revenue and expenditure are expected to increase in line by 2.5% in FY26, and then by 2.9% and 3.0% respectively in FY27.
Net debt as a share of nominal GDP is projected to continue its descent over the planning horizon albeit on a slightly higher trajectory than earlier projected. Net debt-to-GDP is expected to be little changed in the upcoming fiscal year at 26.7% in FY25, marginally lower than 26.8% in FY24. Afterwards, it is projected to resume a downward trend, falling to 25.6% in FY27 as net debt is expected to grow at a slower pace than nominal GDP. The economic forecasts nominal and real GDP grew at 3.5% and 1.1% respectively in 2023. Growth in economic activity through 2024 is expected to remain positive but slow to 0.7% before picking up to 1.7% in 2025 in real terms.
New Brunswick’s borrowing program has completed $1.8 bn of long-term borrowing in FY24, in line with last year’s budget plan and above the $1.5 bn Q3 estimate. Total long-term borrowing planned for FY25 is $1.7 bn, of which $150 mn is on behalf of NB Power, while $278 mn has been prefinanced based on Q3.
DISCLAIMER
This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank nor any of its officers, directors, partners, employees or affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents.
These reports are provided to you for informational purposes only. This report is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any financial instrument, nor shall this report be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The information contained in this report is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a “call to action” or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. Scotiabank may engage in transactions in a manner inconsistent with the views discussed this report and may have positions, or be in the process of acquiring or disposing of positions, referred to in this report.
Scotiabank, its affiliates and any of their respective officers, directors and employees may from time to time take positions in currencies, act as managers, co-managers or underwriters of a public offering or act as principals or agents, deal in, own or act as market makers or advisors, brokers or commercial and/or investment bankers in relation to securities or related derivatives. As a result of these actions, Scotiabank may receive remuneration. All Scotiabank products and services are subject to the terms of applicable agreements and local regulations. Officers, directors and employees of Scotiabank and its affiliates may serve as directors of corporations.
Any securities discussed in this report may not be suitable for all investors. Scotiabank recommends that investors independently evaluate any issuer and security discussed in this report, and consult with any advisors they deem necessary prior to making any investment.
This report and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced without the prior express written consent of Scotiabank.
™ Trademark of The Bank of Nova Scotia. Used under license, where applicable.
Scotiabank, together with “Global Banking and Markets”, is a marketing name for the global corporate and investment banking and capital markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including; Scotiabank Europe plc; Scotiabank (Ireland) Designated Activity Company; Scotiabank Inverlat S.A., Institución de Banca Múltiple, Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Casa de Bolsa, S.A. de C.V., Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Derivados S.A. de C.V. – all members of the Scotiabank group and authorized users of the Scotiabank mark. The Bank of Nova Scotia is incorporated in Canada with limited liability and is authorised and regulated by the Office of the Superintendent of Financial Institutions Canada. The Bank of Nova Scotia is authorized by the UK Prudential Regulation Authority and is subject to regulation by the UK Financial Conduct Authority and limited regulation by the UK Prudential Regulation Authority. Details about the extent of The Bank of Nova Scotia's regulation by the UK Prudential Regulation Authority are available from us on request. Scotiabank Europe plc is authorized by the UK Prudential Regulation Authority and regulated by the UK Financial Conduct Authority and the UK Prudential Regulation Authority.
Scotiabank Inverlat, S.A., Scotia Inverlat Casa de Bolsa, S.A. de C.V, Grupo Financiero Scotiabank Inverlat, and Scotia Inverlat Derivados, S.A. de C.V., are each authorized and regulated by the Mexican financial authorities.
Not all products and services are offered in all jurisdictions. Services described are available in jurisdictions where permitted by law.