04:40 PM EDT, 04/09/2025 (MT Newswires) -- National Bank of Canada on Wednesday noted that Newfoundland and Labrador expects the 2024-2025 fiscal years to end with a deficit of $252 million, or $100 million more than anticipated in the previous budget. It said this deterioration can be explained by slightly lower revenues (-$42 million) and higher than expected expenses (+$58 million). But, National added, it should be noted that this larger than expected deficit has arisen even though the ministry estimates that the province's real GDP grew at an impressive rate of 6.7% in 2024, the highest growth of any Canadian province.

For the coming years, National Bank noted, the budget is based on economic assumptions that "broadly capture" the impact of the current trade war with the United States.

Despite the supposed prudence suggested by the ministry, the economic and commodity forecasts supporting the budget seem optimistic overall in National's opinion. For 2025-26, the budget forecasts a deficit of $372 million, but it could turn out to be higher, since a provision of $200 million not included in this deficit has also been set aside, "a good idea in the current context".

The budget, National also noted, then forecasts a return to a balanced budget from 2026-27 and beyond. National said: "It must be said that the government is showing discipline, as very few new measures have been announced today, even though we are only a handful of months away from the next election campaign in the province. In fact, the budget essentially commits to not increase taxes and fees in the province for the next four years and renews more temporary credit for an additional year, such as the 50% reduction for vehicle registration and the home heat rebate."

As for the province's indebtedness, National Bank noted the budget forecasts the net debt to GDP ratio will increase from 44.4% in 2024-25 to 44.8% in 2025-26, despite the strong economic growth, thanks to the deficit. Debt servicing is expected to decrease from 11.1% of total revenue in 2024-25 to 10.7% in 2025-26. On borrowing requirement, Newfoundland and Labrador expects to issue a larger $4.1 billion in 2025-26, following on a $2.8 billion gross borrowing program from 2024-25.