Treasury
Prince Edward Island's Deficit Persists to Support Provincial Economy, Says National Bank
Prince Edward Island recorded resilient economic growth in 2025, as real gross domestic product advanced by a greater amount than the national average, but slower GDP inflation brought nominal figures in line with Canada's nominal rate of 4.3%, said National Bank of Canada.The provincial budget deficit was larger than expected in the outgoing year, a miss that was driven by both higher spending and lower revenues, noted the bank.Looking ahead, the Canadian province expects to remain in the red, projecting a $410 million deficit, or 3.5% of GDP, for 2026-27, a modest improvement from the year prior, stated National Bank. Deficits persist, but moderate out the projection horizon, with a $338 million shortfall, or 2.6% of GDP, slated for 2028-29.Like other provinces, P.E.I.'s budget prioritizes core service spending, with some targeted cuts and tax changes to support fiscal consolidation, pointed out the bank.Net debt-to-GDP is expected to grow throughout the three-year plan, reaching 38.1% in 2026-27 and peaking just below the fiscal anchor of 40% -- 39.9% in 2028-29 -- that was outlined in December. The provincial interest bite will grow in tandem, reaching 7.2% in the final projection year, shy of the 7.5% anchor -- the second of two, added National Bank.Gross bond requirements, while materially higher than they were just two years ago, will moderate slightly in the upcoming fiscal year. The province is projecting $900 million in term issuance, down from $1 billion in 2025-26.
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