B.C.’S provincial deficit is now $11.6B, $665 million higher than at budget; followed by $12.6 billion next year and $12.3 billion in 2027-28.
But Brenda Bailey, Minister of Finance, says B.C.’s First Quarterly Report shows the province’s economy remains steady despite disruption and uncertainty from the global trade conflict.
Bailey said on Monday: “While B.C.’s diversified economy is better positioned than many to weather these headwinds, there’s no doubt that tariffs are challenging our economy and there is pressure on our fiscal position.”
She added: “We’re being focused with our spending, making smart reductions where we can, being strategic with our investments to drive economic growth and foster innovation to build a stable economic future for B.C., and support the services people count on.”
The update reflects the impact of government’s decision to help people with high costs by eliminating the carbon tax, as well as decreases in revenue sources, such as property transfer tax, sales tax, natural resources, federal government contributions and higher fire management costs.
The 2025-26 deficit is partially mitigated by an increase in corporate income tax revenues and from B.C.’s share of the historic $32.5-billion lawsuit against tobacco companies in recognition of the harms caused by the companies’ actions.
The Province is on track to meet its three-year, $1.5-billion expenditure-management target first announced in Budget 2025, including more than $300 million in savings this fiscal year.
“We’ve made a commitment to review every dollar being spent to make sure it’s serving the needs of British Columbians and that work is reflected in our initial savings of $300 million this year,” Bailey said. “In the current fiscal and economic climate, we’re focusing on the key services that people and families need, and protecting the services we all depend on now, and for the future. This work is ongoing as we plan for Budget 2026.”
The Province’s diverse industries and access to global markets are helping support B.C.’s economy in the face of trade uncertainty. However, lower economic growth is projected for 2025 and 2026 due to tariff impacts, a slowing global economy, and a slowdown in the housing market. B.C.’s economy is expected to recover in the medium term, supported by a stable labour market, exports of liquefied natural gas and increased residential construction.
“We’re building our province’s position as the economic engine of a stronger and more self-reliant Canada, moving forward with major projects, including those identified by the federal government, that put people to work, drive economic growth and support strong communities,” Bailey said.
Learn More:
To access the First Quarterly Report, visit:
https://www2.gov.bc.ca/gov/
To access the PowerPoint presentation, visit:
https://news.gov.bc.ca/files/
BACKGROUNDER
First Quarterly Report 2025-26
Economic highlights
* B.C.’s economy is projected to see 1.5% real gross domestic product (GDP) growth in 2025, 1.3% growth in 2026 and return to solid average annual growth of 2.1% from 2027 until 2029.
* Strong year-to-date retail sales, steady employment gains and easing interest rates have supported B.C.’s economy despite weaker home sales and slower housing construction in 2025.
* Exports have also been volatile, influenced by developments in global demand in response to U.S. tariffs.
* Employment has increased by 1.1% year-to-date to August 2025.
* B.C.’s unemployment rate was among the lowest in the country at 6.2% in August 2025.
Operating results
* Revenue for 2025-26 is forecast to be $83.3 billion, $739 million below Budget 2025 projections.
* Lower revenue mainly reflects government’s decision to remove the consumer carbon tax, as well as lower natural resource revenues, and timing of federal contributions under the Disaster Financial Assistance Arrangements program.
* Revenue reductions are partly offset by higher corporate income tax revenues, and the inclusion of the one-time gain related to the tobacco settlement.
* Forecast natural resource revenue is down $225 million from budget, mainly due to lower commodity prices.
* Natural gas royalties were down, forestry stumpage revenue was lower, coal and copper prices were weaker, and coal production was lower.
* Revenue from electricity sales under the Columbia River Treaty is up $17 million as warmer than usual weather and drought created an increase in power demand and prices.
* Revenues from other natural resources are up $31 million due to bonus bid cash sales and higher petroleum production values.
* Corporate income tax revenue is forecast to be $411 million higher than budget due to higher advance instalments from the federal government and an increase in prior year settlement payments mainly reflecting preliminary 2024 tax assessment results.
* Revenues include the estimated one-time net revenue of $2.7 billion in 2025-26 for the tobacco settlement.
* The net revenue represents B.C.’s portion of the global award, net of legal costs and discounted due to the long-term nature of the payment schedule.
* Expenses are forecast to be $74 million lower than budget, due to:
* Lower spending for refundable tax credits due to the elimination of the climate action tax credit, partially offset by higher projected spending funded by statutory authorizations, including an estimated $613 million for wildfires.
* Debt servicing costs are forecast to be $140 million higher, due to a higher opening debt balance, higher interest rates, and accelerated timing of in-year borrowing.
Capital spending
* Taxpayer-supported capital spending on hospitals, cancer centres, housing, schools, transportation infrastructure and other projects is forecast to total $14.7 billion in 2025-26. This is $710 million lower than budget, due mainly to timing changes for major projects in procurement and construction of post-secondary, transportation and health sectors.
* A total of 18 major projects were approved since Budget 2025.
* Self-supported capital spending by Crown corporations is $10 million lower than at Budget 2025, due to changes in the timing of ICBC capital expenditures.
Debt levels
* Total provincial debt is projected at $155.4 billion by the end of the 2025-26 fiscal year.
* Debt-affordability metrics for the Province remain among the lowest in Canada, including the forecast for debt-to-GDP at 26.6% for 2025-26.
Expenditure management
* B.C. is on track to meet its initial expenditure management target of $1.5 billion over the fiscal plan through administrative savings, reductions in discretionary spending, freezing hiring and reviewing programs for efficiency.
* Expenditure management measures are expected to exceed the $300-million savings target in 2025-26.
* Government continues work on program efficiency reviews in advance of Budget 2026.
