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Provincial Fiscal Picture Improves in Canada, Powered by Alberta's Surplus Swing, BMO Says

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Several provinces have now released their first-quarter fiscal updates, painting a mixed fiscal picture across Canada, according to BMO Capital Markets in a note.

The combined provincial deficit is now projected at CA$35.6 billion for FY26/27, a modest improvement from the previous year, driven largely by a sharp turnaround in energy-rich Alberta, wrote the bank in the Thursday note.

Higher oil prices are expected to push Alberta's finances into a roughly CA$2 billion surplus, a sharp turnaround from the CA$9 billion deficit forecast in the province's 2026 budget, added the bank.

Ontario's deficit is unchanged, while Quebec's underlying fiscal position is improving ahead of the fall provincial election. Saskatchewan and New Brunswick are both facing slightly larger deficits as spending pressures continue to mount.

Overall, the provinces' combined shortfall remains "manageable" at 1.0% of gross domestic product and is performing better than initially expected, largely driven by improvements in Alberta, wrote BMO Senior Economist Robert Kavcic in the note.

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