Bank’s economics team highlights BC’s struggles to curb deficits and contain rising debt
British Columbia’s latest fiscal blueprint offers only modest improvement in its near-term deficit outlook and does little to reset the province’s broader fiscal trajectory, according to a new assessment from RBC Economics.
In its review of Budget 2026, RBC Economics notes that while the government has slightly reduced its projected shortfall for 2025-26, the province remains far from restoring balance. The deficit for the current fiscal year is now pegged at $9.6 billion, an improvement from earlier projections exceeding $10 billion. Still, red ink is expected to deepen again in subsequent years.
Crucially, the report underscores that “there is no path to balance” outlined in the government’s fiscal plan.
RBC points to a range of structural pressures weighing on the province’s finances. Revenue growth is expected to soften amid slower economic expansion, while spending commitments — particularly in health care and other essential services — continue to rise. Demographic challenges, including weaker population gains tied to lower federal immigration targets, are also expected to temper economic and tax base growth.
Ongoing trade headwinds in sectors such as forestry and metals add further uncertainty to the outlook.
On the expenditure side, the budget allocates significant new funding to health care, with billions directed toward services and system capacity. Additional investments target education, childcare and community safety. The government has also earmarked funds to support skills training and measures intended to encourage private-sector investment.
To offset spending growth, the province is introducing revenue measures, including adjustments to personal income taxes and an expansion of the provincial sales tax base. While these initiatives are expected to generate additional revenue, the economists suggest they are unlikely to meaningfully narrow the fiscal gap over the forecast horizon.
As a result, British Columbia’s debt burden is projected to climb steadily in the years ahead. The province’s debt-to-GDP ratio, once a relative strength compared to other large provinces, is forecast to rise, eroding its comparative fiscal advantage.
Overall, RBC Economics concludes that Budget 2026 stops short of delivering the decisive fiscal reset needed to stabilize BC’s long-term financial position.
A recent report from the Fraser Institute warns that BC is on the brink of a second “lost decade.”
The BC government says that its plan makes disciplined spending choices to reduce spending and increase revenue and includes a sustainable capital plan.
“Over the past eight years we have built schools, hospitals and invested in the services British Columbians rely on every day,” said Brenda Bailey, BC’s minister of finance. “Our investments have allowed us to enter these uncertain times from a position of strength, but we need to be realistic about the difficult financial situation we face as a province. We are choosing to safeguard what we’ve built, while growing our economy to secure good jobs and economic prosperity for people and families.”
